Vending Machine Business. Is it Worth Doing?
My journey of starting my very own vending machine business at 23 years old
The vending machine business has been around for hundreds of years. It was invested in 1884 by William Henry Fruen and its main purpose was disposing of bottled water. Move to today, vending machines dispense a wide array of items from toys, to snacks, food, and other daily necessities. Japan has the highest density of vending machines worldwide. The Japan Vending Machine Manufacturers Association estimates that there is one vending machine for every 23 persons. Annual sales total more than $60 billion. Having a vending machine provides convenience for customer to visually pick their choice of the item they wish to purchase without having to hire an employee to serve them 24/7.
If you have ever watched businesses on vending machines as a side hustle. You would often only hear the good ones. That making money through vending machines is a fun and exciting way of collecting money. While the collection of money can be a mysterious excitement, it does come along with several challenges not well-known to people starting.
There are a lot of things not well mentioned in this vending machine business space and I would like to share some light on the business. In this blog, I will discuss my take as an ex-vending machine business owner on whether it is worth doing. I will be sharing what you need to start this business, my initial positive thought about the business, the hardship faced, and whether is it still worth doing.
What is required to start this Business?
If I were to narrow it down to a small inventory list of what you would need, it only comes down to initial starting capital, network, and proper research.
It’s ridiculous when I hear people give a sales speech on starting a business with the quote “zero cost” or “you don’t have to do any of the work”. One way or another, starting a business requires money. It can be from inventory cost, labor cost, maintenance cost, or hidden fees. Everything requires money. As a person starting the vending machine business, it is important to know what is the cost that is required, maintenance cost (labor, supply, machinery), and fees (taxes, certificates, approval forms, etc).
Networking is one of the most underrated business skill people take for granted. It involves meeting like-minded people who can help support or provide value to you. In China, the word “guan xi” is a term that may be translated informally as social networks or personal ties. It functions on a personal, familial, social, commercial, and political level and entails mutual trust and duties between partners. One’s influence and capacity for action are influenced by having excellent, bad, or no guanxi. By having a good strong network with local suppliers and other small businesses, your vending machine business may be able to run more smoothly and have a better opportunities.
Oftentimes, people believe that they already have learned everything there is to know about their business. Most oftentimes, they are wrong. Business is ever-changing and we as businessmen need to keep evolving and learn new things. To stay updated and relevant, one must constantly research and evolve their business.
How much in the Initial Starting capital
Depending on the country you live in and what type of vending machine you can get, the price can vary a lot. That’s because some countries requires the vending machine to have a certain energy efficiency level, meet safety standards, and well-documented contracts. Here are the in-depth numbers to know on initial starting capital.
Vending Machine
Depending on the age of the vending machine, energy efficiency level, types of specification, and the amount of work put into the vending machine. A vending machine can cost from $700 up to $4000.
Maintenance Cost
Typically from my experience with my vending machine, they usually do not need repairs for up to 3 months. However, do note that I did proper maintenance every month to make sure all the mechanical parts are in working order. Maintenance cost increase as the vending machine ages and more work need to be done.
Electrical Cost
An average cold beverage vending machine uses 3000-kilowatt hours (kWh) of power annually. That is an average $313 yearly cost for energy per machine. Even machines with higher energy efficiency still consume between 1200 and 1500 kWh annually.
Rent
If you can reach out to people who may want to have a vending machine set up, chances are you may not have to pay rent for the machine. However, this placement of vending machines may not be the best places to make good money. Do proper research on supply & demand around the area, design a term contract (make the contract permit to have the vending machine placed there for a minimum duration so both parties can agree to it), and look into whether the overall cost would be worth setting up a vending machine.
Transportation Cost
Transportation cost is one of the types of cost not properly mentioned. The cost of moving a vending machine can vary between contractors. What I have paid is $100 for transporting the vending machine. For topping vending machine drinks, I spent around $20 per trip for driving around topping up the drinks for my 3 vending machines.
Why I Decided to Venture into the Vending Machine Business
If you don’t know me already. My name is Edmund, and Founder of HustleVentureSG. My goal is to have a passion for building a side hustle to one day have my passive income overtake my full-time income to one day live off of it. In 4 years, I took on 9 different side hustles, only to keep 3 as the main side hustle I can continue to pursue. During that time, I managed to grow my net worth to over $100,000.
My vending machine business was one of the failed side hustle projects in which I didn’t succeed. At that time, it seem to be something I liked. I had the idea and had people asking me whether I can help them to install a vending machine to drive customers to a gym I used to work. That was when I took up the challenge and started the business. At that time, I had zero business experience but had a passion for helping others. Surprisingly, I was able to manage to start up 3 vending machines in 3 separate locations and it was doing pretty alright.
Sold the Idea of Passive Income similar to Investing in Stocks
If you have been investing for a long time, you will know that nothing is truly passive. The dream of “ do nothing, money coming in” involves a lot of behind the scene research and work. There are several steps one must take to truly make a business passive.
Knew where and what the Demands were
The main reason why I started the business was to know where the demands were and help them solve them. I worked with several climbing gyms and sports complex as a climbing coach. Working with the business owner, I knew there was a demand for the machine and pitched the idea to them.
Had supplier willing to provide vending machine at a cheap price
Before I decide to pitch to a business owner on my vending machine idea, I started looking up into companies and people who are willing to sell them. I ended up buying a vending machine on Carousell for $700 and 2 from a local supplier at $1,200 each.
Why I Decided to Quit the Vending Machine Business
After working for this business for a little over a year, I decided to quit. I quit the business because I felt that it wasn’t the kind of money I wanted to make and that I made several terrible mistakes that lead to the business failing. I hope that sharing my mistakes and failure in this business will it give others a better perspective of how the vending machine business truly is.
Nowhere Passive
Starting a vending machine business is not something that will get you overnight passive income. There is a lot of upfront work to be done and you won’t be able to truly build the business passively until there is a proper business structure. Which is hard for a vending machine business to climb towards.
This business is not just about knowing how to solve demands
Yes, I have found a demand for the vending machine business. However, what made my business fail was not truly calculating what is needed overall for my business. Understanding a proper PnL is critical for all business owners.
A vending machine selling for cheap doesn’t mean it’s good
Even if it may work, my $700 vending machine purchase didn’t go as planned. It required a lot of effort to maintain, and repairs were expensive for the company. Worse yet, the earlier type of vending machine wasn’t energy efficient, which resulted in exorbitant electricity costs of over $350 per month.
Maintenance and repairs are a lot of work
When a vending machine is down, don’t expect to make money off of it. The sad thing is vending machine business owners would only check up on their machine every 1 to 2 months depending on the frequency of topping up drinks. That means during the time the vending machine is down, you the business owner is losing money for having it sit right there paying rent and electrical bills. Not only that, major maintenance of the vending machine can cost between $100 to $500. That’s a huge loss to the business.
Hidden Cost
Never had I expected the amount of hidden costs in maintaining a vending machine. I had to spend a huge load of money purchasing parts such as LED light strips in the machine, a Visa/ credit card acceptance machine, and spare screws to fix the machine.
The amount of money I invested and Lost
In total, I invested $4,800 (for 3 vending machines), spend nearly $3000 on repairs and maintenance costs, $180 on drinks, and at least $200 on transportation. The business only lasted 14 months and I decide to call it a quit.
⭐⭐⭐Lessons Learnt and what Business Owner needs to know⭐⭐⭐
However, even though this business didn’t succeed as I wanted. It did teach me an abundance of knowledge and business skills that would help me to grow as a person. In 4 years, by the age of 24, I had a total net worth of over $100,000. Here are the 2 biggest lessons I learned that every future vending machine business owner or businessman needs to master.
PnL for past, present, and future
Having to do an accounting on the business is critical in knowing ways to improve the business. I learned from this mistake by incorporating an Excel sheet to track where all my income and spending are going. By having a proper PnL, the business owner will be able to make a proper financial business decisions. They will know how they to properly spend the money on growing the business.
Constantly spot weaknesses in the business and find ways to mitigate it
Having a third-person perspective always help in looking into mistake and shortfall that can happen in your business. Do meet with people of similar businesses and work for hand in hand as they would be able to give the best information about the business.
Is this Business still worth doing?
In the end, running a vending machine company is still worthwhile. My entry into the industry was a pipe dream that ended abruptly. I’m hoping that by setting realistic expectations for the company, you won’t be swayed by slick sales pitches about how simple it is to make money with a vending machine. As previously said, if you have properly understood the initial starting money, built strong networks, and conducted appropriate in-depth research. You could find it a little bit simpler to launch a vending machine business. Having your safety reserve to draw from to cover all the first costs is thus crucial. In the meanwhile, focus on increasing the profitability of your company.