Starting A Vending Machine Business

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When I was just out of high school I started a vending machine business which included soda machines, snack machines, and candy machines.  The soda and snack machines were more than $500/each used and required restocking of fresh snacks and soda several times a week.

This meant having to go to Sams Club every week and buying cases of sodas and snacks to refill the machines.  I also had to pay a small bill for the electricity they used each month.  Between buying the products, storing them in my garage, and restocking the product it quickly became obvious that this wasn’t a passive income business.

After about a year and a half I sold the machines to another businessman at a loss no less.  I was glad I learned that business but even happier I was out of it.  The candy machines I had I paid less than $50 each used and some of them were generating $100′s a month.

Not only were they cheap to buy the machines were small and the base and head unscrewed from the pedestal.  This made them easy to place in businesses and easy to transport in the back of my SUV.

The candy had a 200-500% mark up versus a 50% mark up or less for the bigger soda and snack machines.  Loading the candy machines was easy and usually only requires bi monthly refills.  This business was the passive income I was searching for.

I eventually ended up spending all my time with my real estate business and had to sell the candy machine business to free up more time but I took that knowledge and wrote a book about how to start a candy machine business with $50.

I have all the different businesses that I placed them in and which locations created the largest income along with what types of candy sold the best at each location.  If your looking for a great micro-business I recommend giving candy machines a try.

Expanding Your Business

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Once your businesses start to grow your going to need to come up with a game plan to expand it.  In my earlier days that meant pouring 100% of my profits back into the business.  The problem with this method is it doesn’t work.

When you put ALL of your profits back into your business your making a potentially fatal move.  First of all you will not be making a profit to pay your personal bills and that will cause stress in your day to day living.

Second you need to spread some of that profit into a new business or expanding a slower growing micro-business.  Why would you do that when clearly the slower business isn’t producing good returns?  Since different businesses are more capital intensive than others that may be the reason why the growth isn’t happening.

Eventually when you invest all your profits into the most successful micro-business it’s going to get to a point of optimized returns.  $1 profit reinvested may produce $1.20 where as the first $1 you had invested may have returned $2.

The law of diminishing return states this theory and it has been proven over and over again in financial matters to be true.  Spreading your profits into your other businesses poses less of a risk with more potential reward than focusing the profits into the best performing micro-business.

 

What Do You Do?

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Whenever you meet new people the first question they tend to ask is what do you do?  Now when you work at a conventional job the answer is easy but when your a micro-business entreprenuer it gets a little more complicated.

It’s important to prepare for this question after you have made the decision to ditch the job and be an small business owner.  Luckily for me I had seen this exact situation play out with a friend before I started micro-businesses myself.

After seeing his shock when he didn’t no how to respond to the question I quickly realized that I had better come up with my own response when I was in this situation.  Now I thought long and hard to answer this question honestly and really there are many responses that fit.

Some of the more humane responses are “entreprenuer”, capitalist, small business owner, financially independent, etc.  Although there is truth in all of these responses they generally won’t stop the question all together.

Most people I have found will ask what type of business, where is it located, etc.  Now if you tell them you have several small businesses the general look is your a liar.  If you have so many businesses why are you driving that car or wearing those clothes, etc.

Most people’s perception of a person that has multiple businesses is that there rolling in money and if you try to explain that your businesses are micro-businesses they won’t get it.  So I found it best to keep the response as brief as possible and throw out your own question to them.

This will deflect the question and give you time to change the subject further.  Since most people love to talk about themselves asking a question about them will change the subject quickly.

Passive Income “The Best Of Both Worlds”

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When starting a micro-business your going to be faced with what types of businesses to start.  There are the businesses that require your direct time to make money aka $/hour, businesses that require items to sell aka $/time, and businesses that pay nothing when created and than income for life aka $/Passive Income.

The first two businesses only pay once, one for your time and one for your items.  These businesses obviously make money but your only paid once ever.  Now creating passive income streams you don’t get paid for your work upfront but after it’s completed.

This passive income will continue to generate income long after the project is created.  Some common passive income businesses are ebooks, websites, and Iphone apps.  Many creators of these products make passive income for many years.

There is nothing wrong with businesses that create passive income as that how most businesses make money but making passive income is definitely the more profitable route.  Remember you could also sell the product (ebook/website/app) later on after getting some passive income.

There is a really great feeling when you create a product that creates passive income and you get your first sale.  You might come home turn on your computer and bam there is a $20 sale sitting in your email and sent to your paypal account.

This reminds me of when I received my first rent check in the mail after I bought my first rental property.  You read about passive income all the time in financial books but when the passive income actually is received by you it’s like “wow” this is great.

That feeling eventually goes away the more passive income and gradually you find yourself expecting this income.  Than you will question why all your income wasn’t generated like this before and you might start focusing on creating all your income this way.

Self Motivation

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One of the first things that may strike you as odd is that when your not guaranteed a paycheck you may lose the motivation to work.  Who wants to work for free?

Even though you may not be generating a decent income initially from your micro-business doesn’t mean you won’t get paid back later.  I have ebooks I wrote several years ago that took months to write with no income during that time from the ebook.

Since the ebooks have been for sale I am still making money from the “unpaid” work I did to create them and will for many more years.  You have to change your mindset from an employee to a business owner.

A business owner takes all the risks and get all the rewards.  This means that you may make a lot of money or none at all since there is no guarantee.  An employee gets a steady paycheck regardless of his work or results but will never get a huge windfall the way a business owner can.

Your going to have some business failures along the way since it’s inevitable however you will also have some big winners.  Just one good idea or business can reward you financially for the rest of your life.  These are the things you have to remember when you don’t directly see the income.

I also like to set sales goals and business goals.  This helps me set the bar higher so I don’t get lazy or lose motivation.  Once I reach one of these goals I reward myself with whatever it is that I wanted to get.

It’s very easy to get distracted and lose motivation when the results aren’t showing up in your bank account, that’s normal but staying motivated will be the key to getting past that feeling and reaching beyond.

I Hate The Boss & I Am The Boss

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It’s inevitable that creating micro-businesses or any business for that matter can get to you.  Just because your the master of your own financial universe doesn’t mean it’s all smooth sailing.  Starting a business is great but later things can change.

When you start hating the boss and your the boss you know you need to reevaluate the situation.  Burn out tends to be high even with small business owners whom in their quest to make money often feel tired.

Working for yourself will require you to make lots of small decisions that over time end up resulting in bigger decisions.  Your going to make some mistakes but most of all these decisions may change your personality.

I have seen relatively humble people turn into ego maniacs once their business becomes successful and I believe it to be partially because they develop a God complex.  When they had a conventional job they were told what needed to be done.  After they became a business owner they were the boss.

This change in thinking is required to run a small business successfully however the confidence that was building from making decisions sometimes back fires.  When it does the ego takes over and they feel almost invincible as if they can do no wrong.

This change in personality is what I refer to as “I hate the boss and the boss is me”.  Over time even these new ego maniacs get chinks in their armour after a few bad business decisions.  The result is a swift and sudden fall in their business.

Although it’s not pretty to watch this happen to someone the end result is a humbling of their personality which was badly needed.  If you ever find yourself in this sitaution pause and slap yourself until you come back to reality.

Basics For Most Micro-Businesses

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Having started and actively managed several businesses I have learned that most businesses require some standard items.  These items don’t cost much but they are very important to your new business.

What I really like about starting micro-businesses is their scalability and the little amount of money that they require to start.  With the technology of today you can start your business off with items that can make you look like a big company.

So here is a list of some of the common tools your micro-business will probably need when getting started.

1. Business Cards – Every business needs business cards to be taken seriously not to mention they are great to hand out to potential customers.  Some of the more savvy new businesses pin them up around the neighborhood businesses.

You can get several 100 business cards that you can design online for less than $5 including shipping from vistaprint.com.  You design every part of your business cards right online.  Color, type of card stock, embossing, layout, business numbers, etc.  This is really a good deal.

2. Business Phone – Nothing says amateur more than your family answering the phone when a customer calls.  Avoid this mistake by spending $10 on a prepaid cell phone with minutes from Tracfone.com.

This phone will allow you to have a business line without all the costs of a traditional business landline phone bill and you control the costs.  This will provide a professional business appearance for your new business.

3. Website – How many businesses do you know that don’t have their own website, probably not to many.  More people look for businesses online than in the real world and having a website will look professional.

For less than $20 you can buy a domain name and hosting service for your business.  Setting a basic website up is very easy and these companies will show you how if you ask them.

4. Advertising – Every new business will have to get the first customers by advertising and whether that is online, newspaper, or putting up business cards you need it.

For free online advertising you can post your ads on Craigslist.org and US Free Ads both of which get lots of traffic.  Obviously you will need to post in your local newspaper or business if your advertising in the real world.

5. Business E-mail Address – Your going to need a email address for your business card since many people only use email to contact you.  You can get a free email address from your website provider or set up a more generic free version at hotmail.com or yahoo.com.

6. Business Shirts – Although this isn’t necessarily a requirement having a business tshirt or dress shirt with your business contact information on it looks good.  You can wear them when working or give them out free to customers.

People love free shirts even if they have your business details on them and will wear them which equals free advertising.  For less than $10 you can design and have them shipped from vistaprint.com

With these few business tools your micro-business can look like a major company and these items cost less than $50 in total.

Get Rid Of Baggage

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Inevitably you will probably share your ideas of possibly starting a micro-business with those close to you.  This could be an uplifting experience or not so much depending on who your talking to.  Most of the “big thinkers” who thought outside the box are now in history books.  After all, if you want to be like everyone else than you get the same results.

But if you think outside the box your going to get some negative comments.  They may be from those with good intentions but the result tends to be the same, loss of confidence in your ideas.  It’s important to think differently from others if your going to live a great life.

Part of that great life is probably going to involve doing things differently to achieve superior financial results.  Creating multiple micro-businesses fits into this box and people may think you have lost your mind.  Look at any of the successful people in life and almost all of them were thought to have strange ideas before they became popular.

Part of living a great life is accepting that most people may think of your ideas as strange but that’s ok.  Later on your income will make up for any questionable thoughts they may have had about you.  Stay strong and continue on with your ideas.

Which gets me to the point that negative people in your life can do more harm to you than any gun could ever do.  They will continually bombard you with negative comments and thoughts which is something you won’t need when you probably already have some negative feelings.

The point is your ideas are every bit as valuable as anyone else’s regardless of their feedback.  Stay motivated by associating with positive uplifting people and get rid of those negative people in your life.

Why You Don’t Need Investments

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Although I believe in investing in stocks and real estate they aren’t required if you have a well managed stream of small business incomes.  It’s much easier to create passive income from small micro-businesses that it is to save up $100,000-$1,000,000′s and live on the interest or dividends it could generate.

The common investing belief is that it is much less riskier to stick a lump sum of money in the bank, C.D.’s, or high dividend stocks and live on the returns.  The reality in my opinion is that the economy can and will effect the value of any of those options negatively.  Inflation can rise, stocks can tank, dividends can be cut, etc.

I think it is much riskier to depend on your financial investments to generate income since your not actively involved in their management nor are your assets guaranteed to not lose value.  Even money in the bank generally loses its buying power to inflation after factoring in the low return the bank pays you.

On the other hand, having multiple micro-businesses that you can start, grow, and manage for maximum income is a lot more valuable since you do have a lot more control over the income stream.  If you want to make more money start another business or expand the ones you already own.

Having control over the day to day decisions involving your income stream is much more effective than letting someone else make those decisions.  After all who has your interest the most, someone else or you.  Add to this the fact that you have more liquidity with your investment in your business and you have a winning combination.

Why Start A Micro-Business?

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Some of you may be wondering what is the point of starting multiple small businesses when you can just focus all your time on starting a normal size business.  This is a very good question and one that definitely needs a little explanation.

Several years ago I had started a real estate rental business and had bought quite a few properties.  When the business was going good it was “real good” however when things turned the corner and cracks started to develop there was trouble.

After spending 6 years being a full-time investor and investing all my assets and income in the business I ended up with literally nothing.  What I learned from this lesson was that although I made a fair amount of money I had not diversified.

I was also very leveraged which is a double ended sword.  I vowed to never go in debt to finance a business and to diversify by creating multiple businesses.  This strategy would allow me to never get in too deep and to never lose “everything” in the event of a problem.

The solution was to make a list of all the businesses I had ever wanted to try and start and dig in.  Not only did this enable me to expand my creative mind but it allowed me to learn new skills.  Over time I just dropped the unsuccessful businesses and expanded the winners, reinvesting the profits.

I found the micro-business model to be the best of both worlds, no debt, diversified income streams, and expanding the businesses.  This is definitely a slower process but a better long term business strategy in my opinion.