This is a story of a 21 year old student that decided to open a vending machine business and loaned money from his grandparents as starting capital. Within a span of one year, he had lost all the money and made no profit, resulting in him not being able to pay them back their retirement money.
A year ago, I was 20 years old, just a year into my uni course. Since I was young I have always wanted to be an entrepreneur. I knew that I wanted to have passive income instead of having to go to work everyday. Ultimately, this mindset made me make decisions that have now left me feeling guilty.
A venture I thought was a genius plan at first
I had met a friend’s older brother who we would go out to clubs with, and he was always having a thick stack of cash. He would pay for RM600 bottles of alcohol, tip generously, and pay for everything with cash. He never used any cards, ever.
Naturally, I was curious. I was in my hustle mindset, but at that time I was still working at a phone accessory shop part time after school. A part of me thought he was involved in some gangs but one day I picked up the courage to ask him why he always had so much cash on him.
His answer surprised me. He said he has a business operating vending machines and claw machines. You know, those claw machines at malls where you can win a teddy bear or a toy.
Turns out he had many of those machines scattered around the city and he said that it gave him passive income while he finished his Master’s programme.
I was immediately inspired.
I started asking more questions, wanting this opportunity for myself. He offered to help me source and set up the machines too. Each claw machine was around RM4000-RM5000, and you also needed to buy the toys that go in the machine. You would also need to pay rental to businesses or malls where you wanted to place these machines.
The more machines you have, the more profit you could earn because it became cheaper to operate each one. He recommended me to get 8 machines to start off, to see a good return.
Looking for Investors
As a young kid like me, with no experience – I had no idea how to look for investors besides asking my family. My parents immediately refused to invest, saying it was too risky. I asked a few uncles that I had, who also showed no interest, but encouraged my entrepreneurial spirit.
Then one day, I was at my grandparent’s house, visiting them. They were asking how I was doing, and that’s when I told them of this idea.
I tried to convince them as I knew they had some savings.
I promised them they would get their money back in a year, plus interest, as the returns were really high. All they could afford to finance was RM20,000 as that was already half of their savings.
I was stubborn and did not listen
When I went back to my friend’s brother, and told him that I had secured RM20,000, he told me that I would only get a small return as that would cover the cost of 2 machines including the costs like transportation, import fees, rental space, toys and other smaller fees that come with running a business.
He advised me to find more investment before starting. However, I was impatient and wanted to start immediately.
I insisted that it’s ok that the return was small, because I would save it up and I would be able to buy more machines soon to increase my profits. Without my parents knowing, I asked my grandparents to transfer the money to me.
I told them my parents didn’t believe in me and I would prove them wrong. Innocently, they believed.
Within 3 weeks, I had everything ordered. The claw machines from China, and toys, which I had to bulk order as they were a lot cheaper. I rented a space in my friend’s brother’s warehouse to keep the stock. Then, I had to figure out where to place the machines. The rental prices at popular malls were far too high, so I had to opt for less popular malls.
The low foot traffic deeply affected the use of the claw machines. In the first month, the two machines that I had only gave me a return of RM150 each, barely enough to cover the cost of the rental of the space at the mall.
By this time, my parents already knew about me using my grandparent’s money and I was getting heat from them, and I was feeling the stress at home.
It was over before I knew it
Within a couple of months, I knew the business was doomed. It was bleeding money from every aspect, and any decisions I wanted to make to improve it would cost more money. I was afraid to borrow anymore money so the business just kept going downhill. By month 6, I was completely out of money, I could not even afford the rent at the mall.
To make matters worse, one of the machines was vandalized and repairing it would cost money I did not have.
I decided to call it quits and sell the machine that was still working.
I got around RM2500 as it was a “used” machine. I gave that money back to my grandparents and promised them I would earn back every ringgit I had borrowed.
Ever since then, I feel I have lost my drive as I am extremely disappointed in myself. I have gone back to working retail, and every month, I give my grandparents a portion of my salary. I know it will take a long time for me to pay it back, but I truly learned the lesson the hard way.
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