Analysis of the Cost of Running a Pure Water Business In Nigeria + Start-Up Manual

Analysis of the Cost of Running a Pure Water Business In Nigeria + Start-Up Manual

THE COST OF RUNNING A PURE WATER BUSINESS IN NIGERIA + START-UP MANUAL

                                     [Establishing a Pure (Sachet) water Business in Lagos]

Introduction

A smart investor knows that the best product to deal on is the product in high demand, that automatically placed pure water production business “investor’s choice” any time. The demand doesn’t seem to go down very soon as it has become the most credible alternative means of getting anything close to clean drinkable water for the average Nigerian”

What you need to get started

Note: Factory site (must not be located near a cemetery, refuse dump, fuel depot, septic tanks and pit latrines)

  • Register your business name
  • Sink a borehole
  • Install overhead tanks (a reservoir to supply water to the distillation system)
  • Install distillation system
  • Get NAFDAC registration
  • Automatic sealing machine (get the one that can seal about 40 sachets per minute
  • Nylon materials
  • Logo and product name printed on nylon material
  • Labor
  • Operator (1) for a start
  • Driver (1) for a start
  • Motor Boys (2)
  • Packer (2)
  • Cleaner (1)
  • Truck for distribution
  • Power Generating set- 25KVA
  • Running cost of between N 200,000 or thereabout for six months running

Start-up Costs:

Factory site (4 bedroom bungalow) must be fenced around Lagos area: N400,000 to N450,000 annually

  • Business registration with CAC: N25,000 –N30,000 annually
  • Overhead tank: Between N25,000 and N30,000
  • Borehole: N250,000 in Lagos
  • NAFDAC Requirements
  • Automatic sealing machine: N350,000 to N400,000 depending on the capacity.
  • Nylon materials: (This will be contracted to a maker; the first price is usually more because of the designing and printing of logo) Printing names and logo on nylon

 

Labor:

Operator (1) for a start: N10,000 monthly
Driver (1) for a start: N2,000 per loading
Motor Boys (2) : N1,500 per loading
Packer (2): N1,500 per packing
Cleaner (1): N9,000 per month
Truck (Tokunbo): N900,000 to N1million (This price is not fixed, you can ask a car dealer for price list of trucks)
Power Generating set: (There are several makers which determine the price, check this link for price list:

Sales:
One automatic sealing machine and one delivering van at 100% utilization will produce 40 sachets of pure water per minute which is equivalent to 120 bags in one hour.

You can produce between 500 to 700 bags with one machine in a day of your operator works for 4-5 hours per day.

If a bag is sold for N100
500 bags X N100 per bag = N50,000 per day
N50,000 X 28 working days = N1,400,000
One year = N1,400,000 X 12= N16,800,000

 

1. Business plan

There is no need for elaborate feasibility study and report since the demand/market is available and on the increase. What is required is a business plan to help establish from the onset the financing of the project – the amount of money needed. Business plan becomes imperative at this stage because it determines the level of funding required and where it is coming from. The level of pure water business can range from using a two bedroom flat to blocks of flats, depending on which category you are investing in.

2. Register the business with the Corporate Affairs Commission (CAC) and NAFDAC

Every business organisation, whether a sole proprietorship of limited liability company must be registered  with CAC for accountability. In the same vein, every business in food and drugs including drinkables must be registered with the government regulator.  Every business also must register with the relevant tax authority (Federal Inland Revenue or the State Internal Revenue).  Alternatively, you can obtain a licence from another well established pure water company in a different part of the country if NAFDAC registration proves difficult, prolonged or   you want to operate in relatively low scale  and do not want to go through NAFDAC protocol.

3. A befitting place for business (factory site)

You must either lease a suitable accommodation, with access to the market or put up a suitable accommodation. There might be trade off between access to the market and cost of acquisition. The bottom line is profitability. However, other facilities must be in place, such as security of the factory, power, access road, etc.

 

4. Sink a borehole and install tanks overhead

This ensures uninterrupted water supply. The cost of sinking a borehole can range from ₦200,000 to ₦600,000.

 

5. Install distillation system for water purification

You may install the full scale distillation system or the ultra violet sterilization bulbs process depending on the start up capacity of the enterprise. The cost of acquisition of distillation equipments may run into millions of naira. The actual cost cannot be estimated with certainty and must be researched upon as it is going to be part of the expenditure included in the business plan.

 

6. Get a sealing machine

Automatic sealing machine must be in place according to the scale of daily production envisaged. The cost also must be verified before embarking on the project.

 

7. Get packaging materials

Rolls of suitable nylon materials which must be printed the company’s name and the brand name of the pure water must be procured. The number of rolls procured should be according to the capacity of the enterprise.

 

8. Recruitment

Recruit staff, ranging from operators of the machines, packagers, a cleaner, driver, one sales staff, one security personnel and a supervisor. This will ensure the specific positions are properly manned.

 

9. Electricity

Generator set must also be installed to power the operations. There are different capacities of generators and also different manufacturers and it all depends on the capacity of the enterprise as well as the start up capital.

 

10. Acquire a truck for distribution

The truck must be able to carry reasonable bags of pure water for distribution to great number of customers for it to be profitable.

 

11. Reach out

Make contacts immediately with retailers who are going to sell the water.  Always establish their credit worthiness before granting credit, otherwise they can send you out of the business.

 

Conclusion

Starting a pure water business in Nigeria is very lucrative and will require passion, hard-work and a reasonable amount of money.

This is only a guide, the size of the organisation determines the scale of operations, the investment in cash, human capital and machines.

 

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