If you are looking for a way to tap into the oil and gas sector in Nigeria, then starting a diesel (AGO) business in a small scale medium is the best. The oil and gas sector till remains the most important and profitable sector in the economy, as it drives and power the Nigerian economy as a whole.
Diesel (Automated Gas Oil) is one of the most consumed petroleum derivative in Nigeria, this is because it is widely used in powering generators in residential homes, offices, hospital, hostels, schools, factories, etc. and serve as fuel in most vehicles.
One of the advantages of going into a Diesel Distribution Business is Nigeria is because the petroleum derivatives called diesel, has more energy than petro (gasoline) and is widely used to fuel powerful industrial diesel engines also too, it releases lesser carbon dioxide into the air because it is more fuel efficient.
One other reason that makes this business very save and profitable is that, diesel doesn’t evaporate as much as gasoline, so it is much safer when accidents occurs, when reselling and also when transporting it to client at various destination point.
Unlike a fuel filling station and other major vendors that buys their diesel from NNPC and other major petroleum depots, we will just focus on starting this business small and growing it, as we will gain more experience in this business. Our main area of specialization will be in selling to consumers (end users) in jerry can.
Sourcing for this diesel will be different for different people and for different location as well as depending on the usage of a particular petroleum product around that area. This is one of the things you should focus more on when conducting your market survey.
This can be a very hectic and stressful business especially when not properly planned out. In other to profit from this business, you need to have a laid down plan (BUSINESS PLAN) and one way to do this is by apply the following point I am about to give below:
Conduct a Market Survey.
The first thing to do is to conduct a market survey, this survey will help you to determine whether your business plan and goal can be achievable in the future, as well as the challenges you may face in the business.
It will also help you to take note of key things for your business to succeed, things such as the best location for the business, as well as the availability of market in whatever location you decide to operation from. As well as make enquires, for the best place or depot to be sourcing your petroleum products (diesel) from and make some business connections.
Choosing the Best Location
The next point is choosing a location where your business will operate from, which I believe you must have added into your market survey. The location one choses can have a great influence in the profit one makes.
When choosing your location for your diesel business, you need your shop to be located near residential areas, offices, schools, hospital, hotel sand any organization –if your business can be location near any of the following I just listed, it will be good. That is because most industrial generators uses diesel, since is more economical and produces lesser carbon mono oxide.
Remember that once you get a shop or an office in any location, it becomes difficult to move out, especially when clients recognize your business, your services and its location. So choose wisely and apply caution.
Having Your Business Registered
Next is registering your business, this may not be the first thing in your to-do list but it is necessary and beneficial as it gives your business a good name, authority and make it trust worthy among clients and your competitors.
Get a business name, have it registered with CAC (Corporate Affair Commission). It may prove to be time consuming, that’s why you should do it when you begin starting your business. So that before you must have be done with setting up your business, your business name would have been registered with the appropriate authority.
Do not think of ever evading tax, that is if you are eligible to pay tax as having a good tax record can help you when seeking, applying or rewarded with a national or international contract.
Building a Storage Facility
This may come in different format, most people might decide to build their, some might decide to just buy a tank usually made from plastic and some can just store theirs is jerry can. You can use whatever method as far as it is cost efficient and align to your business plan, then it is good.
Some start-ups may decide to use litres of jerry can for the first few months before advancing further as this help to build your business brand in a slow and smooth grown than to invest million and end up making bad decision which will hurt the business in the long run.
Marketing Your Products
When the above points are followed and are concluded the next step is to start marketing your products to end users. End users in our case are those that will utilize the diesel (that is either use them to fuel their car or their generator) or even resell it.
You should be targeting end users such as hospitals, organizations, companies and residential homes that uses diesel powered generators.
One of the most appealing way to get their (customers) attention is to offer each client a contract with a discount (that depends on the price you source your products). For example, you could offer to give a discount of 5% on a total of 500 litre any organization buy or 5% for any litre of diesel any organization buys during a period of 3 months, all that depending on how you source your products.
I personally find this to be a better way to market your business and your services to various clients and customers. Despite it might affect certain percentage of your overall profit, but it’s better to get little profits for the first year or two of your business initialization stage and get a good customer/client base, than to try to maximize you profit while having low patronage from customer and clients.
Remember the only risk there is in becoming a major supplier to various organization and clients is by having your profit slash as you would be giving discounts. Once you build the market trust and communication you can then have your price return back to the normal price.
One effect way to effectively build business connections is via popular job site such as LinkedIn, the purpose is to connect with other people around the country and beyond, where ideas and business connection can be carried out.
You can still target other companies within your geographical area through social media marketing that why getting a shop/office and have it registered is essential, as it gives you a legitimate business stance.
Cost of Starting This Business
For example, when taking location into consideration it is less expensive to start this business in the southern or western part of the country and it becomes more expensive when establishing this business in the central or northern part of the country.
Mode of Transportation
Most clients will prefer you bring the diesel product over to there destination, this may be hectic when for example someone order a 200 litre of diesel to be distributed with a period of 24 hours to a far destination, without a private car it becomes harder to meet customer demand.
That’s why there should be provision for a mode of transport, the best option is to use a public cab or taxi. I would recommend you build a good business relation so you can call on him/her anytime and he would show up on time to help you out.
In conclusion, there are millions of naira to be made in this business and with the right knowledge, capital and approach this can be achieve.
Sourcing your capital first before start is important so that you don’t fall into debt, with a capital as low as N500, 000 this business can be established in a larger scale.
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