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🍫 What are the Real Startup Costs of a Profitable Vending Machine Business? (And How to Finance It, Even on a Tight Budget)

🍫 What are the Real Startup Costs of a Profitable Vending Machine Business? (And How to Finance It, Even on a Tight Budget)

Breaking down the costs

Ethan Kohan
August 17, 2024

Hey there, Vendpreneur!

Welcome to Becoming a Vendpreneur—where every week I help you navigate the challenges of running a vending machine business, whether you’re just starting out or looking to expand your operation.

This week, I want to break down the initial costs and ongoing expenses for starting and running a vending machine business. I’m going to answer:

How much do you need to get started?
What does it take to keep the business running?
How can you fund your vending business if you have no $?
How can you grow your vending business cost-effectively?

But before we jump into more details, I want to share a few quick updates on my vending business, Pod Plug:

Business Updates

📊 After 30+ hours, I’ve finally completed our investor deck for our $500,000 funding round over the next 45 days. Interested? Hit reply. We're after strategic investors who can really help us grow.
⚖️ Talked legal stuff with our attorneys. Setting up 2 new entities: Pod Plug Franchising, LLC and Pod Plug, Inc. (c-corp parent company). Found out about this cool tax perk called section 1202 - investors might pay zero tax on profits if we get acquired!
🎥 Narrowed down video editor candidates to 3 finalists. They're whipping up YouTube videos as assessments as we speak. Get ready for some vending content across YouTube, Insta, and TikTok in the next 2 weeks!
📄 Putting the finishing touches on our franchise disclosure document. It's basically the rulebook for our franchisees - all the nitty-gritty details in one place.

PS. Want to get a piece of my nightlife vending machine business? Click the button below to fill out the form to potentially join our list of prospective investors! If I like your application, I’ll reach out within the next 7 days!

Now, let’s dive into this week’s newsletter!

If you're considering starting a vending machine business, your first step might be to search on Google for the startup costs.

This initial search will likely show you figures under $5k, $2k, or even less than $1k.

And if you take a scroll through social media, it looks like everyone's jumping into the vending game on a budget.

Now, these numbers aren't entirely off the mark, but there's a lot more to the story.

I'm here to give you the full scoop on the initial costs and the ongoing expenses of running a vending machine business.

We’re talking no sugar-coating (just the real deal on what it actually takes to start, manage, and grow a vending business).

I’ll break it all down and let you see what the journey really involves. 👇

Initial Costs: What You Need to Get Started

Let's break down the startup costs for your vending business. This is what you'll need to initially invest:

Purchasing Machines: A new machine can range from $3,000 to $10,000 each, while a decent refurbished machine might set you back $1,200 to $3,000.

P.S. My favorite USA manufacturers (buy refurbished): AMS, Crane, USI (owned by The Wittern Group), VE Solutions.

Inventory: Initial stocking of each machine might cost between $250 and $500.

Pro tip: The day before installation, stock up on inventory from Sam’s Club, Costco, or a local wholesaler.

Setup Costs: Transporting machines, installing them, and setting up payment systems might cost around $750 per machine initially.

Total Initial Investment: $3,500-4,000 (refurbished)

Ongoing Expenses: What It Takes to Keep the Business Running

After the initial setup, here are the ongoing expenses you'll need to manage:

Maintenance: Budget around $50 to $100 per machine per year if they're new; more if they're older.
Restocking: Refilling a machine might cost you $250 per month per machine, based on sales volume.
Utility Costs: Some locations might charge you for electricity used by your machines, approximately $10 per machine per month.
Other Recurring Expenses: Things like software for sales tracking or inventory management might run $20 to $50 per month for all machines.

Monthly Ongoing Expenses: $350-400

Financing Options: How to Fund Your Vending Machine Business

Financing a vending business is a savvy strategy that can propel growth with as little as $0 down. Here’s how you might fund this venture:

Financing Option	Description	Pros	Cons
Vendor Financing	Finance machines with $0 down from vendors like Cantaloupe and Vending.com.	No upfront capital required, competitive rates, streamlined process.	Limited model options, long-term commitments, dependency on supplier.
Business Line of Credit	Acts like a business credit card with lower interest rates and higher limits.	Lower interest rates, precise cash flow management, cost-effective financing, credit building.	Requires strong business credit, potential fees.
SBA Microloan	Offers up to $50,000 for small businesses with interest rates between 5-11%.	Favorable financial terms, tailored loan amounts, supportive services.	Extensive paperwork, potential delays, limited funding.
Peer-to-Peer Lending	Connects borrowers with lenders online, ideal for quick funding needs.	Competitive rates, flexible criteria, quick funding.	Variable interest rates, less regulatory oversight.
Personal Networks	Borrowing from friends and family or using personal savings.	Low or no interest costs, flexible repayment terms, strengthened relationships.	Risk of strained relationships, lack of formal structure.

Cost-Effective Growth Strategies

When you’re ready to expand:

Optimize Existing Locations: Ensure machines are in high-volume locations (min 75 ppl at the location daily) before adding more.
Bulk Buying: Save on inventory costs by buying snacks and drinks in bulk, potentially cutting costs by 10% to 20%.
Reevaluate Financing: Always look for better financing rates or terms to reduce costs as your business grows.

Expanding by just one or two machines at a time can increase revenue without a huge upfront investment.

And that’s it!

Thanks for reading this week’s newsletter.

Hit reply and let me know what you found most helpful this week—I read every single reply and I’d love to hear from you!

See you next Saturday!

-Ethan

Whenever you're ready, here are 3 free resources that can help you:

Cold Call Scripts: Get the confidence to cold call like a pro. My guide provides you with tried-and-true scripts to approach potential vending locations and turn conversations into contracts.
Cold Email Scripts: Break the ice with decision-makers using our effective cold email template. It’s designed to capture attention and spark interest, helping you start valuable conversations and grow your business.
Location Contract Template: Nail down the best spots for your vending machines with a rock-solid contract template. This easy-to-use template covers all the bases, so you can secure prime locations without the hassle.

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