ATMs

One of the simplest brick-and-mortar cash flow businesses, ATM ownership is a great starting point for cash flow sticks & bricks entrepreneurs

Sticks and Bricks analyzes brick-and-mortar cash flow businesses: three per week for paid members and one per week for free members. This is our weekly free letter. Want more like this? Become a paid Sticks & Bricks member.

The ATM ownership business has emerged as a profitable niche and a great starting point for entrepreneurs looking to get their start in sticks-and-bricks entrepreneurship. It offers a steady cash flow based on transaction fees collected per ATM use, with owners earning anywhere from $0.50 to $3.00 per transaction.

Initial capital required to start an ATM business can range from $3,000 to $10,000 per machine, which covers the cost of the machine itself, cash to stock it, installation, and initial marketing. It's worth noting that these figures are estimates and can vary based on the specific machine purchased and other factors.

In terms of margins, the primary operating cost is the ATM itself and the cash needed to keep the machine stocked. Other costs include maintenance, cash delivery services (if not self-provided), telecommunications, and rent if the ATM is located in a paid spot. Given these costs, a well-placed ATM can generate a net profit margin around 35-50%, though this can vary depending on the volume of transactions and fee charged.

The physical space required for an ATM is minimal, making it an appealing venture for those with limited space. A small, secure area is all that is needed to house the machine. Locations near retail corridors with bars, college campuses, and other locations where people are likely to need cash are ideal. It often makes sense to sign an agreement with a business owner to secure a prime location, giving them either fixed rent or a percentage of net revenue.

To run an ATM business, an owner needs to understand how ATMs work, the basics of how to service them—much of which can be learned on YouTube—and how to handle cash securely. No special staff is required for a small ATM business, as the owner can handle operations, maintenance, and cash loading.

Here's a simplified example of a P&L for a single ATM machine for one year:

Revenue:

1. Transaction fees: If an ATM averages 300 transactions per month at a fee rate of $2.50, the annual revenue would be 300 transactions * $2.50 fee * 12 months = $9,000.

Costs:

1. ATM machine: A new machine might cost around $2,500. This would be a one-time cost, but for the sake of annual P&L, let's amortize it over 5 years. So, the yearly cost would be $2,500 / 5 = $500.

2. Cash stocking: If you need to replenish the ATM weekly with $2,000, you need to have a float of $8,000 per month or $96,000 per year. The cost of this is the interest foregone. If you could have invested that money at a 2% interest rate, the cost = 2% of $96,000 = $1,920.

3. Rent: If the ATM is placed in a rented spot, the cost might be about $50/month. So, the annual rent = $50 * 12 months = $600.

4. Maintenance and repairs: Annual maintenance, repairs, and parts replacement might cost around $300.

5. Cash delivery: If you use a cash delivery service, it might cost around $50 per visit, weekly that's $50 * 4 weeks * 12 months = $2,400 per year.

6. Telecommunication: For connecting to the banking network, you might spend about $20 per month or $240 per year.

So, your total costs would be $500 (machine) + $1,920 (cash stocking) + $600 (rent) + $300 (maintenance) + $2,400 (cash delivery) + $240 (telecommunication) = $5,960.

Net profit:

Revenue ($9,000) - Costs ($5,960) = $3,040.

This is a simplified P&L and actual figures can vary based on factors such as the transaction volume, fee per transaction, location, and machine type. Other potential costs such as insurance, licensing, taxes, or any extra services you might need to pay for have not been included in this example.

Successful examples of bootstrapped ATM businesses are abundant due to the low startup costs and high potential returns. However, specifics of these businesses are often kept confidential due to the sensitive nature of the business. It's quite common for entrepreneurs to start with one or two machines and gradually expand their network as they start generating profits.

While the ATM ownership business requires a certain degree of diligence, it offers an appealing prospect for steady cash flow. Its success largely depends on the strategic location of the machines, securing good transaction volumes, and ensuring consistent and reliable service.

— Emily Bannerman