Step by Step on How to Start Palm Oil Supply Business

The palm oil business is one of the most profitable ones that a business owner can get into and make a lot of money from. 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 enough to go into the 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 is used as a pain reliever for stomach upset. It contains vitamin A, which is good for eyesight. However, studies have shown that palm oil contains cholesterol, a disease that prevents the free flow of blood in the body.

Palm oil is also used in soap production, body creams, margarine, and cosmetics in general. Other uses of palm oil include:

  • Production of dog and other domestic animal food
  • Production of canned seafood
  • Water treatment chemicals and lots more

Steps to Start Palm Oil Business

The 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 it. There are basically three types of Palm Oil Businesses, namely:

Palm Tree Plantation

This aspect of the palm oil business requires huge capital investments. It also needs a large area of land. However, the profits of this business are 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 and 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 kernel processing.

Palm Oil Mill

This is another lucrative aspect of the palm oil business. It requires a huge capital investment to purchase the milling machines. You can decide to fabricate one locally or simply import one from China’s foremost online retailer, 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 a huge ROI after a few months. The only expense you’ll have to pay is the constant servicing of the milling machine. During the palm oil season, which is between January and May, customers are always available to process 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 them in order to sell them to end users. In this category of the 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 it in large quantities, and sell it 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 20 kegs of palm oil for N500,000 at N25,000 per keg and selling them off to retailers for N30,000 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

Market research

Proper research of the 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 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.

Capital Investment

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 enough 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 transportation costs.
  • 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 the 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.

Note: You can get a business plan on palm oil processing by visiting here

Get Contacts

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 vehicle, 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.

Conclusion

The 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

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