I Bought a Vending Machine Business
Here's What I've Learned So Far
Hey everyone!
Based on my previous posts, it may be obvious to some that working a 9-5 for the rest of my life isn’t part of my plan.
One of my goals before the end of the year was to earn a single dollar with a business I own and manage. There’s something about being the sole reason the dollar ended up in your hands that is so gratifying. Lets just say, mission accomplished!
The Search for an Existing Vending Machine Business:
I’ve dabbled some in locating a few bulk vending machines (Think gumball machines placed in the lobby of restaurants). It is not easy… After around 4-hours of door-to-door pitching, I landed one location. Because of this, I knew I wanted to purchase an existing vending business. While balancing a full-time job, it is important to leverage your cashflow to reduce your time obligation. Everyone’s time value of money is different but if I could find a fair price, I knew purchasing existing accounts was the way to go.
How I Found the Right Vending Business for Me:
I was barking up the wrong tree for a long time. There was an excellent business on sale for ~$130K that had great financials, great locations, and is serviceable on the weekends. But having just graduated college, I didn’t have that kind of money built up. Being that the owner did not want to finance on their part, I spent a lot of time with banking services, throwing my email out there to so many sketchy websites in hopes of a magical SBA 7A loan falling into my lap. From my experience, taking out an SBA loan seemed near impossible to purchase a vending machine business. I needed to think smaller, taking out a loan for my first business venture was starting to feel very risky.
I frequented Facebook marketplace and Craigslist every few days to see whats on the market. Around 5 months after I was prepared to throw down serious money for a business, a single location + machine was posted on Facebook marketplace. After talking with the owner, they had recently accepted a job out of state and are getting rid of their business. I took this opportunity to swoop in and purchase 6 machines on location for $20,000.
Why $20,000? Well, based on my previous conversations with operators in the area, it seemed like vending machines businesses should sell somewhere near 1.5x their yearly revenue. This varies business to business and location to location, but I was comfortable with the valuation given some numbers that were provided by the seller. Note: there was not a great amount of historical sales to study, as the business was young and credit card readers were only recently installed. We’ll call it a calculated risk :)
The First Month:
I won’t make any snap judgements on the purchase price of the business quite yet. I still need to establish my base inventory, settle down with a stocking schedule, and transfer the card readers under my name. Up to this point, everything has been very inefficient. I know I can improve revenue and cut down on logistics costs once the dust settles.
But for the day-to-day, I’ve been having a ton of fun! I’ve troubleshooted a couple of machine errors, changed up some pricing, and built relationships with the owners. My biggest pain point is handling all of the inventory. Drinks are heavy, chocolates melt, bags of chips puncture. As a young, active person, some aspects of the business even has me drained by the end of the day.
There’s no such thing as 100% passive income (Haha maybe dividends stocks) and vending is no different. I’ve spent an average of ~4-5 hours per week dedicated to the business between paperwork, shopping, and servicing. So about an hour per location per week, not bad.
I’ll keep everyone posted on the process and give a full financial breakdown in a few weeks. Fingers crossed that I didn’t overpay for this business!
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