You can make money selling ice and water. When a local entrepreneur is exploring potential business opportunities in your town, it is unlikely that selling ice and water will cross their mind. It is interesting that this is the case, as running an ice vending machine business is one of the highest-margin local businesses you can start today.
What does it take to make ice? You only need water and a freezer. Water is affordable across the United States. For every bag of ice you sell, you will be looking at profit margins of more than 95%. This post explores what you need to do to start a successful ice vending machine business.
First, Is Ice Vending Machine Business Really For You?
Like any other local business, running your own, successful ice vending business will require a high level of commitment. Some people get into the vending machine business thinking that it is a passive income business opportunity. Actually, ice vending machine businesses are not fully passive and will demand that you allocate time for maintenance, restocking, and location scouting.
The more vending machines you operate, the more time you will have to allocate to running the ice vending business. Modern vending machines now make it possible to rapidly scale your business without stretching yourself too thin. Modern vending machines come with features such as remote management that make it possible to monitor and manage all your vending machines from anywhere, as long as you have an internet connection. Still, with all the convenience of running such a business, vending machines won't give you "passive income".
You also need to factor in the initial cost of investment when making a decision on whether the ice machines are really for you. Unlike snacks and drinks vending machines, ice vending machines will often require a five-figure capital outlay. The best ice vending machines start from around $20,000 and can top $50,000 depending on size and functionality. Most providers will help you find financing. Popular financing options include paying up to half the cost of the equipment upfront out of pocket and financing the remainder. There are also options of finding cheap vending machines and even to get one for free, but landing on a solid ice vending machine will be a bit harder to come by.
Start by Writing a Good Business Plan
You need a good business plan to start a successful vending machine business. This business plan does not have to be a formal business plan that follows a specific format. The goal of writing a plan is to help you think through the key aspects of running an ice vending machine business so there aren’t any blind spots that catch you off guard in the future. Also a business plan will help you gain a better overview of your business model.
What Business Plan Should Include
Some of the things you need to think through when writing a business plan for your ice vending machine business include
- Location. A location may break or make your ice vending machine business. It is imperative that you find a high-traffic ice vending machine location.
- Essential supplies. You need a freshwater source and a reliable electric outlet to operate an ice vending machine business. Check here how much electricity vending machines consume on average.
- Inventory management. How do you plan to restock your supplies to ensure there are no stockouts? If you have another job, you will need to plan in advance how you will find time to do restocking runs.
- Dealing with competition. Your competition as an ice vending machine operator is not just other ice vending machine operators. Some local grocery stores and convenience stores also sell ice and purified water.
- Marketing and advertising. You will have more sales generated when more people know about your ice vending machine. How do you plan to get the word out about your ice machines in your local area?
You should also make cash flow projections when writing your business plan. Since an ice vending business is a significant investment, write down in detail how you plan to repay any loans, such as Small Business Administration loans, you take to finance the project.
Register an LLC and Secure the Necessary Permits
Running your ice vending machine business under an LLC will give you limited liability protection. When you start an ice vending machine business, you will be able to protect your personal assets in case your ice vending business is sued by customers, creditors, or any other aggrieved third party.
Forming an LLC is pretty straightforward. Consider registering the company in your state or any of these 5 states. It is best to form an LLC in your state unless there are significant tax benefits that can accrue from forming it in another state. With that being said, make sure you always seek tax advice from experts prior to starting vending machine business.
Requirements to register an LLC
To form an LLC, you will need to:
- Get an Employer Identification Number (EIN). You will need an EIN to register an LLC. The IRS issues this number for free, and you can apply online.
- Choose a business name. When choosing a name for your ice vending business, consider factors such as branding and memorability.
- Nominate a registered agent. A registered agent is a person who receives official and legal documents or communication on behalf of the company. You can nominate yourself as the registered agent if you live in the state the LLC is registered in. It is best to consult a lawyer before making this decision.
- Get the Articles of Organization (or Certificate of Formation). Once you’ve decided on the business name and registered agent, you will need to fill out the articles of organization form and file it with your state. States have varying fees for making such a filing. Your state will issue a certificate to indicate that your LLC is duly registered once they approve the filing.
Once you have a duly registered LLC and got a business license, you can proceed to get the permits, licenses, and insurance required to run a vending machine business in your state. You need insurance because you need to cover your business assets in case of losses occasioned by incidents such as fire, motor vehicle accidents, and theft.
Before you can install your vending machine, you need a permit from your state. You will need a permit for every ice machine prior to its installation. To qualify for a permit and avoid permit revocation, you will have to be in compliance with your state’s requirements as far as machine construction, maintenance criteria, performance control, and installation are concerned.
Further, your state will require that you meet specific labeling requirements. For ice and water vending machines, you will likely be required to display prominently on the vending machines your source of water, water treatment/purification method, and the chemical names of additives or preservatives.
Get Cheap/Affordable Ice Vending Machines
New ice vending machines can cost tens of thousands of dollars. For many people, an initial capital outlay of such magnitude is not feasible. If you want to get into the ice vending machine business but can’t afford a new machine, consider getting a used one.
What to Inspect When Buying An Affordable Ice Vending Machine?
Online marketplaces such as the Facebook marketplace will occasionally have used ice vending machines that are still in good condition. When skimming through a few options to buy a used vending machine, account for the following
- The age of the machine. Avoid very old machines. Ice vending machines have a lifespan of about ten years. Beyond ten years, they require major refurbishments to keep operating efficiently.
- Search by brand name. It is possible to search the Facebook marketplace for the exact brand of ice vending machine you want.
- Your state regulations. If you get a used vending machine from out of state, confirm if it meets your state’s guidelines on construction, performance, installation, and maintenance.
- Monthly maintenance costs. Older vending machines will likely have higher maintenance costs. These costs may eat into your margins.Also, don't forget your local utility costs.
- Always bargain. Many sellers on the Facebook marketplace will be willing to accept a price lower than the indicated one. Some sellers may also be open to paying for the cost of delivery.
Financing Instead of Paying in Full
If you have good credit and see yourself operating an ice vending machine business for the long term, it may be a good idea to buy a new ice vending machine. In this case, you can negotiate good financing terms so that the cost of equipment doesn’t take too much of your initial capital.
Most ice vending machine providers have arrangements with financial institutions to offer financing. You will likely be required to make a down payment. To get an ice vending machine built to order, you will enter into an “intent to purchase” agreement with the manufacturer and then pay a 20% to 50% down payment. You can finance the balance through the financial partner the vending machine provider works with.
Find the Best Ice Vending Machine Locations
The success of your ice vending machine business will largely depend on how good your locations are. If you are in a beach vacation destination, for instance, putting your high quality machines near large apartment vacation rentals or holiday resorts at a location beachgoers can easily see, you won’t have any problems selling ice.
With a great location, you can easily make upwards of $1,300 per month per ice vending machine. Because this business has no employees and is mostly automated, you can scale it pretty fast by adding new locations.
What Makes a Great Ice Vending Machine Location?
A great location will have traffic and the supplies you need to successfully operate an ice and water vending machine. You need a reliable supply of fresh water and a safe electric outlet. Water quality varies by state - get a machine with a filter that can purify the kind of water you have in your state.
Street-level visibility is essential to attract new customers on a target market. In a small to mid-sized town, you need to be near a road where 9000+ cars pass daily. It is important that people on the road can see the ice vending machine.
Parking space should also be available so that people can pull up and load bags of ice onto their cars. Great locations include gas stations and near convenience stores.
Get Help Finding Great Locations
You can scout for potential locations yourself or hire a vending locator to do it for you. There are two types of vending locators - full-service locators who will find locations, talk to location owners, and negotiate contracts on your behalf, and those who will just give you a list of potential locations in your area so you can visit and do the negotiations yourself.
The second option is more affordable and may suit you better as a beginner with limited capital. We run such a service and can search for high-traffic locations for you. We’ll deliver a detailed list of potential ice vending locations with contact information so that all you have to do is reach out to ask if they are open to having ice vending machines on their premises.
Plan and Set Up a Restocking Schedule
For an ice vending machine, restocking will mostly involve adding new bags. If you buy a modern machine with remote management software, you will be able to see remotely how many sales you’ve made, if there are maintenance issues that need to be addressed, and whether you need to add more bags.
Even with remote management, you still need to set up a restocking schedule. Also, set aside time for a maintenance schedule - to clean and maintain the machine every week. Having a schedule ensures predictability and gets you in the habit of doing the essential tasks you need to do to ensure a successful vending business.
Final Thoughts
Running ice vending machines is a side hustle that can succeed in most towns and cities across the United States. You can successfully operate your own business while still holding a job or being your own boss on multiple fronts. Because the machines require minimal human management, you can add new locations to scale the business. If you need help finding locations to install an ice vending machine in your area, get a comprehensive list of potential locations here.
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