Did you know the U.S. has the most vending machines in the world? With an expected annual compound growth rate of over 9% globally, learning how to start a vending machine business just makes sense. The U.S. market alone is valued at over $1.9 billion.
Even with the ongoing COVID-19 pandemic, there’s never been a better time to dig into the vending machine industry. With the right plan, you can carve out a niche to build a multi-region business or generate passive income.
Valued at over $30 billion, the global vending machine market is a large and lucrative industry with enough space for newcomers and veteran vending machine owners alike. Not only are start-up costs low to begin with — a single vending machine can get you going — but the market is diverse.
There’s ample opportunity to carve out your own space, from schools and hospitals to retail stores and hotels. The possibilities are endless. Best of all, once you’ve got that one machine in place, you have immediate access to quick market insights to adjust your model before scaling.
The road to starting a vending machine business may seem long. But when you break it down, it’s actually straightforward. Below, you’ll find a list of steps to move from “business idea” to “small business owner.”
Checklist for How to Start your Vending Machine Business
- Create a Business Plan
- Choose Your Vending Machine Business Structure
- Determine Your Business Costs
- Create a Business Name
- Register Your Vending Machine Business and Open Financial Accounts
- Purchase Equipment for Your Vending Machine Company
- Market Your Vending Machine Business
A business plan is a blueprint for success. Whether you’ll use it to finance your business or work through your initial idea, sitting down to write one is the first step to starting your own vending machine business.
Writing a successful business plan is easier than you may think. Before you start, it’s important to do market research and think about your goals. Then when you sit down to write the plan, you’ll be able to competently clarify your business idea.
Set goals or “SMART” objectives. They can help you identify potential problems and measure progress. Think through whether you’ll purchase or lease vending machines, what you’ll sell, where you’ll place the machines, and how you’ll market the business.
Don’t skip the fine details. Will your machines accept credit and debit card payments? Will they incorporate interactive touch functionality? Will they have voice-activated screens? Will they dispense both food and beverages? Consider asking industry experts for advice as you work through writing your first draft. And be realistic. It’s better to beat your targets than to miss them.
Determining and registering your business structure is one of the most important steps in starting a business. Most vending machine businesses are either a limited liability company (LLC) or sole proprietorship.
A sole proprietorship comes with little to no paperwork, and no requirement to file a separate tax return. However, it’s riskier than an LLC, even when you file for a “doing business as” (DBA) name. If a proprietorship loses a lawsuit, your personal assets are not protected.
An LLC offers flexibility in management structure, taxation, and ownership. At ZenBusiness, we make it easy to tick all the boxes. With an LLC, you get liability protection and a choice of how you’re taxed (as a proprietorship or as a partnership). That gives you more flexibility, and in general, it’s the business structure we recommend for many first-time business owners.
A business plan is a great place to track your startup costs. Begin with a list of all the things you’ll need to purchase. This includes one-time expenses like the fee to register your LLC, and state operating permits or licenses. List ongoing expenses next. They could include legal, tax, and accounting services, office supplies, website hosting, marketing materials, vending machine purchasing or leasing costs, and products to stock machines with.
You can start a vending machine business for the cost of a single machine, especially if you already have a truck. Vending machines cost anywhere from $1,000 to $5,000. Be warned though that many stores and locations will go with bigger vending companies, so you may struggle for market share.
How Can You Fund Your Start-Up Costs?
There are many ways to fund a vending machine business. The Small Business Administration (SBA) offers loans ranging from $500 to $5.5 million. Think carefully about what you need the money for, as not all loans can be used as working capital.
There are also certain eligibility requirements. For example, you must be a “for profit business,” and must have invested equity in the business. You must also have exhausted all financing options. Learn the restrictions on the different government assistance plans that exist.
You can also finance your vending machine business with business credit cards, a personal loan, or asking friends and family to help. Credit card debt often has a higher annual interest rate, as do personal loans. With friends and family, the issue may become more personal. Don’t wait until you absolutely need the money to educate yourself about what’s out there.
Choosing a business name is where the fun starts. This is the beginning of your brand, and the entity that you’ll refer to in marketing materials and on your vending machines. Be sure it’s easy to understand, recognizable, and not offensive.
As you get creative, keep a few things in mind:
- Is the name easy to understand?
- Is it different from any other LLC or business in your state? There may be legal repercussions if you violate the trademark of another company.
- Are there specific words your state prohibits in a name? For example, some states may not allow the words “bank,” “insurance,” or “corporation” in a business name.
- Is the domain name available? If you plan to build a website or implement a digital marketing strategy, this is an important point.
- Are the social media profiles or handles available?
Once you’ve got a name, you’re one step closer to owning a working vending machine business.
This is it. The time to make it real. Consider partnering with an expert to help guide you through the important steps — it’s affordable and fast.
When it comes to obtaining a vending machine business license, every city and state will have its own requirements. If you’re concerned about missing something, check in with your local SBA office or local business council.
Give serious thought to purchasing general liability insurance. Look into what your state requires, and think about the downsides if you skip this step.
Finally, you’ll want to open a business bank account. It’s a good idea to keep your business and personal finances separate. Not only does this help at tax time, but should you ever encounter legal action, separate accounts will make life a whole lot easier. A business account may also be a requirement to take out some loans, especially if they’re government-backed.
Don’t get so excited about your vending machine LLC that you forget about equipment. Most vending companies need at least a vehicle and a machine or two to start. But as you grow, you may need a garage, storage space, office equipment, and tools for repairs and maintenance. Will you lease machines, or buy? Source a good inventory vendor too, so you understand the costs up front.
Chat with vending machine business owners from other regions to build a list of everything you’ll need. These established owners are often your best sources for what supplies to buy and where to buy them. Since you’re just starting out, consider keeping your costs low by buying refurbished equipment.
You can start out with one machine at $1,000 to $5,000. Going with used machines can save money, but don’t skimp on other minimum equipment:
- Lifting straps
- Storage space
- Tools for repair
We said naming a business is fun, right? Well, how about marketing it? That’s the ongoing fun part! Many new companies start their outreach on platforms like Twitter, Facebook, and Instagram. Also, make sure potential customers can find you on Google. This may be a little tricky if we’re talking about a vending machine, but if you have an office, be sure to register it on Google My Business.
A great website is a must these days, but don’t discount word-of-mouth. Starting with a few happy customers and going the extra mile is the best way to grow a local business.
Don’t miss out on online local directories as more and more people opt away from old-school phone books. Last but not least, look into print advertising. You can advertise in local newspapers, magazines, or with flyers bulk-mailed to local businesses. Don’t forget — your machines are valuable ad space too. A sign with your business name and contact info can get new customers to notice you.
Vending machine businesses aren’t limited to selling snacks or beverages. Here are a few other ideas for vending machine businesses you can start:
- Laundry supplies: Laundromats and residential buildings often need suppliers to both place and stock machines. Laundromat customers need detergent, fabric softener, and dryer sheets. Check with local laundry businesses to see if they’re happy with their current vendors and pricing.
- Electronic accessories: These vending machines are becoming increasingly popular, especially in airports, bus stations, and other travel-related facilities. They can dispense both high-end and budget items, with some selling phone chargers, earbuds, headphones, or tablet cases.
- Skincare and hair products: Catering to women (who drive consumer purchasing) is a viable option. Plus, shampoo, conditioner, styling products, and makeup are hot commodities for people on-the-go.
- Toiletries and hygiene products: Supply toothbrushes, toothpaste, soap, and feminine hygiene products that people may forget in a rush. Hotels, conference centers, and train stations make good locations for this type of vending machine business.
A vending machine business is a low-risk, high-reward startup option in a thriving global and local market. It’s one of the easiest businesses to open, not least because you can start with a single machine. The competition can be stiff, but taking the time to explore your niche and area can set you up for potential financial success.