SAMPLE - How To Start A Vending Machine Business
When starting a brand new vending machine business, there are a lot of factors that come into play. Just like most things in life, there's always a lot of debate as to which strategy is best, and which one you should avoid. For example, should you do it solo or buy into an already established company? If you do your research, you will find plenty of people who are successful in both categories.
If you believe you are ready to start, ask yourself these questions:
What's my purpose?
What am I looking to get out of buying a vending machine? Is it for a personal reason or a professional one? Understanding what you are aiming to achieve is a crucial part in your ability to select the best business strategy possible.
Some purpose examples could be:
- More financial flexibility
- Additional income to provide for your family
- Allowing you more time with your family
- Retirement income
Before deciding anything else, it's imperative that you determine your purpose and reasoning right from the get-go. This will make financial decisions later on a lot easier.
How much time do I have?
If this isn't going to be your sole income, you need to determine how much time you have available to invest. Most people fall under one of two categories:
- They will quit their job and jump headfirst into the business full-time. These people will usually have built up enough savings so that they do not need to worry about bills and other expenses for at least six months.
- Others are looking to break from their current job, but still require their current job in order to make money. They will work on their vending business during their time off work and on their lunch breaks.
Basically, you need to ascertain whether you have the available time to do all of the work necessary by yourself. It's also important that the time investment aligns with your initial motivation for even starting this endeavor. Do you think you will need a partner later on?
Imagine that you ended up buying 20 vending machines in prime locations, which ended up turning into a full-time job due to how lucrative they were becoming. Now, if the primary reason for starting this business was so that you could spend more time with your children, then you will need to think about hiring someone to replenish the stock of these vending machines.
How much can I invest?
Just like any business, people have varying levels of financial investment that they are willing, or able, to put in. You will need to determine how much money you are happy to invest in your Coke vending machines.
The answer to this will depend on a few different factors. The more support that you require, the more expensive everything will be. However, the investment might be beneficial to you and beneficial to your reasoning for starting this type of business.
In simple terms, the more that you do yourself, the less investment will be required. But, as the old saying goes, "time is money", so if you do have access to higher levels of investment, it may actually work out as a better option long-term.
Choosing the correct vending machine equipment
Unfortunately, a lot of new vending machine owners make the big mistake of buying a vending machine first and securing a location afterwards. The main problem with doing it this way round is that the machine may not fit the demographic of the location.
For instance, let's say you managed to purchase a basic coil Coke vending machine, which does not accept credit or debit cards. You then secure an incredible opportunity in a busy office building, and because you already have the vending machine, you decide to go ahead and place it there. Unfortunately, the primary demographic in office buildings are working adults, who are unlikely to be carrying around loose change with them, therefore are unable to purchase anything from your machine. Whereas if you secure your location first, you would then be able to search around for the perfect vending machine.
Regardless of your reasons for buying a vending machine, or a vending machine business, the ultimate goal is to maximize profits. Vending machines advertise themselves, but only if they are in desirable locations. Securing an excellent location before buying a machine will give you a much better chance of being profitable.
Credit card readers
Coke vending machines that have been produced in the last few years should have credit card reading equipment installed, as well as remote monitoring capabilities. Being able to monitor all of your sales remotely is a really handy feature. You'll be able to view all of the statistics from your home or office to see what is being sold in your machines, which is not only valuable information, but it also means you know exactly when you need to restock your machines without having to waste a journey to check them.
If you feel that credit card readers for a machine that sells items for only a couple of dollars are unnecessary, you may want to reconsider. It's been shown that recent credit card sales on vending machines have increased by 20% over the last year or so and that the average person will spend 32% more money if they are able to pay with their credit card or phone.
Digital LCD screens
Some vending machine manufacturers do not have the capability to add LCD screens on their vending machines, but if you find someone who is capable, or find a machine that already has one, it's definitely a good idea to try and get it.
Not only do LCD screens add more information for the customer, as well as being eye-catching, it also creates an additional potential revenue stream. Reach out to local businesses to see whether they would be interested in having an advert rotate on your LCD screen.
Conveyor belt dispensers
Conveyor belt dispensers are fairly standard in the vending machine world but infrequently found for those specific to Coke and other sodas. They do add a lot of versatility and can prevent the dreaded problem that sometimes occurs of snacks and drinks getting caught on the coil. Conveyor belts allow you to change the width to fit a variety of packaging types if you so wish.
- Do not purchase your vending machine until you are sure of the location and demographic that you are likely to encounter.
- Credit card readers and remote monitoring should not be thought of as a luxury, and more of as a necessity.
- Digital LCD screens can make your machine more eye-catching, as well as give you additional revenue from displaying local adverts.
Securing the most profitable locations
As we have already spoken about briefly already, location is one of the most important things for a Coke vending machine. The location must have a lot of foot traffic, like schools and offices.
Generate high-quality leads
As with every other aspect of growing a business, lead generation is not something that's done once and forgot about. It is something that is continuously ongoing and should never end. Proper lead generation is an amalgamation of finding and contacting potential leads through your own research of who you think could benefit from your vending machines and then marketing your business in an efficient way so that your desired leads find you.
If you are successful in this, you will be securing vending machine placement meetings within no time. Your success in owning a vending machine business is completely linked to your ability to generate and secure location leads.
Have a plan
Before setting up any business meetings, or even before you make contact, you need to have a well thought out strategy. To achieve this, you need to define precisely what your primary objectives are for the meeting you are about to have. You must understand the locations needs so that you can create a tailored proposal for why you believe that your vending business meets the needs of the specific location.
Simply put, if you are focusing on coke vending machines, you will probably want to avoid setting up any meetings with those who own health spas and gyms. Sure, you may make a few sales, but the people who are visiting those locations are very unlikely to indulge in a nice cold bottle of Coke after working out for an hour.
Ask appropriate questions
Not every lead location will be the same, and as time is valuable, you should only secure meetings at locations that you feel will meet your desired criteria. To do this properly, you should ask various specific questions which should give you the information that you need in order to make the decision for yourself.
Some good questions could include:
- What is the estimated daily foot traffic at the location?
- Do they currently have any other vending machines there, and if so, who do they belong to?
- If they do have vendors already there, do they have a contract with them? If they do, how all much time is left on the contract, and how happy are they with them?
- Do they expect to receive a commission from vending sales? If they do, how much are they currently receiving, or wanting to receive?
The information obtained from these type of questions is vital and should be recorded in detail. Make sure that you do not ask open-ended questions, and that all of your questions give you information that you actually need and are fact-based.
To set up meetings and to build relationships you will likely find yourself having to speak to the same person several times. It's recommended that you try to diversify your communication methods to not only make the whole process more enjoyable but to yield better results. Creating a meaningful relationship will lead to these business partners wanting to do business with you because of who you are, rather than only speaking to you because of what you have on offer. Not only will this make the whole experience more pleasurable for both parties, but you can end up getting a better contract this way.
Closing the deal
You may have had a couple of meetings already, or perhaps you have had none at all. Either way, at some point you will want to pursue getting the go-ahead on the contract and closing the deal. If you approach it in an incorrect way you will turn your contact into a dead lead. If done correctly, however, you will have not only just secured a new location for your business, but you would have also just created a partner who will help you grow your business in the future.
Make sure that you turn up with all of the appropriate documents and material that you need. This almost seems unnecessary to say, but there are so many people out there who are so focused on the meeting, they forget actually to bring the supplemental materials that they may need. Being able to talk about your Coke vending machine is great, but it's even better if you have large laminated descriptions that you can give to them, or even a life-size banner to show them.
If this isn't your first deal, use your previous secured deals to help influence your potential business partner. Social proof provides you with success stories which will help grow your business as fast as possible.
Once your vending machines are out in the big wide world, and you tested every lead that you think is possible, your next goal is to gain referrals.
Referrals are the quickest way to expand any business, as there is no better type of marketing than word-of-mouth from someone you trust. Business owners are usually in large business-related networks themselves, so if they feel that your vending business is worth talking about, they will likely speak highly of you to their associates if vending machines are ever to pop up in conversation.
- Generating leads is the most vital part of growing a vending business
- Communicate with your potential business partners well, and always have appropriate material available
- Referrals are the best way to generate new leads, so make each lead impressed with your professionalism and performance
Choosing and sourcing your products
For regular vending machines, there will be lots of variables and choices available when selecting products. However, if you are simply interested in Coke vending machines, there are still a few variables that you can play with. Determining the correct products in your vending machine is essential for the success of your business. As every location is different, the customer demographics will also vary.
Factors to consider when sourcing
The nutritional value should be considered, even if your primary goal is to sell Coke. The trend in healthier eating means that a lot of people pay more attention to calories and sugar content than they did before. This means that you might find that having more diet or "0 cal" options can generate a bigger profit, than simply stocking the regular and unaltered versions.
Your products must be priced competitively, or they will fail to sell. Nobody will buy a four dollar can of Coke, regardless of how much they want one. Increase your margins by purchasing directly from the manufacturer if possible.
If you are machine has been in the same location for a while, your customers may get bored with the same old drink selection. If possible, try and get hold of the limited edition sodas when they are available, to keep your customers interested.
How do I source my products?
There are a few different ways that you can source your products, some are easier than others, but the more accessible options will usually generate the least amount of profit.
Purchasing straight from the manufacturer
Product companies will have sales and marketing representatives that will be happy to work with any vending machine business. Your profit margins will be high if you go down this route, but you will need to order in large amount to be eligible for the great prices that are available. Once you have become established and have many vending machines, this is the best route to go.
Purchasing through a wholesale distributor
Although they will require a membership, visiting a wholesale superstore, like a Costco, is a great way to get stock when you're starting out. These wholesale superstores will have lower prices than most retail outlets.
Choosing the correct vending machine option
We spoke of this briefly at the start of this article, but as there are a few different ways to get into this business, you have to ask yourself which option makes sense to you.
- Do you want to own Coke vending machines as a part-time endeavor, or do you intend for it to turn into a fully fledged business?
- How much startup capital you have available?
- Are your goals to create a vending machine empire or do you just want some extra cash on the side?
Doing it all yourself
If you have minimal start-up capital and have some business and sales experience already, then starting from scratch may make the most sense.
You will be responsible for sourcing your own machines, as well as training yourself as to how they work and to how they are set up. You will also be responsible for conducting your own sales and to secure your own leads. Without real experience in the vending niche, you may find that this process can take about a year before you have a couple of machines fully operational.
This option is the most time consuming, and there are more risks involved. However, doing everything yourself is certainly the most affordable. This route makes the most sense for someone who has a business background, has the time to put in a lot of hours initially, and perhaps doesn't have a large amount of start-up capital.
Buying an existing vending route
Just like any business, you may find that there are already established vending machine business owners in your local area that are looking to sell up. Craigslist and your local paper are the best ways to find these sort of business opportunities, and they are usually snapped up fast.
The advantage of going down this route is that you will have a business straight away and you will not need to purchase any machines or to secure locations. The obvious disadvantage is that the vending machines won't be new and the contracts on these machines may be about to expire.
This option requires a little less time to get started, but it can be the most expensive. Make sure that you do as much research as you can on the business in question and to analyze all of the sale figures that are presented to you, to ensure that the asking price is worth it. You also need to find out how much time is left on any of the contracts, if there are any in place.
These businesses can be bought from anywhere between $100,000 and $500,000+, are suited to those who can finance that amount of money.
Franchise and business opportunities
Sometimes you may see the opportunity to buy into a franchise or business opportunity. You will get to be a partner with a company that has a proven business model and a dedicated sales team which will help you to secure vending locations.
A lot of the time you will also receive machine training as well as support for sales throughout the location acquisition process. You also benefit by joining an established community of other vending owners who are in a similar situation to you. If you are looking to start your own Coke vending machine business with the most support that you can, buying into a franchise is the best option.
The drawbacks, however, are that you will still need a bigger investment that if you were to start solo, and you will also likely have to pay monthly or yearly fees and royalties for the business support that you will get