1. Starting a Vending Business
Steps to Starting a Vending Business
Starting a vending business can be profitable. Starting a vending machine business requires careful planning and ongoing attention to detail. With the right locations, products, and customer service, you can build a successful vending business over time.
It is generally better to start the business officially. You will initially want to develop a business plan. In this plan you will want to define your target market, outline your marketing strategies, and set financial goals. You will then need to define your timeline and how you are going to obtain the following:
01. Get an LLC: Depending on your state it can range from $25 to over $300 to set up on your own. You will need to get this from your state. It's usually easy done if you contact your state website. It's usually well spelled out on the website. LLC’s are handled at the state level. The process is simple and usually involves completing some questions on an online form. You should note that there are professional organizations which will do this process for you. You can use them, but they are usually overpriced with ridiculous fees.
02. Get an EIN: This is done at the federal level. The EIN is an employee identification number ( it's like the social security number for a business) and it's the number that you would use on your tax forms when reporting income from the LLC. This number is from the IRS website.
03. Banking: You will want to open a checking account and apply for a debit card or credit card. This is an important step as some credit card reader companies require a business account to deposit the credit card money.
04. Get insurance: At a minimum you will need product liability insurance. You might want to consider umbrella insurance for issues which are not covered by product liability. To get an insurance policy, it is generally better to talk to a local independent insurance agent. It is frequently asked who has the best policy? This is not possible to answer. Insurance policies are controlled at the state level and a company policy may differ widely from state to state in offering and costs (or two states might have very similar policies - point is this impossible to predict).
05. Get a vending location: The vending machine will need to be placed at a location (which is a whole discussion on its own - grin). Determine if a contract is needed at the location.
06. Get a vending machine: Once a location is secured, you will need to find a vending machine(s) to place at the location. It is important to match the machine to the needs of the location. For example: sometimes space is limited and you want to offer both drinks and snacks. In this case, a combo vending machine would be useful. In other situations, there's lots of room at the location and having a separate vending machine to offer snacks and drinks would be a more profitable way to go. Be careful - there are many scams on facebook, marketplace, craigslist, etc - perhaps as much as 50 to 75% of the offers are going to be scams … buyer beware!
07. Permits and Licenses: Decide if you need permits or a license for the machine location: A license is generally controlled by the state. Permits are generally controlled by the local authority in the town, county or city.
08. Food Handler Permits: Some products in vending machines require a food handler permit: Know the laws of your location. You should be aware that some types of vending machines require food handler permits which are usually handled by the Department of Health or other similar agency in the state.
09. Tax Stamps: In some locations, a tax stamp or resale certificate is required. This might be from both the state and/or county - depending on where the machines are placed. This is very location specific and you need to investigate in the location you place the machine. I know of one town that has imposed a special tax as well… be very clear on who provides what taxing Authority for that specific location. Failure to pay taxes usually carries with it steep fines and is generally better to be avoided.
10. Product Selection: Determine the Products for the machine. It's important to match the products to the location. For example: a hotel vending machine might do better having products vending personal care/healthcare products such as toothpaste, toothbrushes, tampons, condoms, Tylenol and other such products in it. Be very aware of state regulations on mixing products which are food and non-food items as well as any regulations such as vending Tylenol or other OTC medications to minors. A laundromat may do well with a drink machine and a soap machine.
Its also important that you only sell items which are labeled for resale. You dont want to purchase a large package of cookies in which each cookie is packaged with clear wrap (for example) with nothing written on it. Each item in the vending machine needs to have the name of the product, date of expiration (if appropriate), and nutritional facts. While it is unlikely that your machine would get inspected, if there is a problem with the item and you were sued, the insurance company could deny your claim because you are professionally selling food products not designed for resale.
11. Service Logistics: Determine how you will service and/or repair the vending machine when issues arise. After you purchase the machine, download and read the manual …before you need to fix something. Be aware of the internal operations of your machine and/or have a repair person already established for your route should problems present themselves. Regular maintenance is required for the machines to keep them in good working order.
12. Inventory: Determine how you will keep track of the machine and product that goes into the machine. This is specifically related to determining the profitability of the location.
13. What Next: Determine how you will outline your plans after you acquire the first location? Are you planning to just stick with one location or are you planning to expand… What is your timeline? How are you planning to handle the logistics for current services and expansion?
14. Sourcing Products: How will the machines initially be stocked and what is the source for the products you will purchase? What is your plan for logistics to keep the machines stocked?
15. Pricing products: Do recon to the area… look at other machines, convenience stores, pharmacies, etc in the area to determine pricing of the products that you put into the machines. You need to ensure you are competitive but also need to be priced to make a profit.
16. Credit Card Readers: All machines you place should have a credit card reader. Prior to the vending machine purchase, ensure you have a clear path on how to obtain credit card readers to attach to a machine. Card readers can only be placed on machines which are newish and have a port for them. You would want to make sure they are either upgradeable or upgraded. ( don't bother buying a card reader already attached to a machine or from a secondhand source such as eBay… occasionally it works out but frequently this is pointless …you will have no control over getting that reader transferred to your account… the faster and usually more effective path is to buy a reader directly from the many credit card processing companies which make and sell these)
17. Jump Start: Some people suggest you purchase established routes when starting out as this will give you a jump start into the process without having to “reinvent the wheel”. This is a discussion unto itself and also as a significant learning curve. There is a lot of Fraud and scams with this process. This is also a definite process of buyer beware
18. Customer Service: Always provide a clear instruction on the machine how the person can reach you should an issue arise and you need to provide a refund or issues such as a product gets stuck and needs to be cleared.
19. Track performance: keep clear details on the machines and what sells and does not sell. You need to update and change out products which are not selling and replace them with items of more interest.
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