I am always looking for ways to generate some extra money and, while researching vending machines for the lunch room at work, I decided to see if it would be a profitable venture. Here is what I found out.
The great thing about vending machines is they fall into that area known as passive income. That is, income you earn while doing something else.
I purchased a second-hand machine that holds soft drink cans, chocolates and packets of chips (what they call a combo machine). Second-hand, you can pick one up for around $2,000; the machines with all the bells and whistles can be in excess of $15,000.
Effort vs. reward
I should mention at the outset there is some work involved - mainly re-filling the machines and collecting the money - but this is minimal.
Each fortnight I work for 15-20 minutes topping up the machines and travelling about 40 minutes in total and make approximately $140 profit for that work (turnover is around $200) so that makes it about $140 an hour (after tax) in my pocket.
Location location location
The site where I have the machine is a commercial warehouse with about 15-20 staff.
The machine is set up out the front so not only staff, but any trade customers can come and purchase goods during the day. This is a good thing as it boosts the number of people who have access to the machine.
Another bonus of this location is the machine is kept behind closed doors so there is very little chance of theft or damage outside business hours. All of this equates to minimal problems and ease of management.
I buy stock from local supermarket chains when they are on special. It requires a bit of stock held at home, but I keep it all under the house where I have ample room.
I purchased the second hand machine from a company in Adelaide for $2,000.The company shipped the machine to Brisbane, installed it, levelled it and coded all the prices for $300.
You can do some of this yourself but I wasn't interested in investing hours reading manuals.
The company even found the site location for $250 as a once off fee, although you can do that yourself to save money.
I don't pay any royalties back to the business where the machine is located, but I am able to use their electricity. Apparently this is a little unusual but it works well for me.
The standard arrangement for larger companies is to organize a profit share system where 10% of gross is passed back to the company to cover base costs. These sites generally have a larger turnover so the impact is minimal.
It cost about $300-400 to stock up the machine if you hunt around for stock and buy it cheap.
I generally make about $1.00 profit for a can, $1.40 for the chocolates and about $1 on the chips.
Coke is the most popular drink, Cherry Ripes are the most popular chocolate, and they can't get enough of the salt and vinegar chips.
One thing to consider is expiry dates. Cans of drink have an expiry of multiple years, chocolates are normally one year, and usually 6 six months for chips. I manage levels closely to ensure I never get close to holding expired stock.
I generally top it up once a fortnight, but a lot of machines will need servicing weekly as they have a higher turnover.
Dealing with the coins
One thing you will have to deal with is a great deal of coins. A great option is to take all your coins into your nearest branch, and deposit them into a high interest savings account where you will be able to earn interest on the proceeds.
Where I am now
If I decided to throw in the towel now, I would break even.
The machine and all other costs worked out to be around $3,000 six months ago. The machine has held its value and with the profit I've made thus far I would make my money back.
My plan though is to let my vending machine continue to look after itself, managing all the money received in a separate account. This will allow me to measure the overall gain after all the profits and expenses come in and out.
Based on current usage I expect to have the entire machine paid off and the full return on investment within 12 months - a good ROI, especially with the initial machine still worth $2,000.
I'm also looking at using the additional money to buy a second machine in the same area to minimize travel time and maximize profits.
Top 7 Tips
- Start small with one or two machines
- Make sure you place your machine close to where you live. This will save on travel time and save you money on petrol.
- Make sure the machine is set up where there is good traffic flow or where there is an established business with at least 10-15 staff.
- Make sure the position of the machine is in an easily accessible place.
- Think about the location and what chance there is of vandalism or theft.
- Buy stock from local supermarket chains when they have sales.
For me it has been a great way to dip my toe into the world of vending machines. So far it has been hassle free and should there ever be a mechanical issue there is a support line to help.
It has put money in my pocket each week and has been a good way to earn a bit of extra pocket money each fortnight without much effort - an extra $300 a month is always welcome.
Is this something you have ever thought about doing? What other ideas have you tried to generate passive income?