This is a cash flow business that will produce a 6-figure income stream if the right location is chosen.
A single water and ice vending machine can generate cash flow of between $22,047/year and $107,348/year depending on the location.
The cost of purchasing a water and Ice vending machine starts at $40,000 and I reviewed 6 models that went up to $80,000.
The two companies I found have no franchise fees or upfront charges.
We recently canceled our home delivery of 5-gallon bottled water because the company kept raising prices until it became unbearable - $9.00 per bottle.This morning, I drove over to get four 5-gallon bottles refilled, at a much more reasonable price: $1.25/5-gallon bottle.It cost me $5 versus the $36 I would have paid for the service, and all I had to do was bring in the old bottles for refilling.The place that provides this service is called “Water & Ice” and it’s a franchise. It's not as convenient, and I must carry the bottles in and out to the car, but the water is excellent.
While I was there, I bumped into Tonya & Emilee and asked if they also do home deliveries.Tonya said that she and her daughter were about to go out and deliver to their commercial accounts, but she hadn’t really gotten into home deliveries.She and her daughter have a water truck, and they use their reverse osmosis process to fill it.When they get to the commercial accounts, she goes in and collects the empty bottles and refills them from their water truck, and then uses a hand cart to roll them back into the office area.
My guess would be that you could create a home delivery business if you bought one of these trucks and you asked the homeowners to leave their empties outside their homes for an exchange.Cleaning the bottles bothered me, as did the cost of a water truck which starts at around $40,000 - used.The alternative would be to start out with a cargo van and prefilled water bottles like the current vendors use and then move up to a water truck or a custom-built water bottle carrier at some point. So I throw that out to you for your consideration as well. That wouldn't be too hard to start with a van if you're near one of these "Water & Ice" franchises. Even a 5x-6x markup on their prices ($1.25/5-gallons) would be a discount versus what I was paying. Go for it. I'd sign up for home delivery and these owners would probably love the additional business.
However, what I wanted was a business opportunity to tell you about that would be a lot more ‘passive’ in nature. So that started me out on a journey to find an alternative way of doing a water and ice business using machines positioned in front of buildings. These are pretty prevalent in Arizona, and you see them everywhere here. But then, I also needed to figure out a way to differentiate the business, as well as find an inexpensive way to get into this business. It took a while, but I did accomplish both of those goals.
First The Equipment and Differentiation
Source of time-lapse video: Nick Streeter and Arizona Ice & Water
What I came up with was this manufacturer called Everest Ice and Water Systems, as well as another manufacturer called Polar Ice & Water. What's unique about these two manufacturers? Both build machines that dispense both water and ice. All the traditional competitors dispense only one or the other - water or ice. That's a great differentiator.
The website for Everest is here: LINK; and the website for Polar is here: LINK.The Polar Ice & Water would be more like the unit shown in the time-lapse video above.
Besides the dual ability to dispense water and ice, they both had a lot of other features that made them quite different from everything else that’s out there.The first thing I looked for was a credit card capability - with 'tap' - in addition to the coin operation to make paying easier and safer for the customers, as well as cut down on my having to go collect the money every day (as the projected daily intake would be between $100 - $160 in coins and bills). Both had that dual coin/credit card capability, although it took a call to Polar Ice & Water to discover that it was an option.
From there, the systems parted ways. The Everest system was more like a co*ke or Pepsi machine that could be propped up against the wall of a retail business, while the Polar system had more of a 'presence' to its design which made it more visible. The entry-level Everest system had dual ice dispensing capability - bulk or bags - and started in the $40,000 range, while the Polar system became more effective when you were in a location that required two machines. The one I asked Polar to configure would have 2 water dispensing windows, with a bulk ice dispenser on one end and a bagged ice dispenser on the other end. The bagging of the ice by the machine would be an advantage over the Everest model. That configuration also had way more ice production than the Everest, but it was also a reverse-osmosis machine that produced a lot of wastewater (effluent) because of the RO process. You need permits on both machines to dispense effluent. That special configuration could be built for around $80,000 and it was the equivalent of 2-3 base Everest machines.
The Everest system stressed "simplicity of design" because of only one moving part (the ice drum) which they claimed makes it less of a mechanical maintenance problem.That was another check for their machines.But the biggest differentiator was that it dispensed both ice and water in a much smaller footprint.That convinced me that they could provide a differentiator for getting into this 20-year-old business.But that's when I discovered how horrible their delivery time was: 20 weeks, maybe.
Going back to the Polar machine, there was no doubt that it would attract more attention. If I located in a parking lot or off to a side area near a gas station, it would also be a lot more convenient and accessible. The Polar system also required no more maintenance attention when you got down under the covers. And although Everest proclaimed ease of installation over the Polar machine, when I talked with a couple of owners, it turned out that the Everest machine wasn't as close to "plug and play" as they claimed. Much like the Polar machine, you had to isolate the electric and water lines, as well as provide for about 5 gallons of wastewater per hour. Depending on where the water, electric, and drain sources were, one owner said she spent between $5K to $7K for each of the 3 installations at an Ace Hardware store. So compare $15K to $21K for one Everest to what it might cost to put the Polar station in a parking lot.
How Much Can a Person Make?
That’s always my first question, and I posed it to Everest Ice & Water. They had a calculator on their site that answered that question once you fed it some variables like low, typical, or high pricing; low, typical, or high volumes.That’s all you needed to do.You can try it here: https://everesticeandwater.com/why-ice-vending/roi-calculator/.If you put in “Typical Pricing” and “Home Run Volume” you’ll see the numbers that I showed in the opening. Below is a table that summarizes some of the ROIs assuming normal prices for the cost of goods.What it doesn’t consider is the financing of the equipment or commercial crime insurance, as well as the installation costs I uncovered above.The financing and insurance costs are explained later.
To understand the costs used in the above, the following was assumed by the calculator.The national average of 13.19 cents per KWH is used for electricity, and .0015 per gallon of water cost was used.
So that means it takes 8 cents to make 10 pounds of ice; each plastic bag cost 10 cents, but only 50% of the customers will opt for plastic bags and instead, fill coolers; and lastly, you must spend $400/year on filters in the machine.No other annual costs were considered, but there are some like cleaning of the machines to keep them looking like you could trust that the water was clean, although they're not at all related. It's all about perception.
How Do You Find a Perfect Location?
This is where you’re going to have to be a little bit innovative.Many of the gas stations are taken, as are all the grocery stores, even though they were just water dispensers. However, ARCO and Chevron stations, as well as 7-11 stores didn't seem to have any installed around here.
You need to approach them with the mindset that what you have is a traffic builder. And there are going to be plenty of retailers that would love to have more people traveling to their location.So, think about which retailers that would benefit, and then go where your potential customers are going:
Visibility and accessibility are the two most important factors to consider.Will your machine be visible from the road?Can your customer pull right up to it?
How Do Landlords Like to be Paid?
The typical cost for leased space is approximately $200/month for the Everest-type machine and double that for the Polar. The best way to set up your leased space agreement is with a fixed price lease and it's also what most landlords prefer.You might have to pay a little extra for a really good location, but it will be worth it.
Alternatively, you might try for a split of profits.The usual percentage is going to be 15-20% of net profits, and that means reconciling with your landlord monthly.The plus side of this arrangement is that it will allow your rent to go up if you’re having a good month or more importantly, decrease if you’re having a particularly bad month.
To help you close a deal more quickly consider things like:
If you want a sample copy of a leased space agreement, you can download one here: LINK.It’s 7 pages long, so not something that I can easily include in this write-up.Or you can check with your lawyer and get one written specifically for your needs.
Remember, not only are you bringing additional traffic to their business, but you’re also bringing potentially a lot of customers their way.How convenient would it be to go inside to grab some extra beverages or picnic supplies when you grabbed your ice? That’s a big value add for a retailer, and it comes at no added cost to the retailer or additional marketing. And you're dealing with all the machine issues, which thankfully, both have remote alert systems when something isn't functioning correctly.
Other Things to Consider
Conclusion
First the cautions.The biggest cautions in my mind are weather and unexpected installation charges.As mentioned above, if your summers are only 4 months long where you live, then the ice part of this machine is going to see diminished use.Also, having a water and ice dispensing machine outside in really cold or really hot weather is another factor that could affect its ability to dispense water year-round. Will you shut it down for the winter months (see the first video of a Delaware owner who has 20 of the Everest units in Resources.) If you’re in the southern states, then this might be a revenue opportunity for you.
Ice vending is an $835 Million industry and growing rapidly, by approximately 35% annually. Add to that water vending, and you can see that this is not an industry that’s going to be going away.In Arizona and in our community, it's a "starving market." That means you could have less than optimal product or service and still make money. Most of the stores run out of ice here in the summer.
With the right equipment, you don’t need any employees, you can run it in your spare time, generating passive income with relatively low capital investment and a very high rate of return.Better yet, unlike traditional vending machine businesses, you don’t need to replenish stock or carry inventory.
But even using worse case numbers and subtracting the additional financing charges together with the commercial crime insurance, you’re looking at losing approximately $10,000/year from the income table shown above – if you finance 100% of the cost of the machine.
So, if you picked a typical pricing and typical volume – and you find the right locations – you would be looking at generating new income of $38,209.70 - $10,000.00 or $28,209.70 of income from each machine at each new location.Compare that to having to buy a home for rental income, and you can see how this is going to be a bigger cash flow for you.In fact, if you put in $240,000 and bought 5 machines, and at each new location you matched the numbers for typical pricing and volumes, you would have an annual cash flow of $141,048.50.If you didn’t need to finance it, you’d be adding back $8,280 per machine or $41,400 to the $141,048.50 for a total of $182,448.50 in income potential.
Contrast that to a home rental on that same $240,000 investment, and you can see that this has a much larger cash flow opportunity.Is there risk?Absolutely!You’re putting up real money in comparison to the other “side hustles” I’ve shown you.And there’s potential vandalism involved.But renters can also bring their own troubles.You’ll just have to decide if it’s worth the risk, and as always, the rest is up to you.
Hope you enjoyed this particular “side hustle” and a deviation from the usual scenarios that I present.Please let me know in the comment section below.
Resources
Listen to an owner with 20 machines: https://www.youtube.com/watch?v=TQg4A6kpYpQ
Make enough money to quit your job: https://youtu.be/Dd_BYmpcswk
© Joe DiDonato, Side Hustles Newsletter #12.
