How to start a Gas retail Shop In Kenya
With rapid urbanization taking place in most parts of Kenya, more and more people are switching to using LPG Gas for cooking. Cooking gas is cleaner and more convenient as compared to using charcoal or kerosene. That’s why the idea of starting an LPG retail business is not only a timely one; but also an environmentally conscious one. Let’s dive into the details on how you can implement this low-cost business idea (and how much you can potentially make).
Like with any other business the best approach to setting up a cooking gas retail business is by first conducting research. You are probably here to do just that – but it is even wiser to carry out some on-ground research to get the finer details. Some points you need to pay close attention to during your research include:
Ideal location for the business
Rules and regulations of the industry
How to manage the business
If you are satisfied with your research and are sure that you have spotted a gap in the market, the next step is to draw-up a budget. Your budget should include the cost of premises, licensing costs, equipment and miscellaneous expenses. Here is a sample budget using real-time data.
|Premises (Rent & Deposit)||Ksh10,000|
|Metal grill for storage & security||Ksh20,000*|
|County Government License||Ksh10,000|
|Acquire a license from ERC||Kshxxx**|
|Certified weighing scale||Ksh2,000|
|First supply of gas stock||Ksh30,000***|
|Marketing and advertisement||Ksh1,000|
|Wheelbarrow for deliveries||Ksh5,000****|
|TOTAL (Excluding ERC license cost)||Ksh88,000|
*We recommend you invest more in making the premises more secure especially if you are operating in an area where theft of gas cylinders is rampant.
**Current cost of ERC license was not readily available for our perusal. Note that most small retailers opt to venture in first without this license and figure out its processes much later.
***The current wholesale cost of gas is Ksh98 per kilo in Nairobi and its environs.
****You can upgrade to a motorbike once the business gets well established.
Once you’re comfortable with the budget and have raised the funds required, you can go ahead and set up the premises. Then as the fundi’s finish their job, you can approach a few distributors serving in your area and draw a sales agreement with them. You can then proceed make your first order so you can stock your outlet. (A list of wholesale distributors approved by ERC: goo.gl/n0o9fq)
• Ideally, you should locate your business in a relatively busy or growing residential area. Think of those upcoming estates like Joska, Kantaffu, Kiserian, Isinya and so forth. Most established estates are quite competitive although you can still find some gaps to fill.
• Be sure to market your business through good branding and distribution of posters in the estate
• You can offer free delivery to your clients as a way to win over their loyalty
• Security is a very important aspect of this business, make sure you put in place proper security measures and don’t compromise
• Keep good books and be sure to issue all your customers with receipts on each transaction
• Don’t buy gas from shady distributors – it may be cheaper but it can land you in trouble
Just How Profitable Is Cooking Gas Business?
The profitability of this business depends entirely on your customer acquisition and retention efforts. This is how the LPG gas business works.
You purchase gas from wholesalers at Ksh100/- per kilo of gas (price may vary) and sell for as much as Ksh154 per kilo. Thus 13KG gas will cost you Ksh1300 and you will re-sell it at Ksh2000 thus making Ksh700 profit. The 6KG one will cost you Ksh600 and you will in turn retail it at Ksh1000 making profit of Ksh400.
On a good day you can make sales of Ksh10,000 with a net profit margin of about Ksh2,000. A bad day is when you make sales of less than Ksh5,000.
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