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Don’t Make These Mistakes!
You made the decision to start your own ATM business. Hopefully you followed the 7 “must-do’s” to set it up right. Now you must keep it operating smoothly and profitably. Here are the 8 mistakes you must avoid:
1. Overestimate cash flow
There are many sources online which tell you that you can make $500 per month or more from each ATM. Most of the time, these estimates are much too high. My recommendation is to do your homework and count on $250-$300 of income on the higher side. $150-$200 on the low side is a safe bet. Make some calls, talk to merchants and be conservative with your income estimates
2. Purchase used equipment
Buying used equipment can sound appealing but right now you need to be cautious of what you buy. With EMV requirements right around the corner you should invest in new equipment when starting an ATM business. Pay for new equipment and you get a 1-year warranty on parts and set your business up for success. If you buy old equipment, you could run into many repairs and potentially lose locations due to out of service machines.
3. Underestimating capital requirements
You will need cash to load the machines on a rotating basis. You should count on at least $2000 per week per terminal. If you plan on deploying 10 terminals you will need at least $20k of working capital to service the machines if not more.
4. Overlook EMV
Do some research on EMV and make sure you know what makes/models can be upgraded and what the costs to upgrade are. This will save you headaches down the road when EMV is implemented.
5. Not setting up a bank relationship first
With operation Chokepoint and other issues in play, you should contact your bank or locally recommended banks and make sure they can support the needs of your ATM business. Some banks will not support the ATM business at this time so make sure yours does.
6. Set your margins too low
Be careful when negotiating your surcharge fees and your commissions to your merchants. Don’t give away too much of your margin. You need to know the market and understand what is expected but at the same time not give away too much. If you set your margins correctly out of the gate you will be much happier with the income in the long run.
7. Not having signed contracts
If you plan to sell your locations or defend your location, you should make every effort to get signed agreements with all of your merchants. I have seen many operators who run their ATM business without contracts and when its time to sell, the valuation is eroded. You will also have nothing to stand behind if the merchants decide to have your ATM removed or allow a competitor to come in. Bottom line is, get signed contracts.
8. Poor geography
Make sure you don’t spread your locations too far from your home base or each other. Choose a territory wisely and do your best to stick with it. The further out your locations are, the more your time and service costs go up. A tightly knit route of machines is far more appealing to buyers as well.
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Starting or Re-Tooling An ATM Business – What You Must Do
In spite of the advances in electronic, digital and alternative payments, cash is still a preferred means of paying for goods and services throughout the world. Recognizing this fact has prompted many entrepreneurs to strike out on their own and enter the ATM industry as independent owner/operators. If you are thinking about starting an ATM business, or are looking to make adjustments to your present business model, here are 7 things you must ensure are part of your process in order to maximize your chances for success.
1. Make a plan
As with any business, you will want to have a plan. Are you going to offer full service, processing only, or a mix? What is the niche you targeting? Bars, hotels, convenience stores, or something else? Going after high margin lower volume accounts or targeting high volume and potentially lower margin accounts? Decide how you are going to deploy, where you wan to be located and what your business focus is. Set a plan and potentially talk to an expert.
2. Understand the business
Do some research, talk to as many people as you can. Read and look into information online about how to start and grow an ATM business. Talk with processors, ISOs, merchants, retailers, consultants etc. This way you will have a complete and clear understanding of the ATM business.
3. Find a bank
With rules and regulations hitting the banking sector, it’s a good idea to talk to your bank and/or locally recommended banks and set up your relationship.
4. Find a processor
Look into and research ATM processors and offerings. If back office support important, then ask about that. Is web portal technology key for you? 24/7 technical support and service? What is the interchange and or buy rate? If you don’t know what these things are, find out.
5. Get signed contracts
Make sure when setting up relationships with merchants that you obtain a signed contract or agreement. The agreement should state the ownership of the ATM as well as the surcharge and split to the merchant. Try to get merchants to sign 3+ year contracts or minimally one-year recurring agreements. The key thing is to have something in writing.
6. Stick to one manufacturer
There are 4 main manufacturers in the independently deployed ATM industry. You should choose one and stick with it. This way, you know your machines and you understand how to repair and replace parts and you can substitute parts when needed. If you end up purchasing from many different manufacturers, your costs and learning curves go up exponentially.
7. Build your route with logistics in mind
Keep your locations as close to home as you can. The closer to home and to each other your locations are; the easier and less costly they are to service.
In many places the ATM is referred to as a cash machine. Turn your ATM business into a fleet of cash machines by following these proven steps to success.