Getting into the vending machine industry can be a lucrative and worthwhile endeavor for anyone looking into starting a business for themselves and break away from the shackles of working on someone else's behalf for their income. While there are many factors that go into the overall costs of getting started initially, one of the primary questions that people ask before jumping in is how much money do vending machines actually make on a regular basis. While this can seem straightforward at a glance, due to the amount of upfront costs that go into buying a machine, securing a location, moving that machine to a location, and maintaining its stock, it can be a while before you make your initial investment back.
To get an idea on the realistic type of vending machine business profit margins to expect when entering into the industry, there are a variety of factors at play that will determine how profitable any individual vending machine will perform. These variables are not consistent from vending machine to vending machine, and will vary greatly depending on the location and time per year, but can give you a rough idea on what to expect per month once a vending machine is set up at a location.
Working out the actual profits from any vending machine can be broken down into a simple equation, just as any other method of determining overall revenue can be. The three primary factors that drive profit from your vending machines are
This formula can be broken down into this formula to make it easy to plug into a spreadsheet.
Net profit = (SPD x PPS x DPM) - ME
This formula is a simplified breakdown of overall expenses that go into running any type of business, but for the vending industry typically these are the primary factors that go into determining profits from any single machine.
As an example of this formula in action, say you have a vending machine established at a set location and has been in operation long enough to establish a consistent rhythm of sales and restocking. Assuming the following statistics of a single machine
Your Net Profit utilizing this formula can be estimated to be.
Net Profit = (100 x .5 x 25) - 500
Net Profit = $750 per month
These values for a location with a reasonable amount of foot traffic can be expected, but keep in mind that location is the most important factor for how profitable a vending machine can be, so this formula should be run for each individual machine you have in your vending portfolio to get accurate estimations. Let's take a deeper dive into each of these factors of this formula.
The primary factor that determines how profitable any vending machine can be is how many items you are vending out per day. You need to make sales of stock in order to make a profit off this stock, so this is why the location of your vending machines is a critical aspect of what determines how profitable any single machine investment can be. This applies to many other factors in business, but for vending machines this is a critical factor as it is easy to invest up to $2000 into a single machine only to have its stock expire and become a lost investment due to not being able to move its product fast enough.
The amount of locations that a vending machine can operate successfully are endless, as essentially any space with a lot of foot traffic typically will result in multiple vends a day, but the primary factors that go into what makes a location successful that increases the amount of items sold per day can be broken down into
There are multiple types of public locations that fit this description perfectly, but if one of these factors are off it can potentially throw off revenue greatly and render a specific location worthless.
An example of this type of location can be a shopping mall. A shopping mall in the US typically will have thousands of customers passing through each day who are there with the specific purpose of spending money, whether they are at this location for a specific purpose or to just browse. This location almost always matches factors 1 and 2 of this breakdown, where there is a high amount of foot traffic with a high amount of potential customers more willing to spend money than otherwise. Factor 3 however, is where this location can become a low earnings spot to place a vending machine.
The reason for this in this example, is that if you are placing either a drink or snack vending machine in a shopping mall, you are also competing with other food and drink vendors within this location, potentially rendering your product offerings useless if a better choice for the consumer is around the corner or a short walk away. While a lot of people may pass by your machines with disposable income in their pockets, if they are more willing to spend this money at another establishment, it means that this vending machine investment can potentially yield low results.
This is just one example of a potential issue that can come from a location, but there are many more similar to this that can affect profits. It’s important to take everything about a location into consideration before putting any money into a potential location.
The amount of profit you make per item sold is a big factor in determining the success of a single given machine. This applies to virtually every product sold by a business, but with vending machines since it typically consists of buying consumer items at a bulk discount and selling them at a convenience upcharge.
The rule of thumb for vending is that any product you are selling within a vending machine, at minimum you should mark up the cost per item by 100%. For certain items like bottles of water, cans of soda, and popular food items such as Frido Lay and Coca Cola products, you can typically get these items at a volume where an upcharge of 200% to 400% is possible for a reasonable price to the consumer.
There is a limit however, to what a consumer is willing to pay for a single item at a convenience, so it is important to play around with pricing to see what works for any given location. A/B testing is advised before settling in on a set stock for a specific machine as lowering the cost of a specific item can result in an increase in total vends per day of a specific item, resulting in a higher profit margin than simply marking an item at an higher cost hoping the consumer is willing to pay the expense.
Outside of the profit margins of a single item and how many of this item you can sell per day, the amount of days that your vending machine is accessible to consumers is another primary factor in how much profit you can realistically expect out of a location. Depending on the location, the amount of foot traffic actively passing through in a given week can vary greatly if it's a consumer, business, or specific service space (Such as an automotive dealership or store).
Some locations, such as a university campus or a high school for example, may not be in operation or active use all 7 days of the week. This means that while you may have high vending volumes 5 days of the week, the other 2 days of the week your machine may either be inaccessible or the foot traffic volume diminishes to a point where the location might as well be closed to the public.
This isn’t always a bad situation however, as some locations can yield more profits in 5 days of operations than others in 7 days of full operation, but this is an important factor to consider when determining overall potential profits of a given vending location. Ideally you would want your vending machine accessible 24/7, as it doesn’t matter what time of day, or day of the week it is for someone to purchase an item out of an autonomous machine, but it does play into how profitable a location can be in a best case situation.
Since purchasing a vending machine, purchasing stock for said vending machine, moving costs, as well as the costs associated with stocking a vending machine on a regular basis, the amount you are paying (loan or otherwise) each month is important overall to consider when getting an idea on your overall profits per month, or when you are going to reach a point of profitability after making the necessary investments into getting up and running.
The primary factors to always consider each month when determining your profit margins can be broken down into these categories
These expenses eat into your final profit margins just as any other business, so it is important to keep all associated costs to your business in mind when determining how much you are actually making each month. For a vending business that is up and running with multiple machines at various successful locations, these expenses can be mitigated by profitable locations, but for anyone who is starting out with a few machines to start, these expenses can quickly eat away at any potential profit.
Vending machines are a fantastic way for anyone to get their foot in the door for building up a business for themselves. While there are many associated costs to maintaining, running, and stocking vending machines, there is plenty of profit to be made as long as you are aware of all the various factors that go into running such a business. If you are dedicated to the pursuit and are willing to push your business to the next level, you can make a profit off your machines sooner rather than later.
