Start A Business

How to Start Cooking Gas Plant Cheaper & Profitable in 2022

Cooking Gas Plant Business

Do you want to start cooking gas plant with an ‘insane’ profitability, because people can’t STOP cooking food? Here is your best startup plug for starting, selling and managing a profitable cooking gas plant in Nigeria.

I’m going to show you all about this business, how you can start it, how you can even start small; and how to start it profitably. How best to deal with competitors who may be stronger than you. And most importantly, how to raise money for your cooking gas plant.

Cooking gas plant or LPG plant is very lucrative. But do you know what makes it that profitable? Most people jump into the business because they believe there’s high demand for cooking gas – which is true.

That also means you are not the only one who sees this huge potential. You need to prepare well. How do you plan to deal with competitions? That’s why it’s important you conduct proper study on your location before you setup. Your location determines the success of your cooking gas plant by 75%. The remaining 25% is shared by marketing and capacity.

Don’t work on assumption about your location. By conducting proper location assessment, you will be able to address the issues of patronage, market concentration, potential new markets and identify competitors both present and future incoming.

If you are about to setup a cooking gas plant, study this document thoroughly and contact me if you need more guidance. Contact detail is at the end.

✅ Is LPG Plant A Good Investment Option?

Most people desiring to start cooking gas plant always desire to know if it’s lucrative. Well, I will leave you to decide, but see why you may have to consider LPG plant business.

♦️if you want to start your own business
♦️if you are looking for a highly profitable investment
♦️if you are looking for a business that’s easy to setup
♦️if you want a business with low operational cost
♦️plus, plants can be located closer to LPG customers

However, considering that gas is now the cooking energy of choice, that makes it a necessary consumer product. Most households now cook with gas cooker. And many more are joining in the use of gas for cooking. The demand is skyrocketing, making the business even more lucrative.

✅ What’s Your Startup Plan?

Before you can start a cooking gas plant, you need to have a startup plan. Here are the things you should list out in your startup plan. It’s like your own LPG plant to-do-list.

♦️How to raise the money to start
♦️Where to setup your gas plant?
♦️What it would take to get government approvals?
♦️What’s the potential customer value in your chosen location?
♦️How to deal with stronger competitors in your location
♦️How to guarantee profitability in both short and long run

It’s always important to think and plan ahead. Most times startups are only concerned about how much it would cost to setup. That’s just one part of your problem. 95 percent of investors interested in cooking plant business can’t afford it from their pockets.

So, the right question you should be asking yourself is not how much, but how do you raise the money to start? If you can answer that, you can now ask yourself how much do I really need to raise?

✅ How to Raise Money From Lenders

Big projects like LPG plant is not one you should be considering starting from your personal income. The best options would be to get a financial partner or get funding from the bank.

Contrary to what many think, banks and financial institutions can give you loan to setup LPG plant without knowing anybody in the bank. In case you don’t know, CBN made provision for loans for oil and gas businesses, which you can assess through the banks.

You can also approach your bank to finance the purchase of your gas plant equipment or give you operating capital. This kind of loans are easily accessible. To do that successfully, you will need the following to apply for it.

♦️A business plan to describe your business and how you intend to pay back the loan
♦️A collateral or land documents owned by you or one of your partners in the business
♦️A pro-forma invoice detailing the product you required financing and the cost

Note that this kind of financing may require the bank making the purchase themselves on your behalf to ensure the money isn’t diverted for other uses. The equipment can also serve as part of the collateral.

✅ What Do You Need to Get Started?

Let me break some things down for you. The things you need to start are what would make you succeed or fail. Here are what you are going to do to help you start cheaper and build it to be profitable.

♦️Process Implementation and data analysis
♦️Following Regulatory procedures and approvals
♦️Site cost analysis, safety and construction
♦️Equipment planning and purchase
♦️LPG supply partners, logistics and costs
♦️Employment plan and management

✅ Process Implementation & Data Analysis

There’s time to plan and there’s time to implement what has been planned. If you noticed, when I talked about what should be in your startup plan, I expect you to have a plan of what you intend to do. For example, to raise money for the plant you need to convince partners and financial institutions.

What are the processes you need to put in place to get the money you require? How do you convince a third party that the business is viable, and that you have the right expertise to get it started. Don’t just think anybody will give you money simply based on the business profitability alone.

Every business is profitable, but how do you prove that you can do it profitably? That’s the point, and that’s the reason for process Implementation and data analysis. You want the potential investors or financial institutions to see your ability to make the idea profitable.

You will need to do the following:

♦️Hire a consultant to be in your team and overseas your startup operation
♦️Package a professional business plan with proper feasibility/viability report, which should include a physical location assessment study

If the bank or investor sees you have an experienced consultant in your team they will believe you have the right expertise to guide you profitably. That would mean their money will be safe. Hiring a consultant doesn’t mean making him a board member of your company. It’s the same way you hire a company lawyer. You can pay monthly, or sign a fixed contract.

A business plan describes what you want to do, how you want to do it, and with what you need to do – either to explain to interested investor or lender or simply to guide you in what you are building. This kind of document must be professionally done. Investors are not fools. They would see a poorly packaged plan as inefficiency on your part.

Also, your business plan would need a proper location assessment report. Any wise investor or lender would appreciate good data analysis. If you can provide factual analysis of the target market, and not assumptions, it will help them trust you more and invest with you.

✅ Planning Against Competition

The biggest challenge in this business is competition. As a lucrative business, more people will eventually invest into it. Just like we have Petrol stations and mega Petrol stations, the gas competition will soon become stiff.

If you are starting small, you have to plan how to fight these kind of oppressing competitors before they even arrive near you.

Here are tips to apply during and after startup:

♦️Setup in the best location in your target market
♦️Create room for expansion even while you start small
♦️Understand your target market better. Know your saturated areas, growing areas, and areas already covered by your competitors.
♦️Conduct a location assessment to identify different parts of your market and how competitors can possibly intrude to offset you.

✅ Following Regulatory Procedures & Approvals

In all you do, always adhere to regulatory processes. Don’t cut corners with regulations. It might hurt you later. Always remember that the staff who may help you cut corners today may not be there tomorrow to cover up for you.

Also, make sure you make every DPR payments through the approved government accounts.

✅ What Permits Do You Need?

There are basic requirements you must obtain before starting a cooking gas plant, regardless of the size. Even the road side gas seller need approval to operate these days.

Here are the permits you would need to process before you can be allowed to to commence sales of cooking gas, even before you should start construction.

You will need to get the following approvals:

♦️Town planning approval from ministry of lands and physical planning
♦️Police report from a divisional police station within the location
♦️Fire service report from the state fire service
♦️Environmental impact assessment report
♦️DPR (department of Petroleum Resource) approval

✅ Site Cost Analysis, Safety & Construction

The location is very important. It should be chosen properly. And whatever location you choose, you must ensure its assessed professionally. Don’t invest your money in any business blindly. Data is essential to your business success. Get credible and realistic data.

If location determines 75% of an LPG success, you should spend good money to confirm the viability of the location you plan to use. Don’t plan to invest tens of millions of naira without first spending hundreds of thousands just to conduct a location assessment study. Don’t be penny wise, pound foolish.

And if you are going for a loan, it’s important to present a better assessment of your location to your investor or lender.

✅ Setting Up Inside A Petrol Station

If you can’t afford the cost of land you may consider setting up inside an existing Petrol Station. This kind of setup would require an add-on license from DPR. But it’s rare to find a petrol station that may want to lease space to you.

However, it’s not bad to try. It will cut down your cost by over 50 percent. It’s one of the cheapest ways to start a mini LPG plant. The cost of rental is low and the capacity of LPG is also within 2.5 to 5 metric tons.

✅ Cost of Approval Using a Petrol Station

♦️LPG Add-on License – 300,000
♦️Fire Service Certificate – 50,000
♦️Police and EIA – 100,000
♦️Authority to Construct (ATC) – 50,000
♦️Tax Clearance Certificate – 50,000
♦️Tank Data Sheet – 100,000
♦️Sundry – 250,000
♦️Total – 900,000

✅ Setting Up On An Empty Land

Anybody can setup in an empty land. So, you can purchase a land for your LPG plant setup. However, you need to know the DPR land Requirement rules. DPR specification is minimum land size of about 100 by 100 square feet.

You will also require to perform major construction work, like fireproof fencing, security house, dispense area and some office blocks. Not leaving out the tank area. You would require a building plan as well to put this cost into proper perspective.

Avoid assumptions when starting a gas plant, unless you have excess funding that you can always draw from if you got stuck. It’s better to get expert cost analysis done for you to the minutest details.

✅ Cost Of Approval For Empty Land

♦️DPR Approval – 300,000
♦️Police Report – 50,000
♦️Fire Service Certificate – 50,000
♦️Authority to Construct (ATC) – 400,000
♦️Tax Clearance Certificate – 50,000
♦️Tank Data Sheet – 100,000
♦️EIA (Environmental Impact Assessment – 600,000
♦️Sundry – 500,000
♦️Total – 2,000,000

✅ Equipment Planning & Purchase

LPG plant equipment is the main item you should have proper consideration for in all of your plans. This equipment will be the main player in your day to day operation of the gas plant.

A bad equipment could mean many bad working days. So, making sure the best and quality equipment is procured should be utmost importance for you. I will strongly recommend that you go for new and high quality equipment.

Here are basic parts of a gas plant equipment:

♦️Storage tank
♦️Dispenser
♦️Compressor
♦️Leak detector
♦️Fire proof LPG Pump
♦️Automatic shut off valve
♦️LPG motor

✅ What’s The Cost Of LPG Equipment?

I will simply give you some current prices for new equipment for skid plants. Prices changes with time. Your business plan will be able to give you the most recent and applicable price for your plant.

Also, since the prices here are for new and complete skid plants, if you have options of buying items separately, or considering used equipment, or even using local fabrication, you should verify the cost and quality of equipment before making decision.

♦️2.5MT mini plant cost around N6 million
♦️5MT mini plant cost around N13 million
♦️10MT plant cost around N24 million
♦️20MT and above (enquiry for current price)

✅ LPG Supply Partners, Logistics & Costs

To operate a successful LPG plant you will need regular supply of LPG product. While some mega LPG plants may be able to provide their own logistics to pickup gas when ever they require it and deliver to their plant, small plants don’t have such advantage.

You will depend on suppliers to help with regular refill of your plant. While you may start with the company that built your plant to get your initial supply, you should expect new suppliers will either come to you with their offer or you search for suppliers to add to your list.

✅ How Do You Refill Your Plant?

As a newbie in gas business this may seem as a challenge. But it’s not any issue at all. There are gas logistic companies that would deliver to your plant anywhere you are in Nigeria within 48 hours.

The price are also very competitive, due to the deregulated environment of LPG industry. This would also stop logistic companies from trying to sell at outrageous rates to you.

However, you will be charged for cost of transportation to your plant separately. To also ensure you don’t stay without product, you should always place your refill order 48 hours ahead of your need.

✅ Employment Plan & Management

The day to day operation of your gas plant require plant workers. You need to employ some people to help you do most of the work in the plant. If you are going to be personally present to run the plant, then you won’t be needing a plant manager.

But you will need to hire other workers you may require.

♦️Plant manager who will be in charge of all operations at the plant
♦️Cashier to help sell and collect money
♦️Customer attendants to do the Refill to cylinders
♦️Security personnel to help secure the plant at night

Also, it’s best to have an employee handbook to help you know the type of persons to employ, what they should be doing for you, the general workers guidelines, and what kind of training to give them to help improve their efficiency.

A consultant can develop one for you. It will also address management issues and help you understand best ways to manage your gas plant.

✅ Conclusion

The best way to setup a cooking gas plant as a newbie is to hire the services of a consultant. Follow who know road to prevent you from making some avoidable mistakes and also help to save you from unwarranted costs.

It’s better to avoid a costly mistake than trying to fix it with a high cost. While cooking gas plant maybe lucrative, a wrong setup approach may make it a pipe drain for your finances.

And if you need to raise capital through financial institutions, you need to present the best business plan that’s convincing enough to make them give you the amount you want. You can reach me for more consultation through Call/Text/WhatsApp: 07087770518.

Chinedu David
Chinedu David is a business consultant with experience in oil & gas, hospitality, IT & telecom, consumer products, business strategy, marketing and distribution. He was the telecom editor for SuccessDigest for over a decade. And founded Mystore, one of the indigenous online marketplace in 2013. Drop a comment below and he will respond to your query. He can also be reached via email: nedu@myblog.com.ng or Call/Text/WhatsApp: 07087770518
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