The palm oil business is a profitable business to start in Nigeria. And as a matter of fact, palm oil is used for cooking, production of soap, cosmetics, preservation of food, etc. So every part of this business is very profitable. And the interesting part of this business is the high return on investment.
Starting a palm oil business allows you to comfortably make an extra source of income, depending on how you handle the business. In as much as you have the capital and the right knowledge, you can start a palm oil business in Nigeria.
In this article, we will try as much as possible to discuss the major steps needed to get started.
How To Start A Palm Oil Business In Nigeria
Follow the below procedures:
- Have The Knowledge About The Business
- Come Up With A Business Plan
- Conduct A Market Research
- Improve Your Business Plan
- Raise Capital For Your Palm Oil Business
- Choose A Business Structure
- Choose A Business Name
- Register Your Palm Oil Business
- Find A Suitable Location
- Open A Bank Account
- Obtain Necessary Licenses And Permits
- Look For Reliable Suppliers
- Promote And Market Your Business
1. Have The Knowledge About The Business
Having the knowledge about the palm oil business will help you make the right decision on the type of palm oil business to start with. However, you can choose to start with a palm tree plantation, selling palm oil, or establishing a palm oil extraction mill. Your sole aim should be about having the knowledge and equipping yourself with the right information.
2. Come Up With A Business Plan
A plan mostly is a guide away from failure. A business plan guides you through the journey of knowing and identifying relevant, irrelevant, and excesses. After all, growing a business is a process, it is never an immediate achievement. Therefore, a good plan from the start gives you clear visions, confidence, and Focus.
There are two methods of writing your business plan, the traditional business plan method, and the lean business plan.
The traditional business plan: This is mostly used or needed by a detailed business owner or investor, this is mostly the best option as it is detailed. The traditional business plan contains:
√ Business name
√ Your mission statement
√ Your services
√ Your business leadership team
√ Your employees
√ Where your business is located.
√ Your Target market
√ Your Market Analysis
√ Your SWOT (Strengths Weaknesses Oppositions Threats) Analysis
√ Your Organisation and management structure with a chart if possible
√ Marketing and sales strategy
√ Funding requirements and duration
√ Business yielding Potentials
√ Credit Histories
√ Permits that would be required
√ Licenses that would be required
The Lean Business Plan method: This is a direct-to-the-point type of business plan, it contains:
√ Mission Statement
√ Major Partnerships
√ Resources that would be used to create services
√ SWOT (Strength Weaknesses Oppositions Threats) Analysis
√ Sales and Marketing Strategy
√ Target Market
√ Revenue Streams
3. Conduct A Market Research
It is important you understand the system of your market because you will be needing it. First and foremost, understanding your market gives you a great insight into what the value you are providing is worth, its target, and the competition.
Additionally, you can conduct market research on the strength and weaknesses of other palm oil businesses, what you are going to do differently or what you are going to improve on to provide a better service. What you need to make the difference or improvements, What it will cost you to startup? During your market analysis, you take a SWOT analysis of your business.
4. Improve Your Business Plan
With the knowledge from your market analysis, you improve your business plan, let go of the excesses, and add to the plan the necessities to be the shift in the market. This stage in starting your own palm oil business can be regarded as the final plan stage.
At this point, a clearer picture of your business and a modification of your mission statement is done. So as you go about putting things in order, you have a clear perception of what you are doing.
5. Raise Capital For Your Business
As there are several means of raising capital, a lot of negative information is out there about taking a loan. Taking a loan depends on the business plan and structure, if you are confident enough about the potential of your business, a loan is no bad idea.
LOAN: Loan is a certain amount of money lent to you by the bank over years and the interest rate and monthly payments are fixed in terms.
Other ways to raise capital include:
√ Personal Savings: The money you have put aside to start a business. This is not gotten from anyone else but you.
√ Selling stock of your business: This refers to liquidating your asset for money. Your investor buys the share and gives you cash, most times it is advisable you keep over 50% of your stock as the investor has the exclusive right to re-sell his share and that might affect your ownership of your business. The highest shareholder is the owner of the business. These are the things to consider when starting a business.
√ Partnership: You partner with someone or an organization of like minds. Where the other party who contributes to the capital is given a percentage. In partnership, they share in the profit as well as the loss which would mostly be aligned to their contribution of capital and overall growth of the business.
√ Sponsorship: You can write a business proposal to individuals, organizations, or companies. If validated and approved, these individuals, organizations, and companies will raise the capital. In this case, they may not be interested in any percentage of the profit but might be requiring a steady report on the growth process. On the other hand, they may require a given percentage (most times a little percentage. for Example, Non-governmental organizations) but will not take part in the loss of the business.
√ Friends and Family: This is contributions from close relatives and friends. it could be a place to start, it could be facilities but mostly cash. The business owes no obligations to these persons.
6. Choose A Business Structure
In starting a palm oil business, having done the fore analysis, the next consideration is the structure of your business it will be a sole proprietorship, partnership, or limited liability company. While choosing a business structure, you must consider the following:
• The tax and legal standing: Tax is a mandatory contribution, levied on business owners by the government. It could be at a national level or state level. It can also be on both levels.
• Cost of a start-up: From your market analysis, having explored the possible ways of raising an income and the potential of your business, you would know the right business structure to erect.
• Profit sharing: It is just in sole proprietorship that you do not share the profit and loss of the business. In every other business structure, profit and loss are shared based on the agreement of both parties.
7. Choose A Business Name
Your business name is like your gateway to investors and customers. So in picking a name you should know and consider that:
1. It is almost like the full essence of your business in one word or two, so keep it simple and intentional.
2. It is your business identity, it should therefore be in alignment with your services provided or the satisfaction intended.
3. The business name should not take a lot of energy to pronounce or needs special attention to memorize. It should ring a bell such that even a layman can relate with and relate to the name.
4. Trade mark issues should be put into consideration while choosing a business name.
5. In as much as it should be simple, make your business name unique. If possible, a name not found in the dictionary.
8. Register Your Business
A Registered business gives you a legal standing. Your registration is your proof of authenticity. A registered business is recognized as a separate entity on its own, separate from the owner. It has its rights, values and identity recognized.
Reasons To Register Your Palm Oil Business:
√ Protection from Legal Authorities: When your business is registered, your business name is protected and cannot be used by any other business. The authorities protect and preserve your business name and slogan.
√ Business Account: Having a business account is very important for every business. A business that is not registered cannot get a corporate account and this is not good for possible investments and business transactions. Hence, using a personal account in running your business limits the potential of your business.
√ Business Trips and Conferences Outside Your Country: A registered business makes it possible for you to travel outside the shores of your country for business deals and business transactions. Only registered businesses can gain international recognition thus you can only leave the country for business purposes when your business is registered.
√ Hiring Employees: rules and regulations are guiding every business. When a business is registered, it makes the rules more valid, this applies also to the hiring, paying, and maintenance of employees. It is easier for a registered business to hire employees as the individuals know that they will be properly protected and are operating under controlled management. This breeds the best from both the employees and the employer.
√ Continuity: A registered business name assures you of a lasting legacy. Even after the Business owner is no more, the business can still run on its own. it does not die with the owner. Therefore, registering your business is as good a solid foundation as Posterity.
√ Getting Loans: Banks and other corporate bodies give loans to Registered businesses. When your business is not registered and a loan is applied, there will be an alarm for investigation of fraud. This makes the process longer than necessary as you would have to prove beyond doubt that you are genuine and most times not get the loan until you are registered.
√ Reputation:: A registered business is trusted by your customers. Your registered business entails permanence and shows effective management. This builds confidence in your investors and patronizers alike.
√ Incorporation: When your business is registered it will now be recognized by the corporate bodies (The body responsible for the registration of businesses). This recognition gives your business a legal stand and is an advantage against other palm oil businesses that are not registered.
√ Legal protection from risks: Your Registered business is an entity of its own. So if your business runs into debt or liability of any sort with the bank, so far you did not guarantee such debt on a personal basis, nothing related to you would be affected. it is outrightly that of the business to deal with.
√ Financing: Most investors will not put their money in a business that is not registered. A non-registered business has so many disadvantages in this regard as it can not be regarded as a separate entity. Therefore many investors will not accept it as having a legal and working structure that can be accountable for their money. So, a registered business keeps you open to opportunities for investment and growth.
9. Find A Suitable Location
If you are starting as a wholesaler, you need a location that will be suitable for your palm oil business. In addition, the space you will make for the storage of your palm oil should be cool and safe. These are the things to consider when looking for a location for your business.
10. Open A Business Account
We do not mix pleasure with business as much as we do not mix personal affairs with business. A business account is vital and different from your account.
Most business accounts require multiple signatures thus relieving the business owner of the stress of every aspect of management, business accounts also generate income as interest.
Having a business account makes it easy for you to prepare taxes and also makes it easy to keep a proper book record of your expenses and your income.
A business account presents the management as organized and effective to investors. This can offer you credibility.
11. Obtain Necessary Licenses And Permits
Registering your business is not the only guarantee you need to kick off. As a result, palm businesses have licenses or permits of some sort and this is dependent on your location. Business permits regulate the structure and safety of the business community.
12. Look For For Reliable Suppliers
If you are not starting as a producer, then you will need to have a trusted supplier that you can purchase from. As a palm oil wholesaler, you should endeavor to make solid plans with suppliers to avoid disappointment. Therefore, it is very necessary to have a reliable one to source your palm oil.
13. Promote And Market Your Business
We are a most fortunate generation with the internet, where almost everything is possible including Promoting and marketing your business. Key effective ways are:
Make Videos: The selling means of advertising your services is video making. The video first should be short but detailed. If you cannot deal with the creative, you hire the services of a content creator an accurate one at that.
Make Reviews: You can render your service to some persons for free or a little token, and get honest reviews from them. They would spread the word for you.
Social Media Ads: Run Facebook, Instagram, or Twitter Ads. For this, you would be needing a good copywriter. This would bring your business to the limelight, people from all works of life would see it and a good percentage of these people will click on it.
Have A Website: A website properly developed with a very good user interface and an articulated blog post, where potential customers can come and know everything about your service is necessary, so when you run this Ads, it takes your potential customers to your website and exposes them really to your services.
Create Business Social Media Handles: Create business social media handles separate from your handle, post your services daily, and have a social media manager who has great skills in copywriting or content creation. You ask for honest reviews from consumers and re-post on your social media handles. This will encourage and boost the confidence of other potential customers.
Collaborations: When bigger industries are hosting events and call for sponsorship or partnership, this is a good strategy to sell your services as you will be featured either as a partner or as a sponsor, as much as this might bring about financial responsibilities, it can also be as free and simple as volunteering, it can also be donating assets that can be gotten back after the event.
Offline Advertisement: You can promote your business offline through word of mouth, sharing your business card, billboards, and flyers. Offline advertisement is one of the best ways to promote your business & reach your potential customers (target market).
Cost Of Starting A Palm Oil Business In Nigeria
Based on the procedure, location, and type of palm oil business you want to start with, the capital varies. Starting as a producer requires a lot of capital, same as wholesalers but lesser. However, you need more than ₦1,000,000 if you are starting as a wholesaler. And as a producer, you need a capital of ₦10,000,000 to get started. It can be lesser or above the estimate base on the scale of business.
In our conclusion, do well to do an offline investigation, and visit other palm oil producers & wholesalers, This will keep you updated and as well give you more exceptional knowledge.