The idea of setting up a small kerosene supply shop where you can sell this commodity in small quantities is an age-old gem that never disappoints.
With over 70% of Kenyans directly relying on kerosene for power it turns out that this is a potential launching pad for futuristic entrepreneurs who would like to venture into the lucrative oil distribution business.
Below is what you need to do in order to get started.
*Identify A Good Location*
This is where you will need to use your genius mind as you will want to find a location that offers you maximum chances of growth. If you live in the slum areas or estates, an ideal location would be one near a main road in a place with significant foot traffic.
If you live in the rural areas, then a place located by the roadside or near a busy junction would be the perfect spot to set up shop. The room you choose to setup your business should be:
*Secure
*Well-ventilated
*With a wide frontage
You don’t have to spend a lot of money decorating the room. A simple paint-job and branding with a clear “Buy Kerosene Here” labeling would be good enough.
*Set-Up The Dispensing System*
If you are starting on a tight budget then the cheapest way out is to invest in a metallic tank with a tap on one end. Whenever customers come to buy kerosene, you will simply turn on the tap and dispense the required amounts. For instance, you can price your fuel as follows:
50ml bottle - Ksh.15
150ml bottle - Ksh.25
300ml bottle - Ksh.40
500 ml bottle - Ksh.60
You don’t always have to start that small though…you can buy a fully-fledged dispensing pump from local distributors. This will simplify your job, minimize wastage and best of all allow customers to purchase fuel from as low as Ksh.5.
Instead of the metallic tank, you can invest in an above-ground or under-ground tank so that you can acquire larger quantities of kerosene from distributors. By leveraging on such economies of scale, you will be able to reap more profit per sale.
*Getting Licensed*
There are no major license requirements for running a small kerosene outlet. The only license required to start is the Single Business Permit which is issued by the County Government.
Those in Nairobi County may also be required to acquire a fire clearance certificate. Generally to be in good books with the authorities you may want to take the following precautions:
*Ensure your fuel outlet is not near a public institution
*Ensure you have fire extinguishers in place
*Ensure your infrastructure is well constructed in a way that doesn’t pose danger to the public
Please note that if you are intending to open a fully-fledged filling station that sells petrol and diesel you will have to get a certificate from ERC and NEMA to operate.
*Where To Buy Your Stock*
For starters, you can be buying your kerosene stock from your nearest petrol station (particularly if you are buying anything less than 1,000 litres).
But as you expand you can be buying from wholesale distributors at a cheaper price.
Examples of local kerosene distributors who offer considerable prices when you order 1,000 litre and above include KK Kerosene, Mwarabu just to mention a few.
*Getting Into The Business*
Now that you have a shop, dispensing tank, necessary licenses and of course your starting stock of kerosene you are good to go.
Ohhhh…and before I forget you will need a funnel, plastic bucket and a few mtungis (Jerry cans).
Your starting budget will look something like this:
Rent + Deposit - Ksh.15,000
Oil Drum - Ksh.10,000
General Shop Setup - Ksh.5,000
Metallic Tank - Ksh.10,000
Licenses - Ksh.7,500
Opening Stock - (200 litres) - Ksh.12,000
Total Budget: Ksh.49,500
*Note*: Cost of modern dispensing pump is Ksh.150,000 or thereabout. It’s not a must you start with that pump because the metallic tank can serve the purpose.
*Note 2*: Price of kerosene per litre may vary from time to time and place to place. For purposes of this article i used Ksh.59.1 which is the recommended retail price for kerosene in Nairobi as at the time of writing this article.
*The Returns*
From our research, a small kerosene outlet in a place like Kibera sells an average of 30 litres of fuel per day. A 200 litre opening stock usually translates into Ksh.26,600 worth of sales revenue.
If we deduct that from the cost of buying the 200 litres from distributors then we remain with Ksh.14,600 profit per week or roughly Ksh.2,000 per day.
How did we arrive at that? Well, we used the price of a 300ml bottle of fuel which is Ksh.40 in some parts of the country.
That means a litre is retailed at Ksh.133 and therefore a 200 litre tank brings you to Ksh.26,600.
26,600 (Sales) – 12,000 (Cost of buying 200 litres) = Ksh.14,600.
Why 1 week? Because going by the average of 30 litres per day then 200 litres can only last you that much.
Of course, the prices and conditions may vary from one place to another and these figures are only meant to give you a rough idea of how this business is done.
Returns/profit: Ksh.2,000 per Day
*Final Word*
So if you are looking for a business idea that you can start with Ksh.50,000 and look forward to about Ksh.2,000 profit per day then this is something worth looking into.
Remember, before you start it is advisable to do a feasibility study. If the math sounds right and if you spot a gap in your area then you can go for it.
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