Duncan Ferris
Mary M. Flory
A vending machine business can be a great way to make an income without the need for qualifications or much interaction with customers. Even so, you must be prepared to work hard and plan a sensible strategy to be successful.
Want to stock the right snacks, secure the best locations and get the best funding tips? Read on to find out all you need to know when starting a vending machine business.
Why start a vending machine business?
- Be your own boss: Starting your own vending machine business lets you choose when and where you work, making other commitments easier.
- Mechanised: If you are not a ‘people person’, a vending machine business could be a good fit. Owners can make sales without much customer interaction, as the machines do most of the work.
- Simple: With costs largely limited to machines, stock and transportation, and the simplicity of routinely stocking machines, a vending machine business can be a good option for someone looking to start a company without too much complexity.
- Low barriers to entry: Starting a vending machine business requires no qualifications and a relatively low amount of funding. However, a driving licence and van will likely be necessary to transport machines and stock.
Start a vending machine business in 5 steps
Research and choose your market
To start a business, you need to understand the environment in which you are launching. To achieve this, you need to conduct market research to find out more about the customers you will aim to serve and the rival businesses you will be competing with.
This might sound complicated, but anyone can do some basic information gathering to learn more about what to expect when they launch a vending machine company. Reach out to people who already run successful vending machine operations to learn about the challenges your business might face and to get advice for starting out.
Contact businesses that allow vending machines on their premises to find out about requirements they have for vending on their property. It might even be worth doing some research into the most popular snacks, drinks and other items to make sure your machines can provide people with what they want or need.
If customers are not interested in the contents of your vending machines, you won’t make much money.
Create a budget for your vending machine business
Every new venture needs a business plan and a budget. Vending machine businesses are no different. Spending time creating a plan and a budget will give you a realistic idea about its financial viability and clear goals to aim for. In addition, most lenders will require a business plan as part of the application process for a loan.
For a detailed guide read our article on how to write a business plan.
For vending machine businesses, some key aspects of your budget to consider include:
- Vending machines: You will need to purchase at least one machine to start your business and will likely purchase more over time to expand. The cost of buying a vending machine varies considerably. You can get your hands on a basic pre-owned machine for around £100 to £500, while more sophisticated machines purchased brand new can cost upwards of £5,000. You can also lease a vending machine for around £20 to £30 per week.
- Stock: Keeping machines stocked will likely be your main regular cost. Costs will vary depending on what kind of goods your machine offers, but make sure you shop around and use the right wholesaler for your business.
- Transport: To make regular trips to wholesalers and to stock your machines, you will likely need a van or large car. A van could be particularly useful, as it would let you transport vending machines yourself if the need arises. Make sure you factor the price of any new vehicle, as well as insurance, fuel and maintenance costs, into your budget.
- Site commissions: To get premises to agree with your placement of a vending machine on their premises, you will likely need to offer them a cut of your revenue as a commission. This is generally between 5% and 25%.
- Repairs: Sometimes your vending machines will break or require maintenance. These costs will vary depending on the type of machines you use and whether you can repair them yourself.
- Payment fees: Vending machine retailer Vend Trade claims that more than 80% of the UK’s vending machine transactions use contactless card payments. This may mean less time rooting around in machines for small change, but it will mean your business faces transaction fees from your merchant services provider. These fees vary from provider to provider.
For a detailed guide, explore our five-step guide to creating a small business budget.
Register your vending machine business
A key step when starting a vending machine business is choosing a business structure and registering your business. Choose the structure that makes the most sense for your business. The different structures are:
- Sole trader: Being a sole trader means being the exclusive owner of a business and keeping all post-tax profits. A sole trader is not legally distinct from their business, meaning they are personally responsible for any losses made by the business. Sole traders must register for self-assessment.
- Partnership: When two or more people run a business together, they may do so as a partnership. There are three main types of partnerships: business partnerships, limited partnerships and limited liability partnerships. Partners will share the responsibilities, risks, profits and losses of the business. In all types of partnership, a ‘nominated partner’ will be responsible for filing the partnership’s tax return and will need to register with HMRC. Bear in mind that all partners still need to submit their tax returns as individuals as well.
- Limited company: Incorporating as a limited company makes you legally and financially distinct from your business. Limited companies have shares and shareholders and can keep any post-tax profits. You can register as a limited company at Gov.uk.
» MORE: Should I register as a sole trader or limited company?
If your vending machines will sell food, you need to register your business with local authorities a minimum of 28 days before you start trading. This registration costs nothing and cannot be refused, but your permission to trade can be revoked if your business is found to have substandard practices. As such, you should ensure that:
- machines are hygienic and regularly cleaned
- food and drink is stored at safe temperatures
- pests cannot gain easy access to machines
- packaging contains allergen information
- food is wrapped appropriately
Fund your vending machine business
With a budget, business plan and registration sorted, you can seek funding. New business owners might rely on one source of funding, or combine several. Here are some sources of funds:
- Personal savings: Using your money to fund your business can mean retaining control, but make sure it doesn’t harm your personal financial health.
- Friends and family: Your friends and family may be willing to gift or lend you money. In this case, draw up a formal agreement so all parties understand the terms associated with any gift or loan.
- Small business grants: Businesses can benefit from many start-up business grants across the UK. There are also specific grants in Scotland, Wales and Northern Ireland.
- Government business loans: A government business loan could help your business to find its feet.
- Business loans: A business loan can offer significant funding, but it can be hard to borrow with bad credit.
- Angel investors: Sometimes, wealthy individuals may invest in a new business in exchange for equity or convertible debt. These people are known as Angel investors.
- Crowdfunding: Securing small donations or investments from many parties is called crowdfunding. This often takes place through an online campaign.
This is also a good time to choose a business bank account that suits your business. There are many different accounts available, each carrying different features and extras. For a vending machine business, you may want to prioritise accounts with low or free transaction fees due to the potential for high transaction volume.
If you are a sole trader, you can use your personal bank account for business. However, limited companies and partnerships must have a business bank account. In addition, sole traders may find it easier to keep business funds and transactions in a separate business bank account.
Where to put your first vending machines
Finding the right location for your vending machines is one of the most important steps in setting up your business. To maximise sales, try to think of high-traffic areas or locations where people might be waiting around and need a snack or drink. In addition, the location of your vending machine could influence what you stock it with.
Here are some location ideas:
- Hospitals: With busy waiting rooms full of patients and loved ones who could be waiting for hours at a time, as well as busy staff who spend long shifts on their feet, hospitals are prime locations for vending machines. Nutritious snacks and hot drinks are great choices for vending machines in hospitals and other similar waiting rooms.
- Leisure centres and gyms: This might seem counterintuitive but remember that vending machines don’t have to exclusively offer unhealthy snacks. Protein bars, shakes and isotonic drinks could be great options here.
- Office buildings: Anyone who has ever worked in an office will know that a snack is often needed to get through a difficult day. The convenience of on-site vending machines could be attractive to office managers too, as it will keep staff in the building when they might otherwise stray further afield to look for snacks. A mixture of nutritious snacks, sweet treats and hot beverages can play well in an office environment.
These are just some ideas to get started, but don’t be afraid to consider other locations with high foot traffic. Remember that before placing a vending machine you will need permission from relevant business or building owners. Any agreement will likely involve paying a commission of 5% to 25% on revenues from the vending machine.
In some cases, you may also need a permit from the local council if your location is in a public area.
It is also essential to consider health and safety concerns when choosing where to place a vending machine. Make sure the machine is not in a location where it could be tipped over or cause a blockage, and consider signage that advises people not to shake the machine.
What insurance do vending machine companies need?
There are several different types of insurance you should consider when starting a vending machine business.
First off, there is protecting the machines themselves with specialist insurance. These machines are both expensive and essential for your business to succeed, so making sure they are protected against damage could be critical to your success.
Some form of general commercial liability insurance is also key. This will protect your business against harm caused by your machines or their contents to customers and people’s property. With heavy machinery that could fall on to customers and food that might lead to illness, this kind of insurance is crucial.
Employer’s liability insurance is a legal requirement if your business has employees who are not close members of your family. This kind of insurance will cover you for injuries and accidents your employees might suffer at work. You can be fined for not having this form of insurance after hiring employees.
As mentioned earlier, a car or van is all but essential for a vending machine business. Of course, this means you will need business vehicle insurance. If you plan on using a personal vehicle for your business responsibilities, you need to inform your insurer or you risk voiding your cover.
Image source: Getty Images
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