Setting up vending machines might sound like an easy way to make passive income, but Codie Sanchez, founder and CEO of Contrarian Thinking, a financial advice enterprise, shows us that it’s actually not as hands-off as we think. In a video on her YouTube channel, she breaks down exactly how much money you can make with vending machines, what they actually cost, how much time they take and the rookie mistakes to avoid.
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Instead of doing the experiment herself, Codie had her producer, Caroline, try it from scratch. Caroline had never started a business before, so everything she ran into was super relatable for anyone curious about this side hustle.
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The Startup Costs
Caroline started with a $5,000 budget from Codie to buy four vending machines. She ended up spending $9,400 in total between machines, shipping, setup and inventory. That included newer smart vending machines that don’t accept cash and come with card readers, but they still experienced numerous technical issues.
On top of the machines, the inventory for drinks and snacks came out to around $2,700. Labor and additional expenses, such as fixing machines or ordering better antennas, added another $800 to $1,000. After factoring in everything, the initial investment was higher than expected.
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How Much Can You Make?
At the first location, a lawn care company, Caroline placed four machines. She was earning about $30 per day in sales across all of them. That worked out to around $900 a month, which isn’t bad until you factor in the 4 to 10 hours she was spending per week driving out, restocking and troubleshooting.
Later, she relocated to a 55 and older senior living community. With just one machine, she still made about $30 per day, but with only two hours of work a week. The new location was closer, the machines worked better and the customers actually wanted the service. So with one machine, she was making the same revenue with a fraction of the stress.
The Profit Margins
Codie estimates that, after expenses, each vending machine generates approximately $350 per month in profit if done correctly. That’s with a margin of 30% to 50%, depending on what you’re selling and where. She also realized that drinks like Gatorades tend to sell better than snacks.
Time Commitment and Challenges
The main point Codie is trying to make in this video is that the vending machine business isn’t actually that passive. In this 30-day challenge, we could see Caroline spending hours fixing tech problems and trying to update pricing in glitchy software. She also had to pitch locations in person, which isn’t easy for people who aren’t a natural at sales.
Also, location is everything. The vending machine business is essentially a real estate business. To make good money, your vending machines need to be in locations with consistent foot traffic and where customers actually want vending services.
The Turnaround Strategy
After seeing how much time and money Caroline was spending on four machines, Codie helped her trim things down. She had her focus on just one or two great locations and either sell off the others or find an operator to manage the day-to-day.
Caroline ended up selling one of her vending routes for $200 and found ten more potential leads she could flip the same way. If even half of those convert, that’s another $1,000 to $1,200 in revenue.
Codie also talked about how important it is to design a “perfect fit” business. That means being honest about how much time you want to spend, how close the location is and how involved you want to be. If you only want to work five hours a week and earn $1,000 a month, then you’ll want to choose a simpler setup so you have fewer machines and fewer headaches.
Should You Start a Vending Machine Business?
After this 30-day challenge, Cody and Caroline came to the conclusion that if you find the right location and don’t mind putting in the work, you could bring in $500 to $1,000 a month per machine. That said, it’s far from passive. You’ll most likely have to deal with broken machines, inventory runs and tech issues.
If you don’t mind dedicating time and energy to make this work, go for it. But if you’re looking for something more hands-off, you might want to explore other options that better fit your lifestyle.
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This article originally appeared on GOBankingRates.com: Codie Sanchez: How Much Money Can You Make With a Vending Machine Side Hustle?
