How We Bought Our New Machine + Weekly Financials: 4/18/22
A detailed walk through of how we purchased our new machine & our weekly financials.
Let’s walkthrough this new machine purchase, together.
Welcome to this week’s edition of Our Financials & Other KPIs.
Through complete transparency, people are able to make the most informed decisions with their money. In efforts to stay transparent with you all about our vending business, we share our financials and other key performance indicators on a weekly basis.
As promised, here is our detailed post walking you through exactly how we purchased our new machine — projected to increase our revenue by +$10,400 and free cash flow by +$6,240, annually.
But first, let’s start by breaking down every dollar we made this week!
Expected Read Time: 3 minutes
Our Vending Business — Financials
A detailed walk-through of how much money we made this week.
Total Number of Machines: Eight (8)
Total Revenue Generated: $1,202.95
Total Number of Snacks Sold: 872 snacks
Canada Dry — 12 oz. Ginger Ale
Munchies Flamin’ Hot Mix
Snapple Watermelon Lemonade
Total Amount Spent on Buying the Snacks: ($269.54)
Sam’s Club — ($269.54)
How Long it Took to Fill the Machines: ~3 hours
—
Free Cash Flow Generated: $933.41
Free Cash Flow per Machine on Average: $116.67
Free Cash Flow After Factoring in Time Spent Filling Machines: $888.41
*assuming $15 / hour
Wins & Losses
Turns out running a vending machine business can be hard — these are our biggest challenges and victories from last week.
Wins —
We were asked to park a vending machine in a local office building. This is particularly exciting because it could serve as a new home for one of our machines that’s been parked in a room without power for the last two months.
Losses —
The school year at the University where a majority of our machines are parked is ending in a few weeks. This will result in a significant decrease in revenue.
What We’re Reading & Listening To
You’re obviously reading this post because you’re entrepreneurial minded, invest, or care about generating passive income. Us too — so, here’s what we read & listened to this week that taught us a thing or two.
Reading —
If you haven’t yet joined my LinkedIn Group, do that! I just sent a copy of my new favorite book Why Does the Stock Market Go Up? to a member. It’s a wonderfully written (and illustrated) read.
This Twitter thread by Danny Baldus-Strauss about several lessons he’s learned while traveling and amassing $3M in wealth:
Listening —
This clip from the Joe Rogan Experience about the best way to exercise for longevity.
This 4-hour long interview between the legendary Lex Fridman and Michael Saylor (the fella who owns 17,732 Bitcoin (~$860M).
Our Play by Play
Here’s our detailed walkthrough as to how we sourced the location, chose the snacks and drinks, and ultimately chose the machine we did.
Put yourself in our shoes — you own a vending machine business with several machines located around a university. Either in dorm rooms, faculty areas, or strategically placed around campus — but at a university nonetheless. Summer time is right around the corner and you realize your revenue is about to drop dramatically (considering it will follow a drop in foot traffic).
With this in mind, you’re walking toward the elevator of your apartment with enough snacks to feed five families when the desk clerk calls out “What could you possibly be doing with all of those snacks?”
You answer with the same old “Oh, I own a vending machine business. This is the inventory for our machines,” not thinking much of it. But then that same desk clerk asks you another question you just didn’t see coming..
“Amazing! Would you mind putting a machine here in our lobby? We’ve had guests ask about a vending machine for months now — but could never get a hold of anyone.”
^^^ and that’s how we got our new location.
Now that you know how it came about, we’re going to walk you through our entire process of sourcing the spending data, the inventory, and even the machine for our new location.
— How much candy could we sell through this machine?
The first question we’re asking ourselves is exactly that. We need to best understand how much inventory we need to keep this machine full and profitable. We start by thinking about exactly how many people live in the apartment complex — and what is the occupancy rate of the building?
450 people live in the building — got it.
What’s their demographic? Are they young or old? In our experience, younger college kids love sugary snacks while older folks enough trail mix and protein bars.
We spent 3 hours sitting in the lobby counting the number of people who walked through while taking note of their gender and age.
We know from our snacks in the girls and boys dorms on campus generally what each cohort enjoys eating and drinking. We know from our dorm vs. faculty locations what each age cohort enjoys eating and drinking. Now with this new data we had a better understanding of who is going to be walking past our vending machines everyday.
We came to the conclusion that we were going to sell healthier snacks (pistachios, trail mix, baked chips, etc.) and drinks that could also be used as chasers for alcoholic beverages (juices, specifics sodas, etc.)
If all goes according to plan, this new machine will be able to sell $175 — $225 / week in product, or $10,400 / year.
— Where should we buy our next machine?
We used this website and bought this machine. After the card reader (we’ll get into that in a second) the total cost was $5,962.
Why’d we use that website?
Well, they have a rebate deal with Sam’s Club where if you buy a machine from them and then buy all of your inventory through Sam’s Club you’ll get a rebate of $4,525. Considering we spent $5,962 — that’s an immediate 76% return on our investment when factoring in the rebate. Assuming our historical margins and sell-through rates, we’d recoup the remaining ~$1,500 after another 12 months.
Why’d we buy that machine?
We knew we wanted to go with a combo machine — this means snacks and drinks in one machine. We saw strong reviews, the rebate program, and had performance data of our current combo machines that ultimately pointed us in this direction. Combo machines just do well for us.
Here’s a fun thought — the machine this website advertises doesn’t come with a card reader (and no cash box to collect revenue) as priced. It’s sort of deceiving, but at the end of the day we knew this extra cost was coming.
It’s imperative to offer Apply Pay and a credit card reader for these machines as more and more people aren’t carrying cash anymore.
— What’s the formal arrangement with the apartment complex?
It’s free.
Generally speaking, we’ve seen vendors enter into agreements of a 5-15% profit share with the establishment. However, the apartment complex sees our vending machine as an amenity to their business — so they aren’t charging us to be there.
We have no formal agreement in place. No contract, just a handshake. That’s how we like to do our business. Everyone is different.
Boom! That’s it.
Building up a stream of passive income from vending machines is just that simple. We’re going to buy another machine here in the coming weeks given the new office building inquiry we recently received — we’ll keep you posted!
Soon, we’ll have 20 machines generating $100K / year in passive income!
Disclaimer: This is not financial advice or recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.
That Twitter thread by Danny Baldwin-Strauss you shared is phenomenal, he hit the nail on the head every time.
I live in a town so small there's no foot traffic to speak of, however, we're about 5 miles from the county seat. What's the best way to scout locations? Do a bunch of cold calls? Keep it on private or public property? There's a university there as well, but like you said, summer's coming. I have not yet scouted vending machines, but I intend to.