All businesses require a business plan for success especially a Private ATM business, as it is new and its characteristics are not so well known all over the world. A Business Plan is a report which spells out how the business will be carried out so that it is profitable. The business plan serves the following functions (a) it spells out clearly what is to be done and in what circumstances (b) it lists down the priority of the actions. Finally (c) it forms the guide to our business so that in case any party who has been approached for part finance can go through it to know all about the business and thereby come to a decision as to whether they will be safe in investing in the business.
With the increasing benefits that bank customers are enjoying and their gradual increase, banking industry experts feel that customers will want more and more of ATM’s in the very near future, which are here to stay. Hence, ATM’s will be broadly classified into two separate categories one type, which will offer all kinds of services from filing your tax returns to investing money in the capital market. The other, which is being considered in this plan, are the ordinary ATM’s of today.
Profitability
Statistics show that in the US, more than 50% of ATM’s are privately owned. These privately owned ATM’s are running profitably, charging transactions with a surcharge of 2% to 4% on its value. This shows that the ATM business is definitely profitable.
The Business Plan vide Investment required
Despite the profitability, there has not been much of a study in this line. We will therefore form our business plan vide the old formula of (Returns less Investment equals Profit). In fact, gauging accuracy of the Investment costs become all the more important when we consider the lack of academic study in this business.
The most expensive item here is the ATM machine. They are available in the range of $1,500 to $3,000. It should be kept in mind that we want our ATM to have a tag of “being reliable”. This is very important in retail selling. Say we go the corner drugstore twice and by co-incidence, the things required are not in stock at the drugstore. In such a case, the store is termed unreliable. The store therefore loses our business and the business of our friends and relatives too. In the same way, if a customer’s sees that the machine is under repair twice or thrice, the ATM will go in for an unwanted tag of unreliability. We therefore invest in a brand new machine say at $2500. We then negotiate with the manufacturer on
1. The guarantee/warranty terms
2. Free transport and installation of the machine
3. Providing a 24/7 service helpline operator for manning
4. Providing to you ATM processors, referred to you by them
5. Other Value added services, as and when, they become available and appealing.
We can get these advantages from buying a new ATM machine. Apart from these, if we buy a second hand machine, we have to keep in mind that many ATM’s sold vide E-bay are not 3DES compliant. Triple DES is an advanced encryption technology that is now mandatory in ATM’s. Buying an old incompliant ATM will involve heavy upgrading expenditure. Further, second hand and leased ATM’s have this tendency to break down at frequent intervals.
What is ATM processing? An ATM has to be programmed with software, which can be such that apart from the common services, it can close down the machine when cash is exhausted and inform me. If programmed, it can send a SOS text to me and the service company in case of a defect; it can keep records of all transactions and even give out gift cards at random intervals to customers etc. All this can be done by hooking up the ATM to the other ATM’s in their WLAN network of the company, which processes my ATM.
If required, they can even fill up my machine with cash, at a surcharge per transaction or we can do it ourselves. All this services should be covered in the ATM processing company’s agreement and everything should be well described. My interest will be to negotiate a contract with the company not exceeding 3 years without any upfront payment .A two year period is a must because the processing company has to recover their costs from a part of the surcharge and also make a profit. These companies already have a number of ATM’s, which has a call center number, and they will just add our phone number to it. Naturally, if we try to provide a similar service our costs will be much higher. It is best to give the AMC of the ATM also to the processing company.
While negotiating we will allow a maximum of 0.8% of the transactions. Two facts which are favorable to us is that we can sell advertising space to the company and as the machine is new, it will not need much servicing. As regards filling-up money, a retail ATM has been found to operate between 8-10 times/day and an average withdrawal being $60-$ 100. Therefore , filling up money of $1000 should be adequate
Within a few days we will be able to find out the trend in our machine.
We decide the location of the machine, which is very important. The more the footfall in the particular area, the more is our earnings. So we select a location which is the most favorable for the ATM. Movie Theatres, Video game centers in malls, fast food chains, casinos etc. are some possible locations. The actual location can only be decided by after seeing it. Inside a video game center in a mall is a good choice.
When we talk to the owner about placing our ATM there, we need to point out that as his is a commercial enterprise where people spend money, the maximum portion of a withdrawal is likely to be spent there itself, thereby increasing his turnover. As soon as he realizes this, we should get a discount on your rent, payable monthly. The deal will be concretized by an agreement. Another point is that the ATM will be secure with the owner’s security arrangements. We do not need to spend money on security.
We have almost finished our job. Apart from what has been listed, we will require
1. A Power connection
2. Two telephone lines, .one for the machine and the other for the helpline .
That concludes our requirement list.
Let us consider a charge of $ 70 for the rent and $ 30 for the power and the telephone.
We charge a surcharge of 3% per transaction , out of which 0.8% is retained by the processing company and 2.2% is credited into my bank account.
Then, considering operations for 1 month and 3 months, we have the following graphs.
For three months, as can be seen from the graph, in four months I will be able to square off my investment and earn a profit. From the fourth month onwards, it will be completely profitable.
Before we conclude the business plan, we have to list a few basic things to do at the very start, which are:
1. Comply with the law and do whatever is necessary to do before starting
2. Open a bank account separately for the ATM business.
3. Have a solicitor see to all the agreements
4. Go in for a limited liability insurance as we will be dealing with cash.
We now conclude our business plan after showing the profitability of the proposed ATM business.
References:
Article compilation, 2008, Emerging Algeria The Report, the Oxford Business Group
McDysanD, Spohn.D., 1999, ATM Theory and applications, McGraw Hill.
