Do you want to start vending machine business?
Starting a vending machine business is very easy and extremely profitable as well. If you don’t know how to start a vending business, just go through this business plan. It will guide you through everything which you need to know for starting this venture.
The first thing you should do is to develop a comprehensive plan for your business. The business plan will not only help you in startup but it will also help you in taking important decisions for your company over the next years. In case you don’t know how to write a good business plan, we are providing a detailed business plan of a vending machine business startup ‘Crunch & Cool’ to help you avoid the trouble of making a plan yourself.
2.1 The Business
Crunch & Cool will be a licensed and insured vending machine business whose main office will be located in Downtown Manhattan. The company’s warehouse for storing the products will be at a 10 minutes’ drive from the main office.
The business will be solely owned and operated by Jack Kith. Jack will hire a small team comprising of sales executives, drivers, technicians and assistants for helping him in his venture.
Our customers will primarily be the residential and working-class community living in Manhattan but with time, we also plan to increase our business in other cities as well.
2.4 Target of the Company
Our primary target is to become the best vending machine business in Manhattan within next 3 years of our launch. As per our vending machine business plan, our secondary target is to achieve the net profit margin of $10k/month by the end of the first year, $15k/month by the second year, and $25k/month by the third year.
3.1 Company Owner
Jack is a business graduate of Harvard University. After completing his Bachelor’s, he worked with a couple of fast food restaurants at executive positions. He is known for his sharp business acumen and exceptional management skills.
3.2 Why the Business is being started
The main motive behind Jack opening a vending machine business is his intense passion for business. Jack has exceptional business skills and this venture is just his first step into the business world.
3.3 How the Business will be started
The company will buy used vending machines for startup which will then be installed in several regions in Manhattan. Nearly 35% of machines will be located in the residential zone while the remaining will be distributed in the commercial zone as well as near schools, offices, and other institutions. The company’s financial experts have forecasted following costs for the start-up:
The detailed start-up information is as follows:
|Research and Development||$32,750|
|TOTAL START-UP EXPENSES||$187,300|
|Other Current Assets||$232,500|
|Start-up Expenses to Fund||$11,875|
|Start-up Assets to Fund||$15,000|
|TOTAL FUNDING REQUIRED||$0|
|Non-cash Assets from Start-up||$18,750|
|Cash Requirements from Start-up||$0|
|Additional Cash Raised||$18,750|
|Cash Balance on Starting Date||$21,875|
|Liabilities and Capital||$0|
|Accounts Payable (Outstanding Bills)||$0|
|Other Current Liabilities (interest-free)||$0|
|Additional Investment Requirement||$0|
|TOTAL PLANNED INVESTMENT||$695,000|
|Loss at Start-up (Start-up Expenses)||$313,125|
|TOTAL CAPITAL AND LIABILITIES||$251,875|
Services for customers
Before you move to starting a vending machine business, you must plan what type of vending machines will you install and what products will they provide to your customers because you can only plan the subsequent things after this stage.
Our vending machines will offer following products:
- Snacks such as chips, cookies, cakes etc.
- Drinks and beverages including milk
- Hot served drinks including tea and coffee
- Frozen foods, chilled drinks and ice creams
- Cigarettes and lottery tickets
Marketing Analysis of vending machine business
The most important component of effective vending machine business plans is their marketing analysis that’s why Jack acquired the services of marketing experts to help him through this phase. It is only after this stage that a good vending machine marketing strategy could have been developed. After identifying the local market trends in Manhattan, the marketing experts and analysts helped him in developing a brilliant vending machine business model. If you are starting on a small scale then you can carry out a marketing analysis yourself by taking help from this vending machine business plan template.
5.1 Market Trends
The vending industry annually contributes about $30 billion in revenue to the United States. There are more than 7 million vending machines in the United States and nearly 100 million Americans use one of the installed vending machines each day. Considering the convenience they provide to the users, the number of installed vending machines have been increasing during the last few years. In short, this industry has a lot of potential and a business in this industry can yield immense profit provided that you plan it successfully.
5.2 Marketing Segmentation
Our marketing experts have identified following type of target audience which can become our potential customers.
The detailed marketing segmentation comprising of the company’s target audience is as follows:
5.2.1 Working Community:
The first category includes the workers and employees who work in the businesses or offices in Manhattan. This group leads a strenuous life, burdened with plenty of work and thousands of matters to think upon. Due to their busy routine, most of the time they can’t go to restaurants and hence use vending machines for grabbing a bite.
5.2.2 Residential Community:
The second group of our target customers will be the residential community. This group comprises of children, teens, adults and senior citizens. They also use vending machines to conveniently get their required products as compared to visiting the stores.
The third category includes those people who do not work or reside in our target areas but have come to for any business purpose or commercial activity. This group also often tends to stop by vending machines for having a quick snack, beverages or cigarettes.
The detailed market analysis of our potential customers is given in the following table:
|Potential Customers||Growth||YEAR 1||YEAR 2||YEAR 3||YEAR 4||YEAR 5||CAGR|
5.3 Business Target
Our business targets are as follows:
- To become the best vending machine business in Manhattan within next 3 years of our launch
- To recover the initial investment within next 1 year of launch
- To expand the business and install vending machines in 3 other cities within 5 years
5.4 Product Pricing
After considering the market demands, we have priced all our products in the similar ranges as of our competitors.
Sales strategy is an important component of any startup plan hence it must be given proper attention before you think about how to start a vending machine business.
6.1 Competitive Analysis
Vending machine industry is one of the most competitive industries since there are more than 7 million vending machines in the United States so any startup in this industry has a really tough competition. To survive in such competitive environment, you must come up with some competitive advantage before thinking about how to open a vending machine business. Our competitive advantage is that our vending machines will be always full of fresh products and stock. We will make sure our every customer gets everything from our vending machines so that they don’t need to visit stores or other places.
6.2 Sales Strategy
We will install our machines at all those places where there are no prior vending machines installed. We will offer a 10% discount on all products for the first three months of our launch. We will also paint vending machines in various eye-catching themes for the purpose of attracting customers.
6.3 Sales Monthly
6.4 Sales Yearly
6.5 Sales Forecast
Our forecasted sales pattern is given in the following column chart:
The detailed sales forecast is given in the following table:
|Unit Sales||Year 1||Year 2||Year 3|
|TOTAL UNIT SALES||3,771,940||5,107,740||5,825,880|
|Unit Prices||Year 1||Year 2||Year 3|
|Direct Unit Costs||Year 1||Year 2||Year 3|
|Direct Cost of Sales|
|Subtotal Direct Cost of Sales||$1,294,100||$1,699,400||$2,104,700|
After deciding the strategy, you must prepare a personnel plan before you start your own vending machine business. The personnel plan of Crunch & Cool is as follows:
7.1 Company Staff
Jack will act as the CEO of the company and will initially hire following people:
- 1 Warehouse Manager for managing the operations at company’s warehouse
- 2 Sales Executives responsible for marketing initiatives
- 15 Assistants for filling vending machines with stock
- 4 Drivers for transporting products
- 2 Technicians for ensuring the vending machines keep working perfectly
7.2 Average Salary of Employees
|Year 1||Year 2||Year 3|
The final thing to do before you think about how to open a vending machine business is to develop a comprehensive financial plan which will cover the detailed costs of startup.
8.1 Important Assumptions
|Year 1||Year 2||Year 3|
|Current Interest Rate||10.00%||11.00%||12.00%|
|Long-term Interest Rate||10.00%||10.00%||10.00%|
8.2 Brake-even Analysis
|Monthly Units Break-even||5530|
|Monthly Revenue Break-even||$159,740|
|Average Per-Unit Revenue||$260.87|
|Average Per-Unit Variable Cost||$0.89|
|Estimated Monthly Fixed Cost||$196,410|
8.3 Projected Profit and Loss
|Pro Forma Profit And Loss|
|Year 1||Year 2||Year 3|
|Direct Cost of Sales||$15,100||$19,153||$23,206|
|TOTAL COST OF SALES||$15,100||$19,153||$23,206|
|Gross Margin %||94.98%||94.72%||94.46%|
|Sales and Marketing and Other Expenses||$1,850||$2,000||$2,150|
|Total Operating Expenses||$188,766||$220,744||$252,722|
|Profit Before Interest and Taxes||$105,205||$146,040||$186,875|
8.3.1 Profit Monthly
8.3.2 Profit Yearly
8.3.3 Gross Margin Monthly
8.3.4 Gross Margin Yearly
8.4 Projected Cash Flow
The following column diagram shows the projected cash flow.
The following table shows the projected cash flow:
|Pro Forma Cash Flow|
|Cash Received||Year 1||Year 2||Year 3|
|Cash from Operations|
|Cash from Receivables||$7,023||$8,610||$9,297|
|SUBTOTAL CASH FROM OPERATIONS||$47,143||$53,651||$59,359|
|Additional Cash Received|
|Sales Tax, VAT, HST/GST Received||$0||$0||$0|
|New Current Borrowing||$0||$0||$0|
|New Other Liabilities (interest-free)||$0||$0||$0|
|New Long-term Liabilities||$0||$0||$0|
|Sales of Other Current Assets||$0||$0||$0|
|Sales of Long-term Assets||$0||$0||$0|
|New Investment Received||$0||$0||$0|
|SUBTOTAL CASH RECEIVED||$47,143||$53,651||$55,359|
|Expenditures||Year 1||Year 2||Year 3|
|Expenditures from Operations|
|SUBTOTAL SPENT ON OPERATIONS||$35,296||$39,549||$43,582|
|Additional Cash Spent|
|Sales Tax, VAT, HST/GST Paid Out||$0||$0||$0|
|Principal Repayment of Current Borrowing||$0||$0||$0|
|Other Liabilities Principal Repayment||$0||$0||$0|
|Long-term Liabilities Principal Repayment||$0||$0||$0|
|Purchase Other Current Assets||$0||$0||$0|
|Purchase Long-term Assets||$0||$0||$0|
|SUBTOTAL CASH SPENT||$35,296||$35,489||$43,882|
|Net Cash Flow||$11,551||$13,167||$15,683|
8.5 Projected Balance Sheet
The following table shows projected balance sheet:
|Pro Forma Balance Sheet|
|Assets||Year 1||Year 2||Year 3|
|Other Current Assets||$1,000||$1,000||$1,000|
|TOTAL CURRENT ASSETS||$201,259||$237,468||$273,677|
|TOTAL LONG-TERM ASSETS||$980||$610||$240|
|Liabilities and Capital||Year 1||Year 2||Year 3|
|Other Current Liabilities||$0||$0||$0|
|SUBTOTAL CURRENT LIABILITIES||$9,482||$10,792||$12,102|
|TOTAL LIABILITIES AND CAPITAL||$198,839||$232,978||$267,117|
8.6 Business Ratios
The following table shows data about business ratios:
|Year 1||Year 2||Year 3||Industry Profile|
|Percent of Total Assets|
|Other Current Assets||1.75%||2.02%||2.29%||27.40%|
|Total Current Assets||138.53%||150.99%||163.45%||54.60%|
|Percent of Sales|
|Selling, General & Administrative Expenses||74.29%||71.83%||69.37%||65.20%|
|Profit Before Interest and Taxes||26.47%||29.30%||32.13%||2.86%|
|Total Debt to Total Assets||2.68%||1.04%||0.76%||67.10%|
|Pre-tax Return on Net Worth||66.83%||71.26%||75.69%||4.40%|
|Pre-tax Return on Assets||64.88%||69.75%||74.62%||9.00%|
|Additional Ratios||Year 1||Year 2||Year 3|
|Net Profit Margin||19.20%||21.16%||23.12%||N.A.|
|Return on Equity||47.79%||50.53%||53.27%||N.A.|
|Accounts Receivable Turnover||4.56||4.56||4.56||N.A.|
|Accounts Payable Turnover||14.17||14.67||15.17||N.A.|
|Total Asset Turnover||1.84||1.55||1.26||N.A.|
|Debt to Net Worth||0||-0.02||-0.04||N.A.|
|Current Liab. to Liab.||1||1||1||N.A.|
|Net Working Capital||$120,943||$140,664||$160,385||N.A.|
|Assets to Sales||0.45||0.48||0.51||N.A.|
|Current Debt/Total Assets||4%||3%||2%||N.A.|
Illustrative business plan samples
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