Can a Vending Machine Business Generate Profits?

To prepare students for creating pro forma financial statements and for assessing the profit potential of each team's startup, this module's discussion will entail figuring out if profits can be made by creating a business owning and operating vending machines.

The following article details expected revenues and costs for vending machine operators:

https://thehustle.co/the-economics-of-vending-machines/ (Links to an external site.)

As outlined in the article, many entrepreneurs enter the business due to the low entry barriers and the perception that the business will require limited effort once established, but how much money can you expect to make in this industry? Is it realistic to assume that a startup vending machine operator will generate profits?

Use the quantitative data included in the article to determine whether it is realistic to assume you can easily generate profits by owning and operating vending machines. Be sure to account for time spent working 'in the business' so that profits only include compensation for working 'on the business'; in other words, make sure you account for the direct labor costs associated with resupplying each machine, since these costs should be deducted along with other expenses to calculate profits.

The article provides almost all the data you need to generate a breakeven analysis or basic income statement in order to assess the potential profit. A few key pieces of information are missing, for which you should assume the following:

• Assume the average new vending machine lasts five years and is treated with straight-line depreciation.
• Assume each machine is refilled twice per month and that it takes roughly two hours of direct labor each time.
• Most operating expenses are included in the article but you may want to add any important costs that are neglected.
• Ignore the following statement that appears in the article, which may be misleading: "All costs considered, an operator who makes $5k per month in revenue might take home something like $2k in profit." Your task is to independently figure out how much money can be made.

Your post should provide quantitative analysis of the profit potential for a vending machine operator. You may submit a break-even analysis identifying when (if ever) a vending machine business is likely to break even, or a basic income (profit & loss) statement. Use numbers and logic to draw your conclusions, and explain your conclusion.

Be sure to conclude whether this is an attractive business to enter based on your analysis of the profit potential.