Vending machine business plan for starting your own company

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.

Executive Summary

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.

2.2 Management

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.

2.3 Customers

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 example, 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.

Vending Machine Business Plan - 3 Years Profit Forecast

Vending Machine Business Plan 1
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Company Summary

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 vending machine 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 vending machine 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:

Vending Machine Business Plan - Startup cost

The detailed start-up information is as follows:

Start-up Expenses  
Legal $55,300
Consultants $0
Insurance $32,750
Rent $32,500
Research and Development $32,750
Expensed Equipment $32,750
Signs $1,250
TOTAL START-UP EXPENSES $187,300
Start-up Assets $0
Cash Required $332,500
Start-up Inventory $32,625
Other Current Assets $232,500
Long-term Assets $235,000
TOTAL ASSETS $121,875
Total Requirements $245,000
START-UP FUNDING $0
START-UP FUNDING $273,125
Start-up Expenses to Fund $11,875
Start-up Assets to Fund $15,000
TOTAL FUNDING REQUIRED $0
Assets $23,125
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
TOTAL ASSETS $0
Liabilities and Capital $0
Liabilities $0
Current Borrowing $0
Long-term Liabilities $0
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
TOTAL LIABILITIES $0
Capital $0
Planned Investment $0
Investor 1 $332,500
Investor 2 $0
Other $0
Additional Investment Requirement $0
TOTAL PLANNED INVESTMENT $695,000
Loss at Start-up (Start-up Expenses) $313,125
TOTAL CAPITAL $251,875
TOTAL CAPITAL AND LIABILITIES $251,875
Total Funding $255,000

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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.

Note

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.

Vending Machine Business Plan - Market Segmentation

The detailed marketing segmentation comprising of the company’s target audience is as follows:

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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.

5.2.3 Passers-by:

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:

Market Analysis
Potential Customers Growth YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 CAGR
Working Community 45% 11,433 13,344 16,553 18,745 20,545 13.43%
Residential Community 38% 22,334 32,344 43,665 52,544 66,432 10.00%
Passers-By 17% 8,322 9,455 10,655 12,867 14,433 15.32%
Total 100% 42,089 55,143 70,873 84,156 101,410 9.54%
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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.

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Strategy

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

Vending Machine Business Plan - Sales Monthly

6.4 Sales Yearly

Vending Machine Business Plan - Sales Yearly

6.5 Sales Forecast

Our forecasted sales pattern is given in the following column chart:

Vending Machine Business Plan - Unit Sales

The detailed sales forecast is given in the following table:

Sales Forecast      
Unit Sales Year 1 Year 2 Year 3
Snacks 1,887,030 2,680,320 2,588,240
Beverages 802,370 815,430 823,540
Hot Drinks 539,320 770230 1,002,310
Cigarettes 265,450 322,390 393,320
Lottery tickets 143,530 125,030 176,240
Frozen foods 134,240 394,340 842,230
TOTAL UNIT SALES 3,771,940 5,107,740 5,825,880
Unit Prices Year 1 Year 2 Year 3
Snacks $140.00 $150.00 $160.00
Beverages $600.00 $800.00 $1,000.00
Hot Drinks $700.00 $800.00 $900.00
Cigarettes $650.00 $750.00 $850.00
Lottery tickets $140.00 $120.00 $100.00
Frozen foods $150.00 $1,300.00 $1,450.00
Sales
Snacks $2,149,800 $2,784,000 $3,383,200
Beverages $120,050 $194,500 $268,500
Hot Drinks $50,110 $71,600 $93,000
Cigarettes $139,350 $194,600 $249,850
Lottery tickets $62,350 $72,300 $82,250
Frozen foods $229,500 $365,500 $501,500
TOTAL SALES
Direct Unit Costs Year 1 Year 2 Year 3
Snacks $0.70 $0.80 $0.90
Beverages $0.40 $0.45 $0.50
Hot Drinks $0.30 $0.35 $0.40
Cigarettes $3.00 $3.50 $4.00
Lottery tickets $0.70 $0.75 $0.80
Frozen foods $3.00 $3.50 $4.00
Direct Cost of Sales
Snacks $989,300 $1,839,000 $2,679,700
Beverages $66,600 $119,900 $173,200
Hot Drinks $17,900 $35,000 $52,100
Cigarettes $19,400 $67,600 $115,800
Lottery tickets $27,700 $69,200 $110,700
Frozen foods $64,200 $224,700 $385,200
Subtotal Direct Cost of Sales $1,294,100 $1,699,400 $2,104,700

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Personnel plan

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

 Personnel Plan      
Year 1 Year 2 Year 3
Warehouse Manager $85,000 $95,000 $105,000
Sales Executives $145,000 $152,000 $159,000
Assistants $550,000 $650,000 $750,000
Drivers $66,000 $73,000 $80,000
Technicians $60,000 $63,300 $70,000
Total Salaries $821,000 $938,300 $1,059,000

Financial Plan

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

 General Assumptions      
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 10.00% 11.00% 12.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 26.42% 27.76% 28.12%
Other 0 0 0

8.2 Brake-even Analysis

Vending Machine Business Plan - Brake-even Analysis

 Brake-Even Analysis  
Monthly Units Break-even 5530
Monthly Revenue Break-even $159,740
Assumptions:
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
Sales $309,069 $385,934 $462,799
Direct Cost of Sales $15,100 $19,153 $23,206
Other $0 $0 $0
TOTAL COST OF SALES $15,100 $19,153 $23,206
Gross Margin $293,969 $366,781 $439,593
Gross Margin % 94.98% 94.72% 94.46%
Expenses
Payroll $138,036 $162,898 $187,760
Sales and Marketing and Other Expenses $1,850 $2,000 $2,150
Depreciation $2,070 $2,070 $2,070
Leased Equipment $0 $0 $0
Utilities $4,000 $4,250 $4,500
Insurance $1,800 $1,800 $1,800
Rent $6,500 $7,000 $7,500
Payroll Taxes $34,510 $40,726 $46,942
Other $0 $0 $0
Total Operating Expenses $188,766 $220,744 $252,722
Profit Before Interest and Taxes $105,205 $146,040 $186,875
EBITDA $107,275 $148,110 $188,945
Interest Expense $0 $0 $0
Taxes Incurred $26,838 $37,315 $47,792
Net Profit $78,367 $108,725 $139,083
Net Profit/Sales 30.00% 39.32% 48.64%

8.3.1 Profit Monthly

Vending Machine Business Plan - PROFIT MONTHLY

8.3.2 Profit Yearly

Vending Machine Business Plan - PROFIT YEARLY

8.3.3 Gross Margin Monthly

Vending Machine Business Plan - GROSS MARGIN MONTHLY

8.3.4 Gross Margin Yearly

Vending Machine Business Plan - GROSS MARGIN YEARLY

8.4 Projected Cash Flow

The following column diagram shows the projected cash flow.

Vending Machine Business Plan - Projected Cash Flow Diagram

The following table shows the projected cash flow:

 Pro Forma Cash Flow      
Cash Received Year 1 Year 2 Year 3
Cash from Operations
Cash Sales $40,124 $45,046 $50,068
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
Cash Spending $21,647 $24,204 $26,951
Bill Payments $13,539 $15,385 $170,631
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
Dividends $0 $0 $0
SUBTOTAL CASH SPENT $35,296 $35,489 $43,882
Net Cash Flow $11,551 $13,167 $15,683
Cash Balance $21,823 $22,381 $28,239

8.5 Projected Balance Sheet

The following table shows projected balance sheet:

 Pro Forma Balance Sheet      
Assets Year 1 Year 2 Year 3
Current Assets
Cash $184,666 $218,525 $252,384
Accounts Receivable $12,613 $14,493 $16,373
Inventory $2,980 $3,450 $3,920
Other Current Assets $1,000 $1,000 $1,000
TOTAL CURRENT ASSETS $201,259 $237,468 $273,677
Long-term Assets
Long-term Assets $10,000 $10,000 $10,000
Accumulated Depreciation $12,420 $14,490 $16,560
TOTAL LONG-TERM ASSETS $980 $610 $240
TOTAL ASSETS $198,839 $232,978 $267,117
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $9,482 $10,792 $12,102
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
SUBTOTAL CURRENT LIABILITIES $9,482 $10,792 $12,102
Long-term Liabilities $0 $0 $0
TOTAL LIABILITIES $9,482 $10,792 $12,102
Paid-in Capital $30,000 $30,000 $30,000
Retained Earnings $48,651 $72,636 $96,621
Earnings $100,709 $119,555 $138,401
TOTAL CAPITAL $189,360 $222,190 $255,020
TOTAL LIABILITIES AND CAPITAL $198,839 $232,978 $267,117
Net Worth $182,060 $226,240 $270,420

8.6 Business Ratios

The following table shows data about business ratios:

 Ratio Analysis        
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 4.35% 30.82% 63.29% 4.00%
Percent of Total Assets
Accounts Receivable 5.61% 4.71% 3.81% 9.70%
Inventory 1.85% 1.82% 1.79% 9.80%
Other Current Assets 1.75% 2.02% 2.29% 27.40%
Total Current Assets 138.53% 150.99% 163.45% 54.60%
Long-term Assets -9.47% -21.01% -32.55% 58.40%
TOTAL ASSETS 100.00% 100.00% 100.00% 100.00%
Current Liabilities 4.68% 3.04% 2.76% 27.30%
Long-term Liabilities 0.00% 0.00% 0.00% 25.80%
Total Liabilities 4.68% 3.04% 2.76% 54.10%
NET WORTH 99.32% 101.04% 102.76% 44.90%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 94.18% 93.85% 93.52% 0.00%
Selling, General & Administrative Expenses 74.29% 71.83% 69.37% 65.20%
Advertising Expenses 2.06% 1.11% 0.28% 1.40%
Profit Before Interest and Taxes 26.47% 29.30% 32.13% 2.86%
Main Ratios
Current 25.86 29.39 32.92 1.63
Quick 25.4 28.88 32.36 0.84
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.
Activity Ratios
Accounts Receivable Turnover 4.56 4.56 4.56 N.A.
Collection Days 92 99 106 N.A.
Inventory Turnover 19.7 22.55 25.4 N.A.
Accounts Payable Turnover 14.17 14.67 15.17 N.A.
Payment Days 27 27 27 N.A.
Total Asset Turnover 1.84 1.55 1.26 N.A.
Debt Ratios
Debt to Net Worth 0 -0.02 -0.04 N.A.
Current Liab. to Liab. 1 1 1 N.A.
Liquidity Ratios
Net Working Capital $120,943 $140,664 $160,385 N.A.
Interest Coverage 0 0 0 N.A.
Additional Ratios
Assets to Sales 0.45 0.48 0.51 N.A.
Current Debt/Total Assets 4% 3% 2% N.A.
Acid Test 23.66 27.01 30.36 N.A.
Sales/Net Worth 1.68 1.29 0.9 N.A.
Dividend Payout 0 0 0 N.A.

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