Vending Machine Business vs. Online Business: Side Hustle Showdown
If you’re an avid reader of the Empire Flippers blog, you know what it takes to be an entrepreneur in this day and age. You need a routine, a method for productivity, and sometimes employees or team members to help you with all the work.
But being a full-time entrepreneur is not all it seems. It’s not always that glamorous.
So? What do you do if you’re interested in opening a business, but not so interested in living the tumultuous life of an entrepreneur?
You run a business on the side, while keeping your stable, paying job.
You may be thinking, “how can I run a business and keep my current job at the same time? Isn’t that more work than just quitting my job?”
If you choose the wrong business, then yes, it is.
The key is to choose a business that makes you passive income. That is, income that doesn’t require a lot of effort to maintain. This is your side hustle––you don’t have all the time in the world to work on it. Many people choose to get their passive income by investing in real estate or doing peer to peer lending, and some even buy established brick-and-mortar businesses.
One of the most sought after passive income-producing investments are vending machines. Weird, right? It’s for good reason, though, as they can make you a hefty sum if done correctly. Vending machine businesses are also easy to operate, and don’t cost a lot up front.
Of course, we believe the side project of the modern age is the online business, not just because it can provide greater passive income, but also because you can do something you are passionate about and that you truly enjoy.
For the sake of impartiality, we’re going to go over the pros and cons of operating a vending machine business (or similar models you may encounter) versus an online business, so you can decide for yourself.
Vending Machine Pros
While we may not advise you start a vending machine business if you are looking to generate a passive income side hustle, there are definitely some positives to investing. Vending machines have been around since the late 1800s, they’ve stood the test of time, and don’t seem to be going away. So, what makes them so resilient?
- It is passive income. And it doesn’t take too long to kick in. In fact, while some businesses might take several years to grow big enough to make you passive income, vending machines often start making a profit in several months. This largely depends on what locations you can get into, how many machines you have, and how savvy you are with your finances; but it is definitely possible to start making serious cash in the early stages of your business.
- Simple business model. Vending machines are also extremely easy to operate as a business model. Once you have all of your vending machines set up, you just need to find a wholesale food supplier and figure out when to restock each machine. If you know where you’ll be placing your machines, you can get in contact with the school, business, or community center you’ll be working with, and find out what kind of snacks or drinks they like. This way, you can stock specifically, to ensure that your vending machines stay active and you maintain a cash flow.
- Low capital requirement. Speaking of cash flow, you won’t need a huge one to start a vending machine business. Though it’s true that each machine costs about $3,000 to $5,000, it’s a lot cheaper than opening a restaurant or brick-and-mortar store. If you have $20,000 saved up, you may be able to start with up to 10 vending machines. With 10 machines and a few months, you’ll make back your initial investment and start pocketing the profits. If you have more, you can buy machines in bulk for a better price.
Vending Machine Cons
As with any side hustle, there are bound to be some downsides. Vending machines are no different. So, when we say that we wouldn’t consider buying a vending machine business, here’s why.
- The machines are difficult to operate. Vending machine distribution may be an easy business to operate, but the restocking and maintenance of the vending machines are not. You have to be pretty physically fit if you plan to do this on your own, or you better be willing to part with some of your profits to hire someone. If you decide to do it all yourself, you’ll be carrying crates of food or drinks to each of your vending locations a couple days a week and you’ll have to make special trips for breakdowns or jams. If you don’t have the time or the energy to do the work yourself, you’ll have to hire and manage an employee.
- Good locations are hard to find. Another big factor in the profits is where you decide to put the vending machines. If you put your machines in places with little foot traffic, your earnings will suffer because of it. The places you want to put your machines may already have contracts with someone else. To find a good location, you may need to hire a locator, which is expensive. Be wary though, and check for your locator on the Better Business Bureau, since scam artists tend to flock toward the vending machine industry.
- Machine depreciation cost. Finally, as with any physical object in business, depreciation is a serious factor. Once you buy a vending machine, its physical value only goes down. What matters is what’s inside, and what’s inside is perishable. So, when you’ve decided you’ve had enough of the vending machine business, and want to sell the machines back, you’ll be taking a loss.
Online Business Pros
Fast forward to 2017, when one of your best bets at making passive income is to invest in an online business. Whether you want to start from scratch, try affiliate marketing, or buy a business that is already up and running, you’ll find that the startup costs are incredibly low –– lower than even the cheapest vending machines.
- Tons of options. It all depends on how much you want to make a month. If you want to rake in the big bucks, you may have to put in a little more money, time, or energy up front — but not necessarily all three. When it comes to your online business portfolio, you can diversify it as much as you want. Seek out businesses that sell for a few thousand to a few hundred thousand dollars, or research the different online business models to find the plan that’s right for you.
- Plenty of free resources. If you decide to start an online business from scratch, or rehabilitate one that you bought, you have plenty of resources to work with. WordPress, Squarespace, and Wix all have free options for websites design, and tools that can help you grow it. You can also find video software, photo editing software, and SEO tools for free on the web, which will cut down on costs and stress, as most of these tools are user-friendly.Some other great tools out there are books. You can find free (or cheap) ebooks written by successful entrepreneurs (e.g., Tim Ferriss, Chris Guillebeau, etc.) on how to start or run an online business, based on how they run theirs. Additionally, there are tons of online communities you can join to get advice or feedback on what you’re doing. You can find anything on the internet — seriously. Google is your friend.
- Doing what you want. If you take one pro into consideration above the others, it should be this: with an online business, you can do what you are passionate about. If you love to dance, you can set up an Amazon affiliate business for dance gear. If you are into sports, you can buy or create an app that fills a niche in the sports industry. Love to fish? There’s a website for that, too. With online businesses, the possibilities are endless.
Online Business Cons
We hate to admit it sometimes, but there are definitely some downsides to running an online business. They can be a lot of work if you decide to start from scratch — which takes the passive right out of the phrase passive income.
- Start up promotion work. To get your business to a stage where it starts making money, you have to do quite a bit of promoting and marketing. If you buy a business with that already built in, then you might have no problems. But not everyone can afford a self-sustaining business when they are just starting out.You may have to spend your nights and weekends working to build a customer base for your website, and you might have to do it for a few months. You can hire an employee to do it for you, but you would have to pay them out of pocket, until you start seeing results.
- Managing people. Of course, if you buy a business with a built-in consumer base, employees that run things, and a steady income to spend as you please, you still have to take on the role of owner and manager. If you don’t like dealing with employees, or simply don’t know how, this might be a problem. If you want a self-sustaining business, you can’t just buy a domain and leave it alone, nor can you do all the work yourself (once again, taking the passive out of passive income). You will need employees or contractors to manage the upkeep of your business, if you aren’t going to do it all yourself. If that scares you in any way, rethink starting an online business.
- Variable income. One final con we have to mention is the lack of financial security you may experience when running an online business. While you can confidently depend on people getting the munchies every day, you can’t always depend on people buying your app or signing up for your service. If you don’t put a little work (and probably money) in, you will have a hard time making the income you expect. Be prepared to have good months and bad months, and definitely have a backup plan.
Ultimately We Still Feel Online Businesses are Better
While both business prospects have positives and negatives, we strongly believe in choosing an online business over a vending machine business. Of course we’re biased about this, but given the age we are in and the possibilities the internet provides, it’s a no-brainer.
Besides all the pros we listed above, online businesses can often be scaled much more than vending machine businesses. When you have 10 machines, you can only service so many people. With one website, your reach could multiply tenfold in a single month.
Once you scale an online business, you can sell it to the highest bidder. The great thing about websites is that they don’t depreciate like machines do (unless you still have your Geocities theme from the early 2000s, then your website has seriously depreciated) and they don’t require crazy repairs with mechanics and pricey hardware. Try to sell a vending machine and your highest bidder might be the junkyard, but — with a website — a millionaire Portfolio Paul might give you a hefty sum for your creation.
If it were 1999, maybe we’d choose vending machines, but it’s 2017 and time to move on to bigger, better things.
So, if you’re deciding on a side hustle, make sure you consider your options before investing. It could be the difference between an extended (permanent) tropical vacation or another ten years of grueling work.
Photo credit: Vaicheslav