A Story: Vending Machine Business

This is a long-winded story of failure. I’m hoping to share some misconceptions I had about starting a business as well as “analysis paralysis”.

Back in October of 2018, I was doing what I do best: Trolling Facebook Garage Sale sites. Some of my better items for sale were:

• Litterbox from a pet free home
• Ashtray from a smoke free home
• A box of skunks image I found on Google, trying to sell them as house cats, which somehow still exists on DuckDuckGo:

But, I came across a post that claimed an income of $350/month and an investment of $5k. This of course would draw any idiot in without a business degree, like me.

After several weeks of talking to the person selling them, seeing the machines, and doing research, I was able to get it down to a more acceptable $4,400.

Here’s the actual cashier’s checks to buy them. With my research, this seemed like a solid plan:

• The machines worked and were stocked
• The machines were for sale and recently sold for similar prices to what I’m paying on eBay and other vending outfitters
• They already had an agreement with two existing locations, and these agreements didn’t include any percentage due the business owners

So, I figured, what could I possibly lose? I bought them. Immediately, I went full capitalist and technologist — how do I track sales as they come in and inventory levels with the least amount of effort? Turns out vending machines have a BUS to track all of this already. I started writing a software platform that would allow me to track every single item in the machine’s cost — and if it sold, what the margin was on the products. I went to the existing locations and talked with a few folks up there to determine:

• What products do they want in the machines
• If they haven’t been using the machine, what’s wrong with the products? Not cold enough? Expired? Bad selection? etc

While there, the first thing became apparent: I didn’t do my market research. The lady at one of the locations told me that the merchandise was expired often and so people stopped buying it.

Of course I was aware that expired does not mean bad, but the image vending machines have to start with means I need to keep on top of this. So, I went and signed up for a Sam’s club membership.

WordPress sucks and isn’t letting me upload may pictures.

So, I went and got prices for common items and those they requested. I’m sure that our current terrible economy means that these items are nearly double now, but back then they “weren’t bad”.

Time to do the initial assessment

So, I had two locations. They were both in dialysis centers. Immediately I was concerned about this — can customers eat / drink before or during this process? What conditions cause this and what shouldn’t they eat/drink? Then I found it they would be in the breakrooms for the employees.

So then I had to consider what that looked like. They had vendors dropping off food, they had a refrigerator in the offices, relatively low foot traffic, and moderate access to external food sources (gas stations, fast food, etc).

I then had to go over what was in the machines:

I walked away with baskets of expired product. You’d think high fructose corn syrup, phosphoric acid, artificial flavors and colors would last a long time — and these Pepsi cans seem to indicate they’re from the late 80s… But they weren’t. Not only do you have to deal with weird date formats and obscure calendar formats, you have to guess between made on, best by, expires, and other dates. All which the FDA doesn’t seem to regulate and are up to the manufacturer. And pop expires FAST.

I left there with BOXES like this, all expired full size candy bars. This wasn’t a total loss because this was all stuff that came “free” with the machines, but still, it sucked.

So I ended up giving this out a few days later on halloween, and apparently I was a popular house.

Now, I mentioned that this was late October. It turns out that I would spend roughly half my Sundays driving from my house, to Sam’s Club, to buy merchandise, and then to the two locations to stock them up and collect money. Overall, I don’t think I had collected $100 before I had to give up.

2019 Rolled around fast — and I was getting BUSY at work, I was flying out for entire weeks at a time for customer sites and I could not keep up with the vending business. I was getting contacted by the sites and I did my best to smooth things over, but it became apparent that I really had to either pull these out and put them in a better location, closer to me, or sell them outright. I went for the latter option. Now, a few hundred into food to stock them, and starting to pull my own “expired” products out of the machines.

I had somebody reach out looking to buy them. I wasn’t really in a hurry, but I just wanted to be done. I ended up selling them for a few hundred below what I bought them for. The same guy bought both.

The second one to sell, we met at first. We confirmed the machines worked and talked to the owner some.

A few days later, we met at the first location and that one sold pretty quickly. I then went back to the drawing board with the second. This guy was a decent businessman in my opinion, he was pretty aggressive about talking me down, and my just lack of interest in doing it anymore, I sold cheaply.

The second machine, which he had seen weeks earlier, he had met locally to purchase. I explained I didn’t want to drive out another 45 mins to meet onsite.

A few days later, he reached out and told me that I “scammed him” and that the compressor had went out on the second machine due to being too close to the wall. Dude was a real tool about it, even though he got the machines with a location for several hundred less than I paid.

Thankfully, this transaction is when I was smart. I took out literal crayons that I had in my vehicle and wrote up a bill of sale containing the words “as-is”. He got to eat the cost of a compressor while I got to eat the cost of months of ownership.

I didn’t feel great about it, but I didn’t knowingly sell it that way.

Oh, and then the government shut us down for a few years not long after the sale, so I assume that impacted his side as well.

Lesson being: Research more than you think you should, buy lower than they want, and sell more than they want. Also, shit expires fast, so vending isn’t “passive income”, you work a LOT for nothing.