Vending machines still bag a punch when it comes to delivering a source of income.

Vending machines or AVM's main appeal is in its passive income -so, having touch on how they make coffee, I thought I would share some insights on how this model generate a stream of income. Isn't it great to know that you have just read something that might potentially bring some dough on your table?

The most important question is how much can it bring in? It is not surprising to hear of machines generating USD 1000-2000 in monthly sales.

However, it depends on numerous factors and the important ones are the type of machines, the location, the conditions and the operation.

The type of machines

Different types of AVM would affect the variable cost, the cost of goods and the margins that a machine can bring in.

In general, they are the gum ball, snack, beverage and cans. The lowest margin with the highest cost of goods would be the snack machines.

These machines requires frequent top up of snacks,(high man power cost) and per snack the profit are usually very lean.

Similarly, cans vending machines also require frequent top up and although the margins for cans are better good due to mass purchase, the topping up is much more frequent than snack and so substantially higher manpower cost.

The highest margins, least variable cost (little topping up) would be the gum ball AVM. However, as it is an impulsive purchase, it takes a while for a machine to generate meaningful income.

Beverages or coffee vending machines strikes a balance in between. The margins are better, the topping up less frequent and it enjoys a better sales than gum balls.

So, theoretically vending coffee seem like a best choice to attain this passive income (however, do note the operation).

The location

vending machines concept is similar to retailing outlets and location is everything. However, different to that of a retailing outlets where heavy human traffic flow is preferred, machines thrives in areas of low human traffic. This is also due to lesser retailing outlets thus "forcing" consumers to turn to the machines.

This is not a one rule fits all, gum ball for example would still do well in entertainment outlets where human traffic flow is heavy. And machines vending coffee, still get good sales in office buildings.

Again, in this instance, coffee vending machines seems to be a more flexible machines that can generate sales in different areas.

The conditions

Not as important a decade ago, conditions now plays an important role in a machine P&L. The conditions includes the utility, the rental, commission, marketing fund and to some extent bundling deal.

Bundling deal for AVM is an agreement where a mall owner would ask vending operator to take numerous locations at all the same rent and with it, you can get "lousy" location in front of a convenience store where it is just impossible to attain any sales.

All the conditions varies and it is outside the control of vending operators. However, this is usually mitigate by the fact that machines operators usually choose less human traffic location (but knowing how lucrative it is, lately, mall owners are increasing rental and commission even for these areas).

A major cost center is the man power. Other than the different types of machines, the reliability of machines affects the profits.

All AVM are subjected to harsh conditions, be it the elements or human abuse. So, the more ruggard the machines, the less maintenance -the more efficient is your manpower cost.

Think of it this way, earlier, we mention that you probably can get USD 1000-2000 per machines, however, that is barely enough to feed a family. So, you would need 5-10 of these money grubbers to enjoy a better quality of life, and for that, the less hassle the machines the better the usage of manpower, possibly having more machines!

Unfortunately, coffee vending machines fall under the high maintenance category. They require frequent cleaning, flushing and pests prevention.

Till now, vending machines still is a profitable business and despite harsher conditions, operators can still find ways to maintain and in some cases better the margins. So, think about it -maybe 2-3 coffee vending machines might bring in that extra hundreds to better your quality of life...

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