Just How Profitable is LPG Cooking Gas Retail Business
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.
Cooking gas business is a very profitable business in Kenya, in a good month you can get profits of between Ksh.90,000 and Ksh.180,000. What determines cooking gas retail business profits is your ability to retain customers and how you gain new customers.
Cooking gas in major towns is refilled at a wholesale price of Ksh.93 per kg, the wholesale price to refill a 6kgs gas cylinder is Ksh.558, the retail selling price of 6kgs gas cylinder is Ksh.900 to Ksh.1,000.
Refilling a 13kgs gas cylinder in wholesale costs Ksh.1,209, the retail price of 13kgs gas cylinder ranges between Ksh.1,800 to Ksh.2,000. That means you can make a profit ranging between Ksh.750 – Ksh.950.
In a day a cooking gas retail business can sell 10 gas cylinders of 6kgs, that means you can make a profit of Ksh.4,000 daily.
But keep in mind that this only accounts for 6kgs gas cylinders, so selling a few 13kg gas cylinders throughout the day could earn you even more money on top.
At most on a monthly basis your LPG Cooking gas business can generally generate profits between Ksh.90,000 and Ksh.180,000.
Let’s dive into the details on how you can start this business.
*Step One*
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
*Challenges
*Safety measures
*How to manage the business
*Step Two*
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.
*Premises (Rent & Deposit) – Ksh.10,000
*Metal grill for storage & security – Ksh.20,000
*County Government License – Ksh.10,000
*Acquire a license from ERC – Ksh.3,000
*Certified weighing scale – Ksh.2,000
*First supply of gas stock – Ksh.30,000
*Marketing and advertisement – Ksh.1,000
*Miscellaneous Cost – Ksh.10,000
TOTAL – Starting capital of Ksh.100,000 will be a good start.
*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.
*The wholesale cost of gas differs per kilo from place to place. When doing your calculations, do research of the prices in your area.
*Step Three*
Once you are 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 that you can stock your outlet.
*DOs*
• 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`Ts*
• 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 between Ksh.93 to Ksh.100 per kilo of gas (price may vary depending on your location) and sell for as much as Ksh.154 per kilo.
Thus 13KG gas will cost you Ksh.1,300 and you will re-sell it at Ksh.2,000 thus making Ksh.700 profit. The 6KG one will cost you Ksh.600 and you will in turn retail it at Ksh.1,000 making profit of Ksh.400.
*Final Word*
Cooking gas business is a good retail business in Kenya provided you find a market where prices are stable and quality of gas is not compromised.
Unlike other business where you need to be involved on a day-to-day basis, this one can be operated remotely as long as you hire a good shop attendant.
By
Timothy Angwenyi
Business Consultant
Justine Nyachieo
Business Man & Mentor
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