If you have read articles that offer ideas for starting a home-based business, the suggestion of starting a vending machine business has probably appeared at least once. Vending machine businesses are popular in part because of the low cost of entry and the possibility of reaping large rewards with little effort. However, the vending machine industry is far from a quick route to easy money, and it is important to consider the downside of the field before starting a business.
Low Cost of Entry
Compared to the start-up costs for businesses that require storefronts--for example, coin-operated car washes or restaurants--the cost of entry for a vending machine business is quite low. You can purchase a machine that distributes both snacks and cold drinks for under $2,000 as of 2010. At bulk rates, food and beverages are inexpensive.
In the vending machine business, you never have to worry about bounced checks, credit card fraud or chargebacks. Customers always pay in cash.
High Earning Potential
With the right location and product selection, you could turn a profit, have your first machine paid for and begin thinking about purchasing a second machine within months. Because of the extremely high profit margins for items such as chips, candy and soda, a high-traffic location could have you raking in the money in a very short time.
Low Time Investment
A vending machine business often requires little of your time. On an average day, your total time investment will involve driving to the machine's location, picking up your money, checking stock and refilling as necessary. Because of the low time investment, you could easily maintain a second job while you wait for your business to turn a profit.
One of the keys to a successful vending machine business is having the proper location. The machine needs to be in a high-traffic area where people are likely to want a snack, and have the money to purchase it. Unfortunately, you may find that the best locations in your area are already taken. If the current vending machine owner has an exclusive contract with the property owner, you will not be able to place a machine there. In addition, many property owners will likely want a cut of your profits in exchange for using their real estate and electricity. This can add to your costs.
Theft and Vandalism
Theft and vandalism are concerns in the vending machine industry--doubly so if you are attempting to do business in a high-crime area. Any damage to your machine can eat into or negate your profits. Additionally, carrying a large amount of change and small bills can make you a potential target for criminals.
In the vending machine industry, you always run the risk of being saddled with product that you are unable to move. Customers may prefer soda in one location and juice or water in another. While market research can give you an idea of what customers are looking for in your location, you may guess incorrectly and be left with items that you cannot sell.