Small Business Model Series Entry #4 – Basic Research

Research is something I hate. I don’t know which is worse, a dental visit or doing research. This is why I didn’t go to college. But, I know; I want to protect my hard earned dollars and I need to get smart about Automated Teller Machines. Where do I start? 

Research needs to be done in a systematic way to obtain great information in the least amount of time. I decided to answer some of the most fundamental questions. 

First, I want to gain an understanding of the industry as whole. Next, I want to understand the process of the transaction and how this works in detail. Then I want to learn about the machines, features, costs, installation etc. Is there competition and if so, can I still make money in this business?


I spent a lot of time on the internet researching the industry as a whole. There are about 220,000 machines in the US that are owned by non-banking companies and individuals. My first thought is that this is about 1 machine per 1,000 individuals (there’s about 220 million adults in the US/220 thousand machines and you get 1,000 adults per machine).  I don’t know if this is good or bad, but it seems OK for now. While learning about this, I picked up on an industry term:  ISO – Independent Service Operator which are the owners of the ATM’s. Note to self, learn the terms as I go through this research phase.

The ATM industry started in the late 1970’s and grew within the banking industry during the 80’s. Banks agreed to honor other bank cards with a fee attached. This fee is called the interchange fee. I learned a new term:  Interchange is the fee I assess the customer to use my machine. ISO’s became involved and this is where we are today. Apparently, the high transaction spots are taken, malls, shopping centers, high volume restaurants, quick serve gas stations etc. Finding a good spot seems to be the trick to making money.

Process of a Transaction

One of the more fascinating aspects of this is the two types of transactions. Both credit and debit cards can be used in the machine. 

  • By paying a fee to the National Transaction Association, any credit card run through my machine earns me that discount fee that merchants have to pay. A $200 withdrawal charges the customer an advance fee of let us say $5, I would earn about $3 of that fee. Hmm…, would love for folks to run their credit cards!
  • Debit cards use your bank account for the funds transfer at the point of sale or transaction. When the customer requests funds from his account, the bank which hosts my ATM contacts the customer’s bank and withdraws the cash and the fee and transfers those funds to my account. I need to find a hosting bank for me. 

Both transactions work similarly. When the customer inserts his card into the machine the phone line contacts my ATM bank and then my bank contacts the cardholder’s bank. The cardholder’s bank authorizes the dispersal of money and withdraws the cash from the customer’s account and then transfers those funds plus the fee to my account. My ATM then disperses the money to the customer. 

One of my primary concerns was liquidity. This solves that issue with great assurance. Think about this for a moment. The inventory is cash, therefore, no need to sell it to get my money back. See for more information on learning how to read and understand a simple balance sheet. If I decided to quit tomorrow, I go to my machines, clear out the cash, go to the bank and withdraw all my money. Problem solved! See: . Keeping this simple, all I really own is cash and a machine. My risk is low because it comes down to the cost of the machine. I would imagine that for liquidity purposes, I could resell the machine, heavily discounted but I could resell the machine in an emergency or closing up process. This achieves another one of my goals which is low risk in case of needing to get out of business.


There are two large manufacturers of these machines. Diebold and Triton combined produce about 60% of the machines in the US. I went to their respective websites to learn more about their machines and cost.

  • Diebold – initial review indicates that Diebold is really for the banking industry and I’m not really their customer.  So I’m off to Triton.
  • Triton – machines range in price from $1,900 to $7,000 depending on the bells and whistles you desire. I decided to keep this simple until I learn more  I used the RL1600 as my base model to do some figuring in my research phase. It looks like you could spend hours researching the machines alone, but I’m only interested in gaining an understanding of how the machines work, their costs, and what is involved in installing them. I’m sure that as I go further down the road, I will need to understand more about the machines to get the right kind of machine in the right location.

The machine can be shipped to my home and I then mount it to the floor of the retail establishment. It suggests using concrete bolts to mount the safe part to the floor. If a wooden floor, use a through the floor bolt system to mount the safe. Plug in the system, connect a phone line or use a wireless modem for communication, program the device, load and begin hoping for transaction activity.

Seems simple enough, but I learned long ago, everything looks easy. If it were easy, everybody would be doing it!


This one appears to me that some legwork is involved. I gathered up the Mrs. and our 2 year old and headed out the door. We started looking in the mall, retail stores, restaurants etc. It didn’t take long to find nor take long to get tired of looking for them. Toting a 2 year old around only lasts for so long before everyone is tired. I thought this isn’t going to work out too well. I’m going to have to create some systematic method to find existing ones and then sort them and then look at options. 

Apparently, location of a machine is critical to your success. You need to be smarter than the other guys for locating a machine. High traffic areas, specifically high traffic spots where the customer needs cash. I’m going to have to spend some serious time on this to get this right. 

Overall my basic research reveals a good industry, very low risk and high liquidity, and the key is finding a good spot for cash needing traffic.

This entry is part of a series of entries exemplifying the steps an entrepreneur takes from starting a business to selling the operation. It is a step by step process addressing the multitude of business concepts every small business owner must face. This is a 6 year example from Day 1 to the day the owner receives a check for selling his business. Read this series as if it you were experiencing all of the trials, tribulations and joy of owning and operating a business.

Entry #4 – Basic Research                   Invested Time:  7.25 Hrs.         Cumulative Time:  20.75 Hrs.

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