I just stumbled upon this: http://www.patientcashflow.com/2012/02/ ... -machines/
It sounds too good to be true and I have no experience with vending machines, but from what I saw in Japan, they can make a lot of money if there is consistent demand. (Japan has an amazing amount of vending machines everywhere, and the Japanese love them).
Anyone had any experiences with vending machines?
Passive income from vending machines?
I have'nt myself, but I know a man who operated them, and has since moved into manufacturing them. It can be very lucrative, but I would guess 120% ROI is going to be tough if your a small scale operator. Like Ice Cream vans, the difficulty is finding the best places to place them. Many of the best pitches are monopolised by existing operators who carve up areas up between themselves, and will try and keep outsiders from trampling on their patch. Been a cash based business, it inevitably attracts some disreputable and criminal operators.
As for been passive, until you get to the point of been able to outsource management there's going to be a fair amount of work; regularly emptying and restocking, dealing with technical problems, refunds, vandalism, theft, liability insurance etc etc.
On the other hand, if your able to get half a dozen or so great pitches in your local area, the work involved could be quite limited. Another idea which might be less hassle: coin operated 'kiddy rides' http://www.kiddyrides.uk.com/
As for been passive, until you get to the point of been able to outsource management there's going to be a fair amount of work; regularly emptying and restocking, dealing with technical problems, refunds, vandalism, theft, liability insurance etc etc.
On the other hand, if your able to get half a dozen or so great pitches in your local area, the work involved could be quite limited. Another idea which might be less hassle: coin operated 'kiddy rides' http://www.kiddyrides.uk.com/
An acquaintance owned several of those automatic photo boots in shopping malls and movie theaters. There was quite a bit of vandalism so he was constantly repainting and repairing them, but in the end he made a fairly easy living. A few locations required that install a separate electrical meter, while at others he offered a larger cut of the profits to include the electricity.
I knew a guy who ran vending machines for a living. He made a decent income and lived a middle class lifestyle, but the income was hardly passive. He worked his butt off stocking, restocking, transporting, negotiating, cold calling and otherwise trying to get new territory, dealing with maintenance, etc.
His schedule was a combination of "work whenever I want to" and "always on call for dealing with delivery/stocking/mainenance issues"
He enjoyed the physical aspects of the work and getting to go outside throughout the day (not working with the office) but he also found it very stressful, he had plenty of business relationships that soured due to unfair dealing on the property owners' part. Also the constant "grind" wore on him. His goal was to build the business substantially and then sell it, but I don't know if he ever did. He complained that there was a lot of competition and it took a lot of work to secure a new location, sometimes only to lose it to a lower bidder.
The money was particularly good considering he hadn't gone to college.
So I think there is money there but I never got the impression that it was passive income.
His schedule was a combination of "work whenever I want to" and "always on call for dealing with delivery/stocking/mainenance issues"
He enjoyed the physical aspects of the work and getting to go outside throughout the day (not working with the office) but he also found it very stressful, he had plenty of business relationships that soured due to unfair dealing on the property owners' part. Also the constant "grind" wore on him. His goal was to build the business substantially and then sell it, but I don't know if he ever did. He complained that there was a lot of competition and it took a lot of work to secure a new location, sometimes only to lose it to a lower bidder.
The money was particularly good considering he hadn't gone to college.
So I think there is money there but I never got the impression that it was passive income.
The article seems overly optimistic. 20% cost of goods sounds low to me. You won't get there by selling soda cans at $1 each.
Also, the situation described in the article is perhaps the most favorable scenario in which to own vending machines-- established locations, established business patterns, apparently no electricity costs (this isn't explicitly stated, but no costs are mentioned). Maintenance costs are not discussed beyond stating that these can be reduced by doing your own maintenance. Expected service life of the machines is not discussed, so we are to presume that these machines last essentially forever?
It's funny that the article discusses the owner of these machines as once owning 1000 machines. Someone who owns 1000 machines will be able to give you a range regarding what percentage of revenue will be consumed by maintenance under ordinary operating circumstances.
The end of the article, regarding restocking times surprised me. There seems to be a conflict of interest in wanting to restock the machines less frequently, but wanting to maximize sales.
As mentioned above, it's only really passive income if you hire someone to do the stocking and maintenance for you, the description in the article seems to be more of a self-employed part time job. The income derived from such a job might well be taxed as earned income rather than capital gains (oops!), so even if your COG is 20%, your taxes will be 30%+.
I've run a business. I've never owned a vending machine. When I read an article like the one in the link, I get the impression that the author has never run a business or owned a vending machine. The discussion of expenses suggests little to no understanding of the practical side of the business.
Also, the situation described in the article is perhaps the most favorable scenario in which to own vending machines-- established locations, established business patterns, apparently no electricity costs (this isn't explicitly stated, but no costs are mentioned). Maintenance costs are not discussed beyond stating that these can be reduced by doing your own maintenance. Expected service life of the machines is not discussed, so we are to presume that these machines last essentially forever?
It's funny that the article discusses the owner of these machines as once owning 1000 machines. Someone who owns 1000 machines will be able to give you a range regarding what percentage of revenue will be consumed by maintenance under ordinary operating circumstances.
The end of the article, regarding restocking times surprised me. There seems to be a conflict of interest in wanting to restock the machines less frequently, but wanting to maximize sales.
As mentioned above, it's only really passive income if you hire someone to do the stocking and maintenance for you, the description in the article seems to be more of a self-employed part time job. The income derived from such a job might well be taxed as earned income rather than capital gains (oops!), so even if your COG is 20%, your taxes will be 30%+.
I've run a business. I've never owned a vending machine. When I read an article like the one in the link, I get the impression that the author has never run a business or owned a vending machine. The discussion of expenses suggests little to no understanding of the practical side of the business.
Good points above. My uncle did this. I got excited about it and he told me to stick to the PHD. What he meant is that I wasn't tough enough. This guy was ex military/working class thug. He explained where you get machine placement is all about turf. Machines can be vandalized to drive a proprietor out of a market. He was well off...almost a millionaire next door type. But he was tough and discouraged my interest.
When I started working in tech I saw my automaton coworkers pump dollar after dollar into the machines in the lunchroom. Nerds eat that trash...Austin peanut butter crackers, skittles, coke, kettle chips. I used to watch the low buck employee hired to empty the machine replace the sealed money capsule and put junk food in all the cubbyholes.
This was at HP. When things got bad we got rid of our subsidized cafeteria. The new outfit Marriott moved out the old vendor and gave a package deal for the cafeteria, coffee machines and vending machines. Turf. Old team was forced out. The cafeteria was profitable juiced by the ripoff machines.
At my second company similar thing happened. We started as a dozen guys at a startup. Snacks and drinks free. As we grew the place up Over 100 it was too hard to bring in the free stuff. The outfit that stocked our clean room gowns, first aid kits and fire extinguishers moved in 3 big machines. Turf again.
You need to somehow corner the market in a junk food eating environment. Stressful tech companies are a good spot but the big players know this. Most of this has been said here in bits and pieces. Just thought I'd share my observations.
Edit- just had an idea. In silicon valley we have tons of startups. Why not skip the machines all together and offer a service where you fill up the free snack basket weekly? Just charge a modest markup for delivering junk food. Many startups have this "productivity tool". It is a real waste of time going out to Costco to get all this trash. Our office manager said it was degrading and got the vending machines.
When I started working in tech I saw my automaton coworkers pump dollar after dollar into the machines in the lunchroom. Nerds eat that trash...Austin peanut butter crackers, skittles, coke, kettle chips. I used to watch the low buck employee hired to empty the machine replace the sealed money capsule and put junk food in all the cubbyholes.
This was at HP. When things got bad we got rid of our subsidized cafeteria. The new outfit Marriott moved out the old vendor and gave a package deal for the cafeteria, coffee machines and vending machines. Turf. Old team was forced out. The cafeteria was profitable juiced by the ripoff machines.
At my second company similar thing happened. We started as a dozen guys at a startup. Snacks and drinks free. As we grew the place up Over 100 it was too hard to bring in the free stuff. The outfit that stocked our clean room gowns, first aid kits and fire extinguishers moved in 3 big machines. Turf again.
You need to somehow corner the market in a junk food eating environment. Stressful tech companies are a good spot but the big players know this. Most of this has been said here in bits and pieces. Just thought I'd share my observations.
Edit- just had an idea. In silicon valley we have tons of startups. Why not skip the machines all together and offer a service where you fill up the free snack basket weekly? Just charge a modest markup for delivering junk food. Many startups have this "productivity tool". It is a real waste of time going out to Costco to get all this trash. Our office manager said it was degrading and got the vending machines.