Do you want to start a business in Nigeria that its profitability is insanely awesome because people can’t STOP cooking food? That business is cooking gas plant. And I’m going to show you all about this business, how you can start it; all the processes to follow, how much you need to get started and how you can even have it where the consumers can easily access your gas plant to buy from you.
This year, after reading this post, you can beat your chest and say, I have found a business I can invest my money into, with guaranteed profitability. But you need to follow my advice.
There’s only one way to start cooking gas plant business profitably. And that’s how to make the business work in Nigeria. If there’s anything you need to know about how to start a coking gas business, I have exposed it all here. The only thing remaining after reading this, would be to execute the idea successfully.
Let’s start with exploring the profit possibilities of cooking gas plant business. You need to know how profitable this business can be before you think of investing your money.
How Profitable Is Cooking Gas Plant?
If you want to go into a business, the first thing would be to verify the profit potential of the business. And that’s so easy to find out about cooking gas business. The evidence is everywhere. The demand for cooking gas is increasing all over the country, and there are still very few gas plants to meet this growing demand.
Also, the profit margin on cooking gas is also good, compared to petrol. Currently, the profit margin on cooking gas is between N50 to N100 per kilogram (KG). For every KG of cooking gas sold, you will be making between N50 to N100 gross profit.
However, that’s not the only way to verify the profit potential of cooking gas business. No matter how high the profit per KG might be, a profitable cooking gas plant would need volume sales to maximize on the good profit margin per KG.
To verify how profitably your cooking gas business would be should be based on volume sales. You will need to conduct location assessment and feasibility study. Even though cooking gas business is profitable generally, it’s not going to be profitable in a wrong location.
Cooking Gas Plant Business Plan
If you have a plan to invest in cooking gas plant business, you should at least do it the proper way. You don’t only need a business plan to get a loan from the bank. I wise investor shouldn’t put money in any business you don’t even know how you are going to recoup your investment.
A cooking gas business plan will help you identify more facts about the business than you currently think you know. It will also put your startup capital requirement in a proper perspective. And help you see if the business will be profitable for you and how long it would take to recoup your investment.
I always advise investors that if you want to invest any amount from N5,000,000 and above, never do that without a proper business plan.
What’s A Proper Business Plan?
Some Nigerians really don’t have a proper understanding of a business plan. For them, you only need a business plan when you want to apply for a loan from the bank. But they have failed to ask why does the banks always demand for a business plan before they can give you their money?
A business plan is a road map that shows what the business is about, those behind it, how much you are expecting to invest, how you hopes to get the money, what’s the benefit for them, how long you hope to recoup the money, what are the risks exposure and how you hope to manage them to your advantage, etcetera and etcetera.
A proper cooking gas plant business plan must be based on these factors:
- Physical assessment of the location, to determine number of households within the location and are likely to buy from the gas plant if it opens for business there.
- A feasibility report to give insight into the financials of business based on a verifiable data from the location assessment report, to accurately confirm how much volume sales is possible at the location on a monthly basis, the risks level and how it can affect the business profitability.
- A financial assessment report that looks into all the financials, capital, loans, expenditures, and turnover.
Note: If you simply buy a business plan online, you just purchased a document and not a proper business plan. The right business plan you need to start a cooking gas plant should be detailed, with custom information relating to the exact location you plan to setup your plant.
It can cost between N300,000 to N750,000 to hire a consultant for this kind of cooking gas business plan.
Cost Of Setting Up Cooking Gas Plant
You have to brace up yourself for this. Starting a cooking gas plant business doesn’t come so cheap. A rough budget estimate is around N20 to N100 million. Although, I will still find a way to explore options that might make it cheaper for you. But have it in your mind it’s not a cheap business to start. If not, there would have been many gas plants everywhere.
Here are the cost requirements for starting a gas plant:
- Cost of acquiring land in a prime location
- Cost of registration of business
- Cost of getting licensed by government
- Cost of site construction
- Cost of operation and miscellaneous
You can already see the cost items even without any amount attached to them. For most of them, the costs are personal and you can fill it in on your own. I’m not trying to scare you but I want you to understand that it’s capital intensive, you should invest wisely.
Cooking Gas Plant Licensing
One cost I can possibly give you freely is the cost of licensing for cooking gas plant. Government licensing for gas plant is handled under a department in the ministry of petroleum called The Directorate of Petroleum Resources (DPR).
The licensing process follows these three steps:
- Step one – Location approval
- Step two – Authority to construct
- Step three – License to sell
You will also need the following documents to apply for DPR approval:
- Your Limited comoany certificate of registration with Corporate Affairs Commission (CAC)
- Tax clearance certificate from Federal Inland Revenue Service (FIRS)
- Town planning approval from your state ministry
- Fire service certificate
- Police security report from a Divisional Police Officer (DPO)
Note: Total licensing budget may vary between N2,000,000 to as much as N3,500,000.
Cooking Gas Plant Design
Cooking gas plant design involve more than just the tank piping design, it includes the site construction design, and actual tank design.
Plant design is important in getting licensing from DPR for your cooking gas plant. Apart from meeting the first approval, which is for location and size of land, your next step would require plant design. A proposed building drawings, showing actual building plans on site, with the appropriate distances to the roadways, nearby properties, driveway for customers, security post, water supply, and fire proof fencing design.
Here are what’s included in the drawings:
- Architectural drawing
- Mechanical drawing
- Electrical drawing
- And structural drawing
Cooking Gas Filling Shed
A filling shed is important in every gas plant. It’s the area where customers bring their cylinders for refill. DPR also has design specifications for this filling shed. It’s positioning in the property is important.
It has to be within a defined distance from both the tank itself and car parking area. Note that one of the reason for specification on filling shed its because that’s where most of human interactions would take place.
And it’s one of the risk points within a gas plant. Following DPR guidelines will not only keep you from violation, it will also save your investment from unnecessary fire incident.
Cooking Gas Dispenser
What happens at the cooking gas filling shed is gas dispensing. And there are two types of dispensers used in cooking gas plants.
- Manual dispensers
- And automatic dispensers
Both does the same thing but in their own different ways. While manual dispensers would still get the cylinders refilled, you will required a scale to ensure accurate weight is dispensed to the customer for the amount paid.
But with a digital or automatic dispenser, it calculates the weight of kilogram to be dispensed and dispenses accurately. However, the cost of a manual and automatic dispensers are not the same. To setup with a manual dispenser can cost as low as N300,000 for 4 nozzles, while an automatic dispenser can cost as much N2,000,000.
This costs should be factored into the cost of tanks and installations for a complete cooking gas plant.
Cooking Gas Tank
The major component in starting a cooking gas plant business is the gas tank. A cooking gas tank is the only approved storage for cooking gas plant. It’s specially designed tanks for storing cooking gas.
There are different sizes of cooking gas tanks available in Nigeria. But not all cooking gas tanks are used for gas plant business. Let me categorize them for you to see.
- Home use cooking gas tanks ranges from 2 KG to 50 KG tanks or cylinders
- Commercial use cooking gas tanks ranges from 25 KG cylinders to 0.5 ton or 500 KG tanks
- Refill plants cooking gas tanks ranges from 1 ton or 1,000 KG to 40 tons or 40,000 KG
Let me now focus only on refill plants cooking gas tanks:
- 1 ton or 1,000 KG tanks cost around N1,500,000 or more
- 1.5 ton or 1,500 KG tanks cost around N2,000,000 or more
- 2.5 ton or 2,500 KG tanks cost around N4,500,000 or more
- 5 ton or 5,000 KG tanks cost around N8,500,000 or more
- 10 ton or 10,000 KG tanks cost around N18,500,000 or more
- 20 ton or 20,000 KG tanks cost around N26,500,000 or more
How To Buy Cooking Gas Tanks
When shopping for a cooking gas tank, there are factors to put into consideration. A coking gas tank is not a standalone equipment. It works together with several components to dispense gas. Although, the gas tank is the major equipment, but don’t approach it like you are buying one single equipment.
Here’s how to look at buying a cooking gas tank:
- Where to buy cooking gas tank and installation equipments
- Who would install the equipments?
- Size of gas tank to buy
- Fire prove pump and fire extinguishers
- Return Hose
- Pipes and piping diagram
- Safety boots, overalls and googles
- Branding your gas plant
- Safety and overall training of staff
- Cooking gas supply channels
You don’t just buy a gas tank, you buy an entire gas plant, with installation, testing safety plan, training for staff, branding and supply sources. All these are what gives you the functional gas plant that you want.
Mini Coking Gas Plant Business
The cost of starting a cooking gas plant doesn’t come cheap, but you can explore options with reduced cost. One of such ideas is the mini cooking gas plant business. This concept of mini cooking gas plant is just an idea to help you get started without following all the full cost requirements of starting a gas plant in Nigeria.
DPR has different requirements for setup of gas plants depending on tank size. For example, the minimum land requirement for a gas plant is 100 by 100 square feet. That’s just a minimum, and doesn’t apply for certain gas tank sizes.
Also, DPR allows for certain sizes of tanks to be installed inside a petrol station. And the cost of setting up inside a petrol station is minimal compared to actual setup plan. That simply means that a major cost of starting a cooking gas plant can be removed or reduced, but that’s only possible for a mini plant or between 1 ton to 5 ton maximum size.
Land Lease Option For Cooking Gas Plant
One of the major cost requirement for a cooking gas plant is the cost of land. Note that a very profitable cooking gas plant should be setup on a prime location. The cost of getting such location might be huge to pay when starting up.
You can lease such prime location when starting your gas plant. The amount you would have required to pay for a prime location purchase can serve in procuring the gas plant equipments and accessories for setup.
Lease options varies and you require the services of an estate agent and a cooking gas plant consultant to get the best location at the right lease price.
Setting Up Inside A Petrol Station
Another cheap option is inside a petrol station. Instead of leasing an empty land, which would also require cost in construction and securing necessary approvals, you can just cut the chase and setup cost effectively inside a petrol station.
Although, this option comes with several challenges as well. There’s also a size requirement for setting up a mini gas plant inside a petrol station. DPR requires a mini space of 1,300 square meters allocated to the gas plant inside the petrol station. That’s hard to come by for many petrol stations.
Also, getting a petrol station that’s suitable, and meets all requirements, which is located in a prime place, and the owner is willing to lease to you might just be a goose chase.
But it’s worth giving it a try. Hire a good estate agent to approach station owners for a deal. The cost can be between N100,000 to N300,000 monthly to lease a space in a petrol station. While you will also save big in DPR approvals. It can cost between N300,000 to N900,000 to get all necessary approval from DPR for a gas plant inside a petrol station.
Cooking Gas Plant For Sale
What if you find a cooking gas plant for sale? This could be a good way to start your own cooking gas business. I once did a job for a client who purchased an unfinished gas plant in Ado-Ekiti, Ekiti state. My job didn’t include assessment before purchase. I was hired to assess the profitability of the location.
Buying an existing gas plant can be cost saving, knowing that Nigerians don’t usually sell their business, excerpt they really needed to sell it. This attitude makes it cheaper to buy cooking gas plant that’s up for sale.
However, the price may differ, and I can’t speculate on cost since there’s different situations, locations and reasons for the sale.
Starting a cooking gas plant business shouldn’t be based on speculations and guess work. You need verified information to make profitable decisions. Consulting with professionals is your best investment decision.
Every business is profitable, but how you get it started can determine whether it will be profitable for you or not. Having a proper business plan for your cooking gas plant is not just a good idea, it’s the right way to ensure the profitability of your gas plant even before you start investing your money.
The licensing processes are there to help you setup with the right principles for a gas plant. Remember, mistakes in gas plant can be very costly both for you and the host community. Doing what’s right is both in your interest and that of your customers that patronizes your gas plant.