Vending Machines Are NOT Profitable (The Truth)

Summary

In this eye-opening video, Dominick Barbato sheds light on the harsh realities of running a vending machine business. While initially perceived as an easy side hustle, many aspiring entrepreneurs face disappointment due to common misconceptions about profitability. Dominick emphasizes that contrary to popular belief, vending machines rarely yield substantial profits unless they're part of a long-term, well-planned strategy. With personal anecdotes, he highlights key factors like location and strategic reinvestment as crucial to overcoming initial setbacks. For those considering this venture, the message is clear: patience, strategic thinking, and a realistic approach are essential to finding success in this industry.

Highlights

• Expecting quick profit from vending machines is a common pitfall. 📉
• Location is everything in vending - choose wisely! 📍
• Reinvesting profits is critical to building a successful vending business. 💸
• Misunderstanding gross profit can lead to financial pitfalls in vending. 💡
• Setting the right prices is crucial as selling for under a dollar often isn't profitable. 💵

Key Takeaways

• Vending machines often aren't profitable right away, and expecting quick success can lead to disappointment. 📉
• Location is crucial; a poorly chosen one can doom even the best vending machines. 📍
• Reinvestment is necessary for growth; without it, success in vending dwindles over time. 💰
• Understanding your market and pricing correctly is key to maintaining margins and profitability. 💡
• The vending business requires a long-term mindset; instant profits are rare. ⏳

Overview

The idea of starting a vending machine business often comes with the allure of quick, easy profits—a passive income dream for many. Dominick Barbato, however, advises potential entrepreneurs to dig deeper and recognize that the initial setup costs and ongoing investments often outweigh the short-term gains. The key takeaway is that vending machines should not be seen as a get-rich-quick scheme but rather a long-term business commitment.

Dominick stresses the importance of location when it comes to success in the vending industry. Many novices fall into the trap of thinking any location will do, only to find they're earning less than they expected. He shares cautionary tales from his personal journey, illustrating how strategic placement of machines in high-traffic areas can significantly impact profitability and contribute to the gradual growth of a vending business.

Reinvestment also emerges as a pivotal theme in the discussion. Dominick points out that many fail to reinvest their earnings into better machines and locations, which is essential for growth. He encourages aspiring vending entrepreneurs to constantly evaluate and refine their strategies, focusing on service quality, product pricing, and understanding the nuances of different locations to increase their chances of sustained success.

Chapters

• 00:00 - 00:30: Introduction and Overview In this chapter, Dominic Barbato introduces the concept of starting a profitable vending machine business. He addresses the common question of whether vending machines are typically profitable, providing a quick answer that they usually are not, unless approached in a specific way that he will explain in the video. This section sets the stage for a deeper exploration into the profitable vending machine business, capitalizing on the growing interest in side hustles sparked by the pandemic.
• 00:30 - 01:30: The Reality of Vending Business Costs The chapter discusses the financial challenges faced by new vending machine businesses. It points out that buying a vending machine for $2,000, stocking it with $400 worth of products, and paying a commission of 10-20% can lead to a monthly profit of only $300. After subtracting expenses, the operator may only take home $100 if there is no expired product, which is often an issue due to limited distribution capability. This makes the initial phase of the vending business unprofitable and difficult to succeed in.
• 01:30 - 02:30: Challenges and Misconceptions The chapter discusses common challenges and misconceptions faced by individuals starting a vending business. It emphasizes the importance of having a long-term vision rather than expecting quick success and financial gain in the first year. The narrator shares personal experiences of initially having unrealistic expectations and later realizing the necessity of planning for the long run. The chapter advises against relying solely on the money earned immediately from vending machines to fund lifestyle improvements, as the business demands ongoing commitment and long-term planning.
• 02:30 - 03:30: Importance of Reinvestment The chapter entitled 'Importance of Reinvestment' discusses the need for continuous reinvestment in the vending machine business. It emphasizes that while a few machines might generate passive income initially, scaling up requires more proactive engagement. This includes investing in more vending machines, expanding product offerings, increasing location reach, and potentially hiring staff to maintain operations. The chapter cautions that without such reinvestment, a business's success may diminish over time, contrary to the common portrayal of vending machines as sources of passive income.
• 03:30 - 04:30: The Game of Numbers in Vending In 'The Game of Numbers in Vending,' the focus is on the critical elements of running a successful vending business. It emphasizes the importance of understanding and improving profit margins, as well as enhancing efficiency in operations, whether through inventory management or the supply chain. The chapter points out the challenges faced by small vending operators, contrasting them with large national companies, and highlights that these smaller businesses operate on thin margins, underscoring the need for meticulous management to achieve profitability.
• 04:30 - 05:30: Factors Affecting Profitability The chapter titled 'Factors Affecting Profitability' discusses common misconceptions about business profits, particularly in the vending machine industry. It uses the example of a vending business generating $1,000 a month across two accounts to illustrate how gross profit is calculated. Each machine makes $250 in gross profit, but this is not the same as the take-home income. The chapter emphasizes the importance of distinguishing between gross profit and actual profitability, as some might mistakenly equate gross revenue with net income. This misconception can lead to incorrect assessments of business success.
• 05:30 - 06:30: Choosing the Right Machines and Locations This chapter discusses the challenges and strategies involved in making a vending machine business profitable. It highlights the common mistake of not reinvesting in a long-term plan, such as a five-year or ten-year strategy. Many operators focus on immediate cash collection rather than sustainable growth. Business owners are reminded of the importance of strategic planning and decision-making to ensure profitability in the vending industry. The goal is to make money, and how one manages investments and reinvestments can determine long-term success or failure.
• 06:30 - 07:30: Profitability Benchmarks and Pricing Strategies In the chapter 'Profitability Benchmarks and Pricing Strategies,' the focus is on the importance of choosing the right locations for vending machines. The chapter highlights that the success and profitability of a vending business heavily rely on location choices, which can influence the operator's perceptions of the business. The author shares a personal anecdote about beginning a vending business at 17, starting with bulk candy machines and facing challenges in securing profitable locations.
• 07:30 - 08:00: Final Thoughts: Success in Vending The chapter titled 'Final Thoughts: Success in Vending' discusses the author's experience and insights in the vending machine business. The author shares a personal story of starting with a humble beginning, managing bull candy machines, and eventually transitioning to more significant equipment like a soda and snack combination machine. Despite encountering challenges, such as dealing with outdated or inefficient machines and managing expired products, the author emphasizes the profitability and lessons learned throughout the journey. The chapter highlights the importance of perseverance and strategic decision-making in achieving success in the vending business.

Vending Machines Are NOT Profitable (The Truth) Transcription

• 00:00 - 00:30 so you want to start a profitable vending machine business you're searching all over the Internet scouring information wondering are vending machines profitable and the quick answer to that is no most of the time vending machines are not profitable if you look at it this certain way that I'm about to explain in this video my name is Dominic barbato welcome back to this channel I'm super excited for all of you to be here you've seen the height for the last year two years ever since the pandemic everyone's looking for a side Hustle but have you seen the fact that most of these side hustles most of these people
• 00:30 - 01:00 starting aren't profitable vending businesses what I mean by that is this buying the machine stocking with product getting a location paying a commission this is not a recipe for Success because if you're buying the machine for two thousand dollars you're stalking me with 400 worth of product and then you're paying a commission of 10 20 and you're only making 300 a month that means you're taking home maybe a hundred dollars a month if you don't have expired product which you usually do in the beginning because you don't have enough machines to put the product out you run into an issue of unprofitability and a lackluster success in this industry and I don't want any anyone to
• 01:00 - 01:30 start a vending business thinking oh I'm going to be successful in the first year oh I'm gonna make so much money in the first year no that's the worst way to go about it that's how I live for the first two years of my Eventing business and I don't think anyone should ever do that everyone who wants to start a vending business needs to think 10 years in the future you cannot just be living for dollar bills they're dollars these dollar bills when you go to vending machine and if you collect and you live off of that money or you expect that money to pay for some sort of Lifestyle advance that you know you want in your life is not the way to go about it because this business requires continual
• 01:30 - 02:00 reinvestment as any business does quite frankly and if you're not continuously investing into your vending machines into more products into more locations into maybe hiring someone to fill your machines then you know your success is going to dwindle over time because there is many videos out there and I'm guilty for doing it saying oh if any machines are passive income sure when you just start and you only have a few machines it might be passive income but when you grow an Empire of these things and when you have a bunch of routes and you need to get out there and you have suppliers giving you machines and products and it
• 02:00 - 02:30 becomes a different ball game it becomes a game of numbers it becomes a game of understanding your margins increasing your margins where you can and becoming more efficient on your back end or your front end and the way you deliver and maintain your inventory management and supplies so what I really want to address in this video is that most vending businesses that you see out there most vending machines that aren't run by huge National companies canteen Compass Group the small guys the guys who start and just want a few machines those businesses are very close to
• 02:30 - 03:00 unprofitability just because the way they're run you know if you have a vending business let's just say for easy numbers that's making a thousand dollars a month let's just say it's two accounts for machines that means each of those machines is making 250 dollars in gross profit and it is gross for sure because gross profit is the money that you get before you actually are able to take anything home and I've seen it where people will go to a machine collect 100 bucks and think that that is their income that is the money that they made they're profitable they're making money XYZ not the case and the reason I'm
• 03:00 - 03:30 making a video saying vending machine businesses are unprofitable is because the fact that most aren't really reinvesting for a five-year plan or a 10-year plan most of us in this industry are looking for that next poll that next cash collection and I expect you are too because you know it is about the money at the end of the day we are business owners we are on a mission to make money and depending on how you do it and what you do with your money after is up to you but what I am saying here is if you want a profitable vending business and this is the next part of this video if you want to have a profitable vending
• 03:30 - 04:00 business you need to make sure you define these next three things that I'm about to go over so jumping into your vending business the number one thing that is going to hurt your profitability is your locations depending on where you put your vending machines will make or break your success and maybe even make or break your feelings towards the vending business and this was me because for a while I was doing bulk candy machines I started when I was 17 years old in high school both candy machines bought 12 used off Craigslist for like 480 got my start gung-ho went out there started locate it was harder than I
• 04:00 - 04:30 thought place four of them let a couple sit for a few months and then got the rest out that next year my point of saying that is this I could go to a bull candy machine once a month and make 35 40 with a margin of upwards of it was like 80 at the time or I think it was three years into my vending business I bought my first soda and snack combination machine 3 800 worth of credit card processor one of the worst machines in the game but no heat to that company and basically that machine maybe netted me without the taking in the account of expired product about 75 a month so every month I was walking away
• 04:30 - 05:00 with 75 dollars for a piece of equipment that cost almost four thousand dollars I don't want to make another video talking about how good bulk machines are or how good honor boxes are and why those are the best to start when you're in this business but I think a lot of people have a misconception that once you started any business you're profitable because you have a dollar you made a dollar you know okay now you can collect money from your machine but that's not the case because the money isn't the point of any business if any business is a service game and a machine game and if you don't have the right machines the right service or the right location you have a house of cards that's ready to
• 05:00 - 05:30 collapse at any moment and kind of the next piece of information that is valuable and I wish I had when I got into this business was you don't need to buy four thousand dollar machines and put them on the worst accounts possible you need to buy two thousand dollar machines and put them on okay accounts and go from there not every machine is for every location not every location is for every machine what I mean by that is essentially you don't put any machine on any location and you don't put any location on any machine because some locations don't need a machine and some machines don't need that specific location that you want to put it at so
• 05:30 - 06:00 just keep that in mind when you're growing your vending business when you're out there locating and talking to people you want to make sure that you understand that this business is not just about letting an account closing it as quickly as possible and you know putting a machine out there because you're excited to start this business or grow your business I've been there I've wanted to grow my business and I've put machines on the worst accounts possible and sure it pays you a little bit instead of it sitting in the warehouse and making zero but at the end of the day is it better to make twenty dollars and not sit at the warehouse or is it better to relocate that machine and put it somewhere where I'll make 200 three
• 06:00 - 06:30 hundred dollars and that's my last point is this and this is going to kind of be very controversial because honestly I think a lot of people's vending machines don't make this much that get into this industry and jump in and buy a route and this and that your vending machine needs to make at least 350 a month net meaning it should make seven hundred dollars per month on the low end that's the lowest you're of any machine should make 700 per month if you are not making that I really don't think your time is worth it I have locations doing less than 700 but I'm kind of one of those guys where it's like do as I say not as I do because
• 06:30 - 07:00 I've been doing this for years and years and years and all the people jumping into it now kind of need to learn the uh real hard truths of what this industry is how hard it is and you know it's not passive income and there's a lot of moving parts that go into it maybe it's a lot simpler than other businesses at like a technology company but it still has its quirks and its perks I truly believe like if you want success long term in this business have locations making 700 and gross if you have a location doing 500 girls sure that's okay but like you're only left with 250 200 and depending on your margin it's
• 07:00 - 07:30 less so like if your margin's high and you're making less that's fine but if your margin is low and you're making nothing then there's no point of doing this industry there are so many people still out there selling things in a vending machine for less than a dollar you cannot sell things out of any machine for less than a dollar anymore I don't know what product it is what you have unless it's a Airhead you're not going to make a good margin you need to sell things for a dollar plus and honestly we're getting plus that dollar fifty more everything needs to be over that and if it's not I don't know where you live but it's clearly on some state that is not New York so it's
• 07:30 - 08:00 a little different I'll leave you with this I'll leave you with a quote your destiny is choice not chance so make sure you make the right choice today and if you're going to start start today not tomorrow because tomorrow doesn't exist it's only a thought right now so live in the present locate in the present start a vetting business in the present and I hope to see you guys in the next video here soon peace [Music] thank you