So, I’m setting up a vending machine business this year. Here’s my plan – though it’s only that. It’s not a prediction. I just want to have thought through the possibilities before taking action.
Here it is. I’m starting a vending machine business.
I confess, it’s largely egged on by this interview on the Niche Pursuits podcast. Although, my take on it will be largely different.
I’ve got minimal capital – perhaps a maximum of £700. I have no experience in the industry. But I know a thing or two about business and I’m certain to give this everything to make it work.
In away, I feel no pressure – like this can only be a win for me. Even if my plan falls short or even utterly fails, I’ll not have lost anything. Only gained. Experience, knowledge and guts.
So, here is my vending machine business plan – little capital, zero experience.
Why a vending machine business?
Until now, I’ve largely been an online entrepreneur. The bulk of my income was made via subscription-based websites.
But something tells me to diversify into a physical, bricks-and-mortar trade.
Over the years, I’ve dreamt of all sorts of trades, from catering to Venetian plastering. But in recent months, my mind has been delving deep into the mysterious world of vending machines.
The video above was an eye-opener for me. In my opinion, it does a great job of helping a complete beginner get a grasp of the strategic levers.
But like every business, there are pros and cons to weigh, plus overall feasibility to assess.
And, for me, the vending machine business model helps me dodge my main constraints and presents +/- trade-off that plays to strengths, offering maximum potential for success.
What do I want this vending machine business to do for me?
Ultimately, I want this vending machine business to do four things within 12 months:
- accelerate my earnings to become debt-free
- replace my current freelance income
- become my no.1 source of business earnings
- contribute £20,000 in saved capital
- add £120,000 to my total net worth
I see this being my main source of income and mainstay occupation day-to-day. It’s earnings will warrant the time.
I don’t expect nor want passive income. But rather a sustainable, scalable and manageable operation for a solo operator.
Constraints
Time
In the first instance, I will be juggling this alongside running my online business interests and freelance day job. So, I’ll be starting this in my evenings and weekends only.
But as always, once the income begins to warrant more time, I won’t hesitate to give it.
Funds
I’m strictly bootstrapping this, so I’m working off savings to kick start. That won’t be any more than £700 to begin with.
As it begins to generate it’s own cashflow, I will retain earnings to reinvest.
Personnel
I’ll be running this by myself to begin with, but will hope to recruit a team to help me along the way. Again, because of my initial time constraints, this business in the early stages will be run off tiny strips of focused time here and there.
Location
I’m based in the S.W. England. I don’t drive currently, but I won’t allow that to pin me back too much. There will be aspects of this business which will require my presence on the ground, so I’ll set my boundaries to this county (Dorset) only. But there will be remote service aspects to this also, which means I can serve a nationwide clientele from anywhere (,,,more on that later in this plan).
Company Overview & Team
Business Name
I’m calling the business Selmore Vending. The name is a tip of the hat to the core mission mentioned later on.
Founder and Operator
I’ll be captain and crew on this ship when it sets sail, but hopefully as this vending business starts to pick up pace on its course, I’ll pick up plenty of other crew members to help build this.
I’d imagine as we start to expand, the following roles and responsibilities will become vital to success:
Logistics
This person, as the name suggests, will be all about getting stuff from A-B on time and in budget. They’ll have to drive a van, be able to shift equipment back and forth and have access to storage too.
Key skills:
- Time management
- Route planning
- Practical problem solving
- Driving
- Manual handling
Tech Support
This role will need to know their way around the technicalities of A-Z vending machines and payment systems.
They’ll not necessarily be needed for travel, but more for solution design, implementation, training, improvements and migration. Plus, troubleshooting existing set-ups.
They’ve got to live and breathe these systems and be conversant across many manufacturers’ models and be familiar with integrations.
Key skills:
- mechanical engineering
- troubleshooting
- vending set-up
- payment systems
Customer Experience Manager
I want a customer experience manager. Someone who’s job it is to keep the venue owners happy at all times. The vending locations will be the key success factor of this business, so I need someone who will actively champion those relationships.
Key skills:
- account management
- customer relations management
- negotiation
- crisis management
- communications
Project Manager
I’ll need someone who is the glue that sticks everything together or the metronome that keeps us all in sync. The project manager will be the master of the diary. They’ll schedule everything from supplier deliveries for replenishing stock to machine installs.
Key skills:
- project management
- scheduling
- spreadsheets
- reporting
Vision and Unique Selling Point
So, now where does this business fit in? As I mentioned before, I’m calling it Selmore Vending (and there’s a concept behind the name).
Concept
Distribution for producers & suppliers (affiliates)
I want this vending machine business to be distribution for independent producers and manufacturers. It will be a conduit for other businesses that produce things to get their wares in front of ready buyers.
The economy is awash with creative skills. Micro to medium manufacturers who have valuable products to share, but don’t always have the distribution to reach their ideal audiences.
Corporate platforms and channels are available, but competition to get in is high. So are the costs and control over presentation is limited.
But Selmore Vending will level the playing field for such producers, offering:
- niche audience access
- low risk
- lower competition
- lower cost
- more channel control
- exclusivity
It will also provide the following benefits:
- product trialing
- expansion
So, I see Selmore Vending helping independent producers sell more products, profitably via a vending network.
Direct marketing
Loyalty
A loyalty scheme will be my method of acquiring a direct marketing list.
Customers will be encouraged to become members in exchange for benefits, including:
- exclusive price promotions
- early-bird new product launches
Email will be the preferred means of contact. Email signup only required to join (no personal data).
Wholesale or bulk upsell & cross-sell
A unique angle is using sales through these machines to drive bulk upsell and cross-sell opportunities.
So, when customers buy products via the machines, the machine, product packaging and POS promotional items will promote bulk purchases via an eCommerce site. QR code technology will be used to link physical materials to digital sales funnels.
Using trackable codes, customers will be incentivised to place bulk orders. The tracking codes will attribute venues as the source for bulk orders. Venue owners will be rewarded for resulting bulk sales.
Cashflow for venue owners (clients)
And this is where that vending network comes into play.
Selmore Vending will partner with hand selected vending owners whose business location and customer base present prime sales opportunities for our selected producers.
The idea is to broker arrangements with venue owner that grant me permission to market relevant, quality products on their premises (emphasis on the relvant and quality).
Relevance
Before setting up a vending machine, I will work with the venue owner to canvass their customer base to survey their attitude towards certain products.
Market research
- Exploratory: each customer survey will act as a barometer of customer insight towards planned product introductions.
- Qualitative: deep dive interviews with venue owers will help estimate footfall
Quality
Vendor vetting is crucial. The vending arrangement between venue owner and producer is really a partnership. And brand association is real.
My job will be to find compatible and complimentary partnerships and optimise the relationship for maximum profit.
Quality indicators of this relationship will be:
- new customer acquisition (more on this under ‘Demand Generation’)
- sales
- customer feedback
- venue owner feedback
- recycled packaging (more on this later)
Demand generation
Thoughtless vending machine businesses have led to the industry’s less-than-desirable perception of being parasitic.
Like leeches, draining host venues for money.
Firstly, selling commoditised goods, ubiquitous brand names that you can find anywhere means there are easy substitutes in reach for customers to compare with.
This devalues the value proposition of the host venue.
Especially when machines are often left broken or unstocked – effectively, unattended. This leads to customer dissatisfaction and negative venue perception.
In other words, by leaving decommissioned machines onsite, neglectful vending operators make the venues look bad.
This drives dissatisfied customers away.
Selmore Vending will do the opposite. Through quality selection of suppliers and first-class maintenance of machines, we aim to nurture high sales (new and repeat sales).
Also, with a curated product selection, I aim to give venue owners the advantage of offering a range of products that their customers have (a) asked for via surveys, (b) have synergy with other products in-store and generate cross-sales / upsales & (c) customers are prepared to go out of their way to get these products from my selected venues.
I aim to leverage this via a direct marketing referral engine. I will make it easy for customers to share their vending experience with friends.
Profit share (Dividend)
Whilst this is not new to the vending machine business model, perhaps the way I see it is novel.
Venue owners are the client in this relationship. My focus is serving them. They come first. Without the venue, there is no real estate and therefore no vending machine business. Location is key.
I’m essentially acquiring the venue network as my own retail distribution and reselling this to producers.
It’s like I’m an investment manager and venue owners are investment partners.
They leverage their capital asset for a return on investment. And rather than a direct profit-share model based on piecemeal monthly payments, I will pay out annual dividends.
Why annual?
Because the primary commercial benefit to venue owners in this arrangement is the section above, ‘Demand Generation’.
I will help them sell more.
Secondarily, they will earn residual earnings too.
What makes Selmore Vending different?
So far, so good. But not exactly radical. That is, until now.
The following themes make Selmore Vending stand out:
Healthy
In most cases, the products sold via my vending machines will be healthy and nutritious.
Foods:
- zero sugar
- zero caffiene
- fresh
Again, so much of what we see vending machine businesses too is copycat. Branded goods with lots of unhealthy ingredients.
We will be the opposite.
Environmentally conscious
This interview with Tom Szaky, founder of Terracycle, made me rethink FMCG retail from the ground up.
I found his insights into the true economics of recycling and reuse fascinating.
So, I’m going to incorporate his ideas.
Basically, this looks like:
- encouraging producers to produce recyclable & reusable packaging
- facilitate collection for:
- reuse
- recycling
Social responsibility
Affordability
I will make every effort to keep products affordable for the most economically challenged members of society.
Job creation
To expand the business, I will use a stewardship model. It’s like a more accessible franchise ownership opportunity.
Stewards will be responsible for managing key accounts and nurturing those relationships for optimal mutual profit.
Stewards will also manage supplier contacts to ensure restocking and replenishment.
Effectively, stewards will take over the management of particular vending machine routes.
This will relieve me of that duty for a given cluster of venues, and then my role will transition to steward support i.e. making sure stewards have all things necessary to continue the success of their vending route.
Mission
To connect the UK’s value chain of independent producers and retailers of quality, sustainable goods.
Scope
My focus will be on hyperlocal communities. I want to saturate the market in my own local town or nearby locale.
I don’t drive and want to minimise travel expenses and time.
Plus, if I constrain the scope of this vending machine business, I maximise the opportunity for compounding benefits of word-of-mouth.
Products & Services
For venue owners (clients)
Machines
The concept of vending machines goes much further than just the standard coin-operated Pepsi or Coke machines.
Healthy foods
Typically, these promote farm gates, but they can be found in diverse locations.
- Raw milk
- Eggs
- Meat
- Fresh fruit and veg
- Juice
- Frozen meals
- Water
Specialist services
Let’s remember that laundrettes are essentially vending machine businesses. They just delivery a service rather than sell products.
Other examples include vending machines for washing dogs, which offer a much-needed service in rural areas and dog walk routes.
Beyond this, I thnk there is great scope for productising local services via a vending machine business model.
For example, let’s say a local plumbers mate which sells Saniflo macerators and other emergency plumbing supplies via vending machine 24/7 for local property owners, tradesmen and property management From experience, if a B&B has a macerator get clogged up on a weekend during peak tourist season and need an emergency replacement out of hours – it can be very tricky finding a plumber with equipment stock to replace.
For producers & suppliers (affiliates)
I will support independent suppliers and producers within the county in accessing retail venues with complimentary products/services.
Market research
Initially, prior to placement of machine and product, I will run (1) exploratory interviews with selected venue owners and (2) surveys of their customers.
This will justify the investment to source potential suppliers and install a machine.
Trials
Based on market research, I will consult with suppliers to choose a range of products to stock.
Then, products will be trialled. There will be short, limited time projects to trial demand at selected locations.
At the end of trials, I will perform full commercial analysis to determine viability.
If sufficient demand has been demonstrated to indicate the products will have continued sales success at that location, I will enter into a rolling supply contract with said supplier.
Venue access (via vending machines)
Suppliers are given the opportunity to sell their products in quality venues with complimentary products.
Wholesale, bulk buy upsell
POS materials will promote bulk buy opportunity. This will help suppliers build mailing lists and generate upsell potential. Plus, venue owners will gain revenue share from bulk purchase opportunities using promotional codes sourced from their venue.
Vending machine locations broker
As an aside, to my main vending machine operations business, I will offer vending locations sales.
For this, I will broker contracts with venue owners for potential machine placements. Then I will sell these contracted arrangements as collateral to other vending machine operators or suppliers.
Contract values will be based on the present value of future expected cash flow of machines.
Vending business broker
Finally, all this talk of starting and running a vending machine business naturally leads on to the M&A world of vending machine business acquisitions.
Having acquired the skills of vending machine start-up and operations, coupled with my background experience in SME M&A, I will offer consulting services as a vending machine business broker.
Primarily, I will offer vending location valuations. This will comprise of my own methodology used as a vending machine location broker.
I will also offer valuations for vending machine businesses inc. machines and stock.
Market Analysis
I’ll avoid vague macroeconomic metrics, such as market size etc.
I’ll go by my own research findings and observations.
I believe this vending machine business is supported by these socio-economic trends:
Increasing
Consumers
- creator economy of independent producers
- consumer nutritional awareness
- special dietary requirements
- buy local support
Retailer venues
- overheads and running costs of local retailers
- costs of marketing
These factors work in favour as tailwinds to drive the mission:
“To connect the UK’s value chain of independent producers and retailers of quality, sustainable goods.”
Objectives
Within the first year of operation, I’d like to hit these goals:
- 3+ owned machines installed with at least 3 venue owners
- 10+ vending locations sold
- 10+ vending machine business valuations
- 5+ vending machine acquisition deals supported
- 20+ digital product sales (e.g. business plan, eBook, course etc.)
I hope this would translate into:
- ~£7,680 recurring revenue from owned machine revenue
- ~£50,000 in vending location sales
- ~£3,500 in vending business valuation fees
- ~£7,000 in vending business broker fees (5%)
- ~£1,000 in digital product sales
1st year revenue: £69,180
Competition
Main competition:
- ultra-processed snack food vendors
- Pros: high blanket demand
- Cons: many alternatives
- farm gate vending machines selling healthy whole foods
- Pros: specialist audience
- Cons: low footfall
- local stockists of indie producers
- Pros: loyal niche audience
- Cons: no automated vending
No direct competition within my region for healthy food vending machines installed at central town retail outlets.
Approach
Phase 1
Vending locations broker
This is the zero-capital starter.
It’s the fundraising stage for the bootstrapped vending machine enterprise.
Locations will be sold with:
- contract
- business plan
- machine recommendation
- stock agreement
I want it to be as close to a done-for-you deal as possible, Minimise risk, and maximise potential.
Phase 2
Vending machines placed
As soon as I begin earning capital lump sums from phase 1, I’ll invest in owned vending machines.
This will begin my recurring revenue.
As an owner of online subscription-based business, I can attest to how economically transformative having cash flow of recurring income is.
It provides a constant baseline of income that provide great financial utility. It’s a multi-faceted financial asset in itself. Namely, having intrinsic value which increases my net worth, having resaleable asset value – should I seek to sell at any time.
Phase 3
Vending machine valuations & transfer broker
Next, is to introduce vending machine business broker services.
The timing of the launch should coincide with my experience in selling vending locations and running some owned machines.
From this, I would have gained the corer competencies of valuation and negotiation.
I’ll then offer these skills as services to other vending operators, in exchange for fees:
- one-off payment for valuation
- percentage of sale value for brokering business transfer
Phase 4
Vending machine business support
Finally, with some sound experience under my belt in: selling vending locations, running machines and brokering acquisitions, I will publish digital products.
These products will be aimed at giving inexperienced operators off-the-shelf access to my expertise for a nominal fee.
Product types could include:
- eBooks
- Templates
- Courses
Operations
Vending location sales
This will be direct selling (in-person and remote) & eCommerce.
I will approach venue owners by phone, email, social media and in-person drop-ins. This will grow a pipeline of opportunities.
The following collateral will help convert venue owners:
- One-page sales brochure
- Business Plan
- Contract
Then, I will promote open contracts to vending operators via this website and offer them for sale via eCommerce.
SEO and social media will be my lead generation channels.
Vending machine operator
I will purchase new vending machines with full warranty and technical support.
Also, I will use a tap-and-go payment system provider for integrated card payments.
Machine suppliers will install the unit directly at the venue.
I will attend the installation and receive training from engineers, along with all paperwork etc.
I’ll coordinate with product suppliers to stock the machine during venue downtime.
All stock monitoring will be done via software and reports available in real-time.
I’ll regularly coordinate machine restocking with suppliers. Venue owners will be trained to handle a range of troubleshooting issues that commonly occur with machine. This will maintain uptime of machine availability.
3-Year Targets
Year 1 Revenue
- 3 total owned/operated machines = £7,680
- 10 vending locations sold = £50,000
- 10 vending valuations = £3,500
- 5 vending machine business transfer = £7,000
- 20 digital product sales = £1,000
1st year total revenue target = £69,180
Year 2 Revenue
- 10 total owned/operated machines = £25,000
- 20 vending locations sold = £100,000
- 10 vending valuations =£3,500
- 10 vending machine business transfer = £14,000
- 75 digital product sales = £3,750
2nd year total revenue target = £146,250
Year 3 Revenue
- 20 total owned/operated machines = £50,000
- 50 vending locations sold = £250,000
- 20 vending valuations = £7,000
- 30 vending machine business transfers = £42,000
- 100 digital product sales = £5,000
3rd year total revenue target = £354,000
Timeline
Key startup milestones
Keeping an eye on the following milestones will help me stay on track for achieving my goals on time:
Draft vending machine financial analysis (Month 1)
Vending machine analysis is the first step. I need to be very confident that all the metrics regarding this plan stack up and financially validate the business commitment.
Source vending machine suppliers (Month 2)
Next, I think having access to quality vending machines that are suitable for the product choices is mission-critical. Machines comprise the main capital expense and also their functionality plays a big part in the customer experience.
Source finance brokers (Month 2)
Having access to a panel of finance brokers who could be recommended to operators might be handy. I don’t want to get into the business of referring finance companies, but having knowledge of the industry and knowing some recommended agents might be useful in future negotiations.
Source product suppliers (Month 3)
Stocking the machines reliably and economically is key to profitability. I’ll need to find a find and vet these suppliers carefully especially as this model relies on suppliers replenishing machines. Therefore, supplier delivery/logistics and customer service is key to success.
Draft vending locations business development collateral (Month 4)
A key point of traction in the progress of this business will be vending location business development i.e. getting venue owners willing to commit floor space to hosting a machine for a specified time.
Much of the success of this will come down to the quality of my marketing collateral. I’ts got to do the job of pursuading venue owners to take action. I aim to develop a suite of business development collateral which will detail the value of my proposal with an outline bsuiness plan inc financials. I want the collateral to sell much like a website landing page converts.
Set up eCommerce for selling vending location contracts (Month 4)
Once I begin getting traction with signing up venue owners to contracts for hosting machines, I’ll need to begin selling contracts online. Each contract represents the possibility of future potential cash flow for operators, and as assets, they hold value. Selling these assets will help me generate capital for funding further stages for this vending machine business plan.
Buy and place first owned vending machine (Month 6)
With capital on hand, I’ll want to invest in my own vending machines. Using my vending location sales to bootstrap my own machine purchases.
Also, having acquired venue agreements, I’ll also have the ideal spots to place my machines.
First vending machine revenue (Month 6)
I expect my first vending machine revenue to be almost immediate following machine installation. This will be my first taste of recurring revenue.
Draft vending valuation analysis (Month 6)
With my own vending machine operation up and running (with recurring revenue, capital equipment and contracted venue hosting), I’ll value the business to begin tracking my net worth.
Once I’ve drafted the valuation analysis documents, I’ll begin to offer valuation as a service to other operators (selling or buying vending businesses).
Draft vending business transfer broker paperwork (Month 7)
Beyond valuation, I will also begin to advise vending business operators on business transfer or M&A.
Financial Plan
Funding
This operation will be bootstrapped. I will not be taking on any financing, leverage or personal borrowings.
I want to enjoy all revenue generated without debt repayments.
Capital
Capital will be required for buying new vending machines. I intend to fund this through the sales of vending locations to begin with.
Recurring revenue
I’ve learned by running my online subscription-based businesses that recurring cash flow is very advantageous financially. It provides a backdrop of continual income that can be used in various ways to service expenses and costs, giving your enterprise robust solvency at all times – always being able to lay one’s hand on some cash to pay something that comes up.
Net worth
Building net worth is key directly from the ownership of my own vending machines
The recurring revenue is an attractive prospect for potential suitors. And once you’ve built a robust system that is scalable, then the valuation multiple is maximum.
Expansion
Case studies
Armed with some solid examples of how my services have worked for others, I intend to leverage the proof to open up further opportunities.
To expand my vending machine coverage, I hope to recruit new venue owners. In such conversations, I want my previous results to speak for themselves. Detailed case studies are an effective method of leveraging past successes for future growth.
Multiple venue owners
Engaging with multi-venue owners will help aid expansion without the overhead costs of having to engage new venue partners.
Exit?
Partners
If I want to exit my vending machine business in the future, I am more inclined to seek franchisees or partners than buyers.
Selling a business for capital gain is a one-off benefit.
But partnering with vending operators allows me to divest my operational involvement but retain ongoing revenue interests.
It’s quite like the contract farming model. The experienced party leverages their commercial contacts as collateral to kick-start a venture (with economic advantages like bargaining power etc), whilst the operational partner invests their financial and physical capital.
Combined, you arrive at a win-win. I would benefit from recurring revenue that would largely result from a passive involvement and the operator circumvents early stage obstacles and friction.
Conclusion
This is my plan for starting my own vending machine business called Selmore Vending. I will post progress on this blog and also share further details as the concept matures.
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