Business Insider recently profiled William Butterton, an electrical engineer who discovered a potential side hustle through social media: placing and maintaining ATMs and vending machines. While skeptical of the term “passive income,” Butterton found this venture to be the closest he’s come to achieving it.

The Genesis of Viking Vendors

After the birth of his first child, Butterton began exploring side hustle opportunities. In 2022, he and a business partner launched Viking Vendors in Silverdale, Washington. As of March 2024, the company operates five ATMs and three vending machines.

Profitability and Income

According to terminal activity summaries viewed by Business Insider, Viking Vendors splits approximately $1,500 in monthly profit. Butterton acknowledges the income isn’t substantial, but it effectively covers expenses like car payments and daycare, while still allowing him time with family and other projects.

Startup Costs and Funding

When Butterton began in 2022, ATMs cost around $3,000 each, after tax. He initially estimated a total upfront cost of approximately $5,000 per machine, including $1,000 for cash stocking and another $1,000 as a reserve. He and his partner each contributed $5,000 to acquire their first two machines.

They later acquired two inactive ATMs from nail salons for $1,000 apiece, representing a significant cost saving.

Navigating Banking Challenges

Butterton highlighted one of the biggest hurdles: securing a bank account. Many large banks are hesitant to work with ATM companies due to concerns about fraud and money laundering. He eventually found a small, local bank willing to partner with them.

How the ATM Business Works

The primary revenue stream for ATMs is the surcharge fee paid by customers for out-of-network withdrawals. “100% of that goes into our business bank account,” Butterton explained. “That’s your profit, and it’s purely location-based.”

Host Business Benefits

Butterton hasn’t had to share profits with businesses hosting his ATMs, as the arrangement already provides benefits. Customers withdrawing cash often spend it within the establishment, and the machine can reduce credit card processing fees. Typically, host businesses only provide power, while Viking Vendors handles cash loading, maintenance, and servicing.

Optimizing Surcharge Fees

Setting the optimal surcharge fee requires experimentation. Butterton found that $3 is standard in his market, aiming to maximize transaction volume while maximizing revenue. He initially started at $2.50.

Location is Key

Butterton emphasizes that location is the most critical factor for ATM profitability. He prioritizes cash-only businesses, as well as establishments where cash usage is common, such as barbershops, convenience stores, and nail salons. Businesses with frequent tipping are also attractive.

In Washington state, cannabis dispensaries are highly profitable locations, though securing placement often requires profit-sharing.

The Importance of Contracts

Butterton stresses the importance of a formal contract with host businesses, covering operational details and long-term value. He used an online template, revised it, and had it reviewed by a lawyer. The contract establishes a two-year term with a 30-day cancellation clause and clearly defines responsibilities.

Challenges and Risks

While the business is largely passive – requiring about an hour per week – it’s not without risks. Theft and vandalism can impact profits. Butterton initially faced high insurance costs, around $2,500 annually for two machines, but has since found more affordable options.

He experienced one ATM theft, which was later recovered empty, but emphasizes that such setbacks are part of the business and can be overcome with proper setup.