How To Start a Vending Machine Business in Six Steps

The first step is to decide what you want to sell and what machine you will need to use. There are many types of machines to start your own vending machine business:

• Bulk Vending Machines. These are coin-operated machines for toys, novelty items, and candy, such as gumball machines. They have the lowest startup costs because the machines cost around $100-$500, and you restock them with items you buy in bulk.

• Snack and Beverage Vending Machines. These offer sodas, water, and snacks that you buy in bulk and sell individually for a higher profit margin. A new vending machine costs anywhere from $3,000 up to over $6,000.

• Specialty Vending Machines. These machines are designed to sell specific items, for example, hot coffee drinks, ramen noodles, or cupcakes. You can even stock these with school supplies to place in libraries at schools and universities. Or with tech and travel products like iPhone chargers and similar items around airports for those travelers who forgot to pack theirs. Specialty vending machines can cost more, upwards of $8,000 or more, depending on the technology and equipment in the machine.

You want the right location for maximum return. Scout out new locations that aren’t competing with other vending machine companies. You want high-traffic areas such as stores, schools, offices, and transportation centers where there aren’t other vending machine options. For example, putting a vending machine near a bus or train station would attract foot traffic from busy commuters who are looking for a snack.

Determine what products may be popular among your target audience. For example, a caviar vending machine in Beverly Hills, California, may not be a successful product elsewhere.

Match your products to their locations where they may make sense, for example:

• Around a gym or exercise studio, stocked with energy drinks, healthy snacks, protein shakes, or bars.

• In a school or university, providing snacks, drinks, or school supplies,

• In an office building, offering snacks, beverages, or specialty coffee drinks.

• At a laundromat, stocking detergents, fabric softeners, dryer sheets, etc.

Once you have identified potential locations and products, talk with the property owners about the benefits of having a vending machine in their place of business.

Even as a side hustle, any new business needs a business plan. A business plan outlines your startup costs, potential customers, competition, and anticipated revenue.

In any business plan you must determine your upfront costs. In addition to the cost of the vending machines, factor in the costs of:

• Liability insurance. Vending machines are prone to vandalism and theft, and customers may claim your machines injured them. Therefore, you will want to have insurance.

• Commissions to locations. You may have to pay rent or commissions to property owners where you place your vending machines.

• Credit card transaction fees. Many machines have card readers for convenience. If you accept credit cards, you must pay merchant fees to the credit card providers.

• Transportation and delivery costs - You need to get the machines and inventory to your vending machine locations.

• Inventory cost - Figure out how much you need to spend per month to keep your machines fully stocked.

• Storage fees - When buying in bulk, you need a place to store your inventory.

The more time and effort you spend on your business plan, the more you can identify your strengths and address your weaknesses. If you are looking for a bank loan to help you purchase your equipment and inventory, they will want to see your business plan.

Many vending machine operators are sole proprietors, meaning one person runs the business. However, if a customer gets hurt and sued, the business owner is personally liable for the injury. Many sole proprietors form a limited liability company or LLC, which shields their personal assets from the business’s liabilities and debts. The advantage of an LLC is that it protects you from business liability and allows you to report your business income on your personal tax return.

It is easy to create an LLC in your state. However, you can also hire an attorney or use an online business formation service company.

Even a small business, such as a vending machine business, needs a business license to operate. Typically, the license is with your state or county. You fill out an application with your business name and location and file it locally.

You should also determine what business insurance you need to protect your inventory and equipment. There are general liability policies that cover personal injury and property damage. Consult with an insurance professional to find out the best type of coverage for your operation.

In this contract, you will want to identify who is responsible for the maintenance and upkeep of the machines, what rent or commission you will pay to the property owner, and whether your business will assume liability for accidents or injuries related to the vending machines. Have a business lawyer draft a vending machine contract for your business that you can use for all your vending machine locations.