Palm oil business is one of the lucrative businesses any entrepreneur can delve into and make huge profits. The youths of today want white collar jobs in the oil and gas sector but fail to tap into the income potential in the agricultural sector. Those who are wise to go into palm oil business, always make crazy profits. So if you’re looking for a step by step guide to succeed in the palm oil business, then you should continue reading this guide.
Apart from using palm oil for cooking, it is also medicinal and it is used as a pain relief for stomach upset. It contains vitamin A which is good for eyesight. However, studies have shown that palm oil contains cholesterol (a disease which prevents the free flow of blood in the body).
Palm oil is also used in soap production, body cream, margarine and cosmetics in general. Other uses of palm oil include:
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- Production of dog and other domestic animal food
- Production of canned seafood
- Water treatment chemical and lots more
Steps to Start Palm Oil Business
Palm oil business is very lucrative if done properly. The demand for palm oil is very high and there are consumers who are willing to buy. There are basically three types of Palm Oil Business, namely:
Palm Tree Plantation
This aspect of palm oil business requires huge capital investment. It also needs a large area of land. However, the profits of this business is huge and you’ll make it big, once you’re able to acquire at least 4 acres of land.
So, you have to decide the area of land to buy. This business isn’t really ideal for startups because the capital needed runs into millions of naira. Again, the incubation period for palm oil trees can take between 5 to 10 years. So, as a farmer, you have to be patient to make good profits from the business
Once the palm oil tree is due for harvest, you can decide to set up a mill to extract the oil or just sell out to those who are into full-time palm oil kernels processing.
Palm Oil Mill
This is another lucrative aspect of palm oil business. It requires huge capital investment to purchase the milling machines. You can decide to fabricate one locally or simply import one from China’s foremost online site, Alibaba. Generally, there are two ways of processing palm kernel seeds and they include;
Commercial Processing: This involves processing other people’s palm kernel seeds for money. It is a lucrative business as the cost of getting a palm oil milling machine is expensive. It is a good business because you’ll make huge ROI after a few months. The only expense you’ll have to pay is constant servicing of the milling machine. During the palm oil season which is between January and May, customers are always available to processes their palm kernel seeds. But during the offseason, the business is fairly stable.
Personal Use: As the name implies, this involves the owner of the milling machine buying palm kernel seeds from different farmers in very large quantities and processing it in order to sell to end users. In this category of palm oil business, you need to set up your milling machine in a location that is easily accessible to farmers and close to the target market.
Bulk Trading of Palm Oil
This involves investing a huge amount of money in buying and selling palm oil. In this business, investors buy palm oil in bulk, store them in large quantities and sell off when the supply of palm oil has reduced. During this period, traders bring out their stock, sell them and make a reasonable profit. If you have the capital, this business is ideal for you. However, you need to be patient to make a good profit from this business. Let’s do a quick profit analysis of this business. Imagine buying 50 kegs of palm oil for N500,000 at N10,000 per keg and selling off to retailers at N12,500 within 3 days depending on your customer base. Depending on the source and quality of the palm oil, you can get it at a much cheaper rate.
Necessary steps you need to take before starting this business
Proper research of palm oil business is necessary if you must succeed in the business. Apart from market research, it is also important to understand the nature of the business. The nature of the business should answer questions such as; is it time-consuming? Where can I source for cheap palm oil? Can I store palm oil for at least a year without it losing its taste? Once you’re able to provide answers to these questions, you’re halfway done. You also need to know your competitors and the existing price of palm oil before delving into the business.
After carrying out market research, the report you have made will point out the right amount of capital to start the business. The amount of capital should be able to cover the following expenses.
- Working Capital: this is the amount of money needed to buy wholesale palm oil from farmers. This working capital also includes the transportation cost.
- Building Capital: this is the capital needed to rent or build a warehouse to store the already purchased palm oil
- Storage Capital: it is the capital needed for proper storage of palm oil. You need to invest in the security of your warehouse and also purchase jerry cans or kegs to store your palm oil.
If you must succeed in this business, you need to get the contacts of suppliers from different states. You can compile a list of suppliers in a spreadsheet (using Microsoft Excel). It is necessary to know how reliable these suppliers are, the quality of palm oil they need and the prices they offer.
Mode of Transportation
This is another important investment you have to make. If you have the money to get your own vehicles, then that’s alright, otherwise, you’ll need trusted drivers to deliver palm oil to your customers all over the country.
Exporting Palm Oil
If you’re planning to export palm oil to other countries, then you should consider searching online. Alibaba is a great site to list your palm oil for sale or you can use Vconnect to search for reliable exporters online. You should do a proper background check before giving your palm oil out for export.
Palm oil business remains a juicy business opportunity that anyone can start without a huge investment. As Africa’s population continues to rise, the demand for palm oil will also continue to rise. It is an opportunity for you to start this business and make a huge profit from it.
To raise funds for your palm oil business, you need a business plan and I you to check out this standard palm oil business plan with 3 years financial analysis