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How to Write a Vending Machine Business Plan

By Edited Sep 1, 2016 0 1
How to Write a Vending Machine Business Plan

Overview

Creating your own business plan is essential before you can get your vending machine or any other small business off the ground. You'll need one in order to attract investment, and even if you have enough to fund yourself, it's always a good idea to have your business plan written down on paper in order to give yourself the best chance to succeed.

This guide on how to write your own vending machine business plan will help you on the way to acheiving your vending business dreams.

The Summary

This bit is really the most important part of the entire plan. The summary (or executive summary) is where you're quickly laying out the overview of what it is you're trying to accomplish. It should be something that's quick and easy to read and gives the person looking at your plan a solid idea of what you're about in seconds. In many bank branches, business loan officers have to look through dozens of applications and accompanying business plans everyday, so you need to get to the point quickly.

Here' a list of what to include:

  • Your company's mission statement
  • A brief history of your company (when it was founded, company size, etc.)
  • Your company's achievements
  • Your products (Food? Drinks? Prizes? - What?)
  • The future - where you'd like to take your business
  • Any funding/debt you currently have on the business

Business/Company Info

Now that you've gained the investor or loan officer's attention, you'll need to hone in on what your company does and what makes it unique.

You should use this section to describe the sort of market you're trying to appeal to and how your product or service can meet that need. So, if you're trying to appeal to office workers, for example, you might describe how your healthy vending approach is a long awaited breath of fresh air for the staff.

If you have an existing vending business, you can use this section to describe your financial success in terms of both numbers and anecdotal evidence of why you're company is a good one to invest in.

Basically, you're trying to sell yourself and the business, so any unique, positive points will help you to stand out from the crowd. Maybe you offer incredibly tailored refreshment solutions and bespoke machine stocking. Maybe you are the only vendor in town who uses pop tarts. Whatever would appeal to someone looking to pop some money in, that's who you're after.

Your Market

Now it's time to tell your business plan reader what you're up against. It's important here to be honest and genuine about what sort of revenues you might come to expect as well as what competition exists, why you stand out, etc.

If you conduct market research (doesn't have to be fancy... just one or two staff asking people questions on the street), then use it. Tell the lenders why they should be choosing you? Anyway, find out what people generally want, and go for it!

It's important here to try to get a grip on the industry outlook (i.e. what's happening and likely to happen to the world of food/beverage or whatever type of vending you're interested in). This MIT Guide to DIY Market Research can help you there.

As with most businesses, in analysing your market, you'll want to let any potential investors know the following

  • The size of your market (this can be broken down nationally, state-wide and locally)
  • Target market description (i.e. demographics, expected frequency, etc)
  • How much market share you can gain (estimate the size of your town and the number of vending machines that may be present, or go by the number of business/office spaces/work spaces of a certain size (often available from your local planning office or chamber of commerce - then mention your plans for what size business you aim to start with and how much growth you aim to achieve... be conservative here)
  • Unmet client needs that your business can help with
  • Your pricing structure and expected profit margin on your product line
  • Any obstacles your business may face and how you might overcome them (i.e. restrictions on junk food in schools being overcome with healthy alternatives, etc.)

Services Offered

So you've explained what market your going for any why. Now you just need to inform the reader how you plan to tap into the market you've identified.

You will have mentioned in your market analysis what your price margins will be, but you can go into much more detail here about your products and the service you will offer. Explain how you will source them- if it's snacks, will you contact wholesalers, or will you just head down to Sam's each week? How long will your products last? How often will you come around to restock the vending machines? What do customers do if they need a refund? Will you be placing machines on a revenue sharing contract basis?

Work out the ins and outs of your services offered and talk about them here.

Financial Projections

How much money are you going to make?

Investors and lenders are deeply concerned with your market, strategy and business model, but many investors to businesses are looking for proven track results and positive, honest projections for growth.

If you have a brand new business, it's possible to gain investment without having any track record, but investors are putting their money into you rather than the business. You will therefore need to demonstrate experience in this or similar retail markets and a solid grasp of the market and figures going forward.

To work out your projections for growth, you'll need to provide a year-on-year breakdown of at least the following figures

  • Turnover (all money/revenue taken in)
  • Gross profit (revenue - costs of sales such as the wholesale cost of the snacks)
  • Net profit (gross profit - all other expenses and overhead such as salaries, maintenance)

Investors love it if you plan to reinvest your net profit after salaries (rather than pay out dividend or give yourself a bonus or raise) in order to promote faster business growth. Doing so will allow you to expand in year 2, then repeat for year 3 and so on, giving yourself a raise only after projecting conservative growth figures which can accommodate it.

Funding Request

Finally, you'll need to spell out your funding request (hopefully having mentioned it in the overview so that any investor/lender will know exactly what you're after).

Determining how much money you need to get your business going is a tricky task. If you already have an existing business, you'll need to explain how you're looking to expand, what market you're trying to tap, and why you need more financial backing to do so (i.e. why you can't just do it without any funding).

If you're new to business, you'll ideally want enough for a large enough business to get you going, but it's unwise to invest or borrow money in a venture that's completely new to you, and you're much less likely to get funding if you have no experience. Instead of going full-scale, you can try getting enough funding to make  a part-time job. If you only want one or two machines to get started, you might find it easier to take on some consumer or credit card debt in order to do so, but you'll want to move that sort of debt to new credit cards every 6 month or every year in order to avoid the much higher interest rate.

Up to know, we've talked about investors and lenders together, but it's a good idea to know which one you'd like to go for.

Lenders

This is banks, private lender, friends, crowd sourcing (like Prosper or Funding Circle) or any system whereby you borrow money at an agreed interest rate and pay it back overtime.

Here, you're shopping around for the lowest rate you can find, but bear in mind that the quicker you pay off debt, the less you'll pay overall. And it's surprising how little difference there is in the monthly payments of a 15 vs a 30-year mortgage, yet, over the life of the loan, the 15 year works out to be far, far less expensive than the 30 year.

So work out a realistic amount of money that your company can afford to pay back. The monthly repayments should ideally be no more than 30%-40% of your monthly income. Otherwise, it wouldn't take very many missed payments to sink your company.

Investors

Investors are those who are looking for a share in your company in exchange for an up front sum of money, or set installments of funding. Your business is likely to be too small to bother with any kind of publicly listed stock/share style investment, so you're probably looking for an "angel investor" who will evaluate your business plan, and choose whether or not to invest their money for an agreed stake in your business.

You might decide that for, say, a $20,000 investment, you'd be willing to part with 25% of your business. This means that you belive your business is worth $80,000, so a 25% share should cost 1/4 of that amount. An investor who paid $20,000 would get 25% of your net profit each year and have 25% decision-making power as to what to do with the profits each year and where to take the business. As soon as you sold of 50% of your business, you'd no longer have complete control over such decisions, so think carefully before taking on board this type of investment.

There's a great guide on how to find your own angel investor on Entrepeneur.com.

Conclusion

So there you have it. Your guide to writing your own business plan for a vending machine company or almost any other small business. It can seem like difficult and technical writing if it's your first time, so do get help, and show your plan to friends and family who can help you with proof-reading on the way. There are also professional services available which may be worth considering too.

Best of luck!

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Comments

Jul 31, 2013 12:41pm
kmancloquet
I have contemplated starting a vending machine business many times. I think it is an easy way to bring in a ton of cash and the vending model really works!
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