Vending machine profitability: how to calculate it, with a worked example

Vending machine profitability is not a figure you can copy from another business. It depends on where the machine is, what it carries, what the location charges you, and how often you have to go and restock it. What is the same for everyone is the calculation.

In this guide we explain that calculation step by step: what goes in, what comes out, which costs are usually forgotten, and how to know how many sales per day a machine needs to avoid losing money. There is also a complete example with numbers, so you can redo it with yours.

The calculation, in one line

What a machine makes = sales excluding VAT − cost of goods sold − location commission − shrinkage − travel costs − depreciation − other fixed expenses.

Everything else is just details of that line. If one of the terms is missing, the machine looks more profitable than it really is. And the ones most often forgotten are the last three, because they are not paid every time you restock.

Revenue: what was actually sold

The starting point is not what was in the cash box, but what the machine sold. They are two different things: the cash box also contains the change you put in, and money may be missing because of refunds, coin mechanism failures, or card payments that arrive another way.

Without telemetry, sales are calculated from the restock itself: what was in each slot the last time you left, minus what is there today, multiplied by the price of that slot. If the machine has counters, they can be used to check it.

And VAT has to be taken out. The price shown on the machine includes it, and that part is not yours: you pay it over to the tax authorities. The example in this guide uses Spanish rates, where VAT depends on the product: 10% for most food and 21% for drinks with added sugars or sweeteners. We explain it in the guide to VAT on food in Spain. In another country the calculation is the same, with your own rates.

If you are self-employed in Spain under the equivalence surcharge scheme (recargo de equivalencia), the calculation changes sides: you do not pay over the VAT on what you sell, but the VAT and the surcharge you pay when buying are a cost. Your accountant will tell you which scheme you are in.

Costs, one by one

1. The product sold. What each unit that left the machine cost you, at the latest purchase price. Not what you bought this month: what was sold.
2. The location commission. The bar, office, or gym where the machine is placed usually charges a percentage of sales, a fixed amount, or both. It is a cost on every sale.
3. Shrinkage. Product that expired, broke, or was dispensed without being paid for. It was bought and not sold.
4. Travel costs. Fuel and vehicle wear for each visit. A machine far from your route costs more than one on the way.
5. Depreciation. You pay for the machine once, but it wears out over years. Divide what it cost by the months you expect it to last.
6. Other fixed expenses. Insurance, card terminal fee, phone, accounting, warehouse rent, repairs. They are spread across all machines.
7. Your time. It does not come out of the bank account, but it is what decides whether the business is worth it. Track the hours, even if separately.

An example with numbers

The figures below are a made-up example to show the calculation. They are not the industry average or what your machine will make: replace each line with your own data.

A snack and drinks machine in an office in Spain, under the standard VAT scheme, over one month. It sells 800 units at an average price of €1.10, all at 10% VAT. It cost €3,600 and is depreciated over five years.

In this example, for every euro sold excluding VAT, a little less than 26 cents remain. And your time is still missing: if that machine takes you five hours a month, divide the €205 by five and you will know what it pays per hour.

The three numbers worth looking at

1. What each sale makes

It is the price excluding VAT minus the costs that grow with each sale: product, location commission, and shrinkage. In the example, €1.00 − €0.45 − €0.10 − €0.025 = €0.425 per sale.

2. The break-even point

These are the sales needed to pay the costs that do not depend on selling: travel, depreciation, and fixed expenses. Divide them by what each sale makes.

In the example: (40 + 60 + 35) ÷ 0.425 = 318 sales per month, about eleven per day. Below that, the machine loses money even if the cash box is full.

3. The payback period

How many months it takes for the machine to pay back what it cost. Divide the investment by what it makes each month before depreciation. In the example: €3,600 ÷ (205 + 60) = just under 14 months, if sales hold steady.

This number is mainly useful before buying: if, with a prudent sales forecast, the payback period goes to five or six years, the location cannot support that machine.

Per machine, per product, and per slot

The monthly calculation tells you whether the machine makes or loses money. To know why, you need to go one level deeper.

• Per machine: two identical machines with the same assortment can produce opposite results. The one that does not reach break-even is a candidate to be moved.
• Per product: what sells the most is not always what makes the most. A high-volume, low-margin product may be taking the place of a better one.
• Per slot: a slot that takes weeks to empty ties up money and ends up with expired stock. One that empties between visits is losing sales.

And pricing should be reviewed product by product. When purchase cost rises and the machine price stays the same, the margin shrinks without anyone noticing. It is worth having a target margin and checking, at least every time a supplier changes, which prices have fallen below it.

With several machines, keeping these numbers by hand gets complicated. Our guide to vending management software covers what a tool that does it for you should do and how to choose one.

What drives profitability

• Location. It matters most and is hardest to change: how many people pass by, for how many hours, and what alternatives they have nearby.
• Assortment. Replace what does not rotate with what people ask for in that specific place. What works in a gym does not work in a workshop.
• Price. A few cents on a fast-moving product affect the result more than any saving in expenses.
• Just enough visits. Too many visits mean fuel and hours. Too few mean empty slots, which is lost sales.
• Expired stock. Every unit that expires takes the margin of several sold units. Selling first what expires first is the cheapest measure there is.
• Purchasing. The same product changes price from one supplier to another. Comparing before each order shows up in the biggest line of the calculation.

Common mistakes

• Counting takings as profit. The cash box includes VAT, product cost, location commission, and your change.
• Calculating margin with VAT included. A product you buy for €0.45 and sell for €1.10 does not make €0.65: it makes €0.55 before everything else.
• Forgetting depreciation. The machine looks profitable until the day it has to be replaced.
• Looking only at the average. A good machine hides a bad one. The calculation is done machine by machine.
• Not recording shrinkage. What is thrown away does not appear anywhere if it is not noted, and it comes out of the same pocket.
• Using old purchase prices. Margin is calculated using what it costs today to restock the product.

Frequently asked questions

How much do you earn with a vending machine?

There is no single figure that works for all. It depends on the sales at that location, the margin on what it carries, the location commission, and the expenses. What you can do is calculate it with your own data, as in the example on this page.

How do you calculate the profitability of a vending machine?

From sales excluding VAT, subtract the cost of goods sold, the location commission, shrinkage, travel costs, machine depreciation, and the share of fixed expenses it should bear.

Is margin calculated with VAT or without VAT?

Without VAT under the standard VAT scheme, because the VAT on the sale is paid to the tax authorities. Under Spain’s equivalence surcharge scheme, the full sale price is yours, but the VAT and surcharge on purchases are a cost.

How many sales does a machine need to be profitable?

Enough to cover its fixed costs. Divide the monthly fixed costs by what each sale makes. In the example, it comes to 318 sales per month, about eleven per day; with your data, it will be a different figure.

How long does it take for a vending machine to pay for itself?

Whatever results from dividing what it cost by what it makes each month before depreciation. With a second-hand machine the investment is lower, but more repairs should be expected.

How do I know what a machine sells without telemetry?

By the difference at each restock: what was in each slot minus what remains, multiplied by the slot price. If the machine has counters, they are used to cross-check.

What commission is paid to the location?

Whatever is agreed: a percentage of sales, a fixed amount per month, or a mix. The important thing is that it is included in each machine’s calculation, because it changes its break-even point.

Conclusion

Vending machine profitability is decided in seven lines: sales excluding VAT, product, location, shrinkage, travel costs, depreciation, and fixed expenses. From them come the three numbers that matter: what each sale makes, how many sales are needed to avoid losses, and how long it takes the machine to pay for itself. Done once a year, it is of little use; done at every restock, it tells you which machine to move, which product to change, and which price to raise.

This article is for information only. The example figures are made up, and the VAT and depreciation treatment depends on your tax regime: check with your accountant.

Useful links

• Vending machine management without telemetry: what a restocking route with Repónlo looks like, step by step.
• Balancing a machine’s takings: how much should be in the cash box based on what was sold.
• Empty slots and expired stock: the two places where margin disappears.
• VAT on food in Spain: which rate each product carries.