Start your own vending machine business by following these simple steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your vending machine business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a vending machine business?
The startup costs for a vending business are manageable. It’s possible to start a business for a few thousand dollars, and a small business might be started with less than $1,000. Business owners must purchase a vehicle, equipment (vending machines), and supplies (items machines sell).
To save on vehicle expenses, many business owners start out using their own vehicle. As a business grows, a larger vehicle that can hold more supplies may be needed. Such a vehicle can be purchased once the business brings in sufficient revenue.
Vending machines vary in cost from a few hundred dollars to several thousand. VendSoft reports that bulk machines, which sell candy and gumballs, cost between $150 and $450 each. Snack and soda machines run from $1,500 to $8,500.
To keep vending machine costs low, business owners can purchase used or refurbished machines. This is an especially good option for business owners who have learned how to repair machines, for a new machine’s warranty is less important to business owners who can make their own repairs.
With some machines, business owners can enter into contracts with suppliers to get free machines. Sometimes suppliers will agree to furnish and maintain a machine as long as a vending business agrees to purchase supplies from the supplier.
Supplies themselves don’t cost a lot because they’re purchased wholesale. For example, gumballs might cost between 2 and 5 cents each wholesale. Snacks and sodas cost more, but they’re still very affordable.
What are the ongoing expenses for a vending machine business?
The ongoing expenses for a vending machine business are similar to the business’ startup expenses. Business owners must pay:
- vehicle costs (fuel, maintenance, etc.)
- supply costs (to replenish supplies)
- equipment costs (to repair machines)
Equipment costs, in particular, shouldn’t be underestimated. Cold, wet weather can cause outdoor machines’ electronics to malfunction, and machines anywhere can be vandalized or stolen. Any broken machines need to be repaired, and any stolen machines need to be replaced.
As mentioned, knowing how to fix machines will keep repair costs low. To reduce the risk of vandalism and theft, business owners should look for safe, high-traffic areas to put their machines.
Who is the target market?
Vending machines appeal to a wide swath of people. Everyone gets hungry and thirsty (or wants a toy) at some time.
How does a vending machine business make money?
A vending machine business makes money by selling items in the business’ vending machines to customers. Vending machines may sell snacks, soft drinks, hot drinks, sandwiches, hygiene products, candles, toys, and other products.
How much can you charge customers?
Most vending machine items sell for anywhere from 25 cents (for candy or gum) to a few dollars (for snacks and drinks). A few vending machines (usually in airports) offer high-end electronics that cost much more, but these are exceptions.
How much profit can a vending machine business make?
The individual markup on vending machine items is high. For example, the gumball that costs 2 to 5 cents wholesale will sell for 25 (or maybe 50) cents. Snacks and sodas generate $1 or more per sale in profits.
Ultimately how much a business can make is determined by how many products its machines sell. This is why location selection is so important.
How can you make your business more profitable?
A vending machine business can increase its profits by offering service for other company’s vending machines and selling products in larger packages through local retailers.
What will you name your business?
Choosing the right name is very important. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your vending machine business is sued. There are many business structures to choose from including: Corporations, LLC’s, and DBA’s.
FORM YOUR LLC
We suggest using either IncFile.com or LegalZoom.com
You should also consider using a registered agent service to help protect your privacy and stay compliant.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It’s really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Open a business bank account
- This separates your personal assets from your company’s assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Get a business credit card
- This helps you separate personal and business expenses by putting your business’ expenses all in one place.
- It also builds your company’s credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
Federal Business Licensing Requirements
There are federal regulations regarding what can and cannot be added to, sold as, and processed with food. Attached is a resource from the Food and Drug Administration detailing the process of starting a food business: How to Start a Food Business
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a vending machine business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide.
For information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Vending machine businesses should consider requiring clients to sign a service agreement before starting a new project. This agreement should clarify client expectations and minimize risk of legal disputes by setting out payment terms and conditions, service level expectations, and intellectual property ownership. Here is an example service agreement.
Certificate of Occupancy
A vending machine business is generally run out of a warehouse. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
- If you plan to lease a location:
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a vending machine business.
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
- If you plan to purchase or build a location:
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for your business’ location to ensure your vending machine business will be in compliance and able to obtain a CO.
When selling food, you will need licensing from a local health department; all establishments serving food are required to pass a health inspection. Tips for faring well on a health inspections
STEP 7: Get Business Insurance
Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
How to promote & market a vending machine business
Promotional efforts for vending machine businesses don’t focus on attracting customers per se. Instead, efforts seek to gain new accounts, which are additional locations where machines may be placed. Having a website, advertising in the phone book and cold calling are all effective ways to gain new accounts.
How to keep customers coming back
A vending machine business can keep its accounts by offering all of the products that the account holders want. This may require putting snack, soda, coffee, and frozen treat machines in a single location.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Here is some very useful information that you should really know before starting your own vending machine business. That includes what to look for when ...