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Sunday, February 3, 2019

Sample Business Plan on Ice Creamery in Nigeria

 Ice Creamery fall under hospitality specifically quick service restaurants in Nigeria and show mixed fortunes when it comes to sales. While during the dry season and festive occasions there is high demand leading to huge sales there however is also the problem of inadequate power supply which lead to high operating costs. 


Demand for Ice Creams in Nigeria
Think about parties, dates, social hangouts and increasing year on year demand in major cities in Nigeria especially Abuja which is Nigeria’s fastest growing city. The main factors which ensure the growth and sustainability of the business namely; a rising middleclass population, hot weather, growing western lifestyle and strong use of internet marketing are present in Nigeria.
·        Over 12,000 children’s parties are held weekly all over the country in major cities and ice creams are staple servings at many of these parties
·        Ice creams offer a nice dessert option to a sizeable middle class market
·        The high population of Nigerians who seek outdoor leisure on special occasions such as public holidays and corporate events also shores up the market size albeit occasionally
·        Supermarkets also provide a large market place to distribute preserved ice creams (sold in buckets or sachets)  
\
 Market Opportunities for Ice Cream in Nigeria
There are many uses of ice creams and they range of from ice cream, milk shake, frozen yoghurt, gelato, frozen custard to ice popsicles among others within the Nigerian market.  They are generally speaking evolving products within the Nigerian lifestyle products/services markets. They events and occasions that promote the large scale consumption of desserts and special treats usually served by confectionery stores within the parts of cities populated by higher income earning segment create the opportunity to sell ice creams to an upscale market.
The high income groups which incidentally have high populations of upper middle class millennials (people born after 1970 and earning over N200,000 monthly) are the main target market with other potential target market. The range in population of between 600,000 to 1,500,000 middleclass population of 20%

Challenges of Ice Cream Production and Sales in Nigeria
Ice cream production in Nigeria suffers from a large number of challenges but some of the key challenges affecting the success of the business are outlined below;
·        Low Shelf life
·        Poor power supply
·        High operating costs
·        Complex marketing strategy
·        High competition 




1ST
YEAR
2ND
YEAR
3RD
YEAR
‘000
 ‘000
 ‘000
Sale Revenue
48,000
57,600
69,120
Direct Sales Costs
19,200
23,040
27,648
Gross Profit
28,800
34,560
41,472
Total Expenses
17,073
21,758
24,282
Profit before interest& Tax
11,727
12,802
17,190
Principal Repayment
-  
-  
-  
Interest
-  
-  
-  
Taxation
3,518
3,841
5,157
Net Profit after Interest& Tax
8,209
8,962
12,033
Dividend
2,000
2,400
4,800
Retained Earnings
6,209
6,562
7,233
Net Profit/sales (%)
24%
22%
25%

Financial Summary
The assumptions used in this projection shows a potential average daily sale of N160,000 and based on a net profit to sales ratio of 24% in the first year should earn a profit after tax 8.2 million naira which over 21% return on investment in the first year. The payback period is 4th or 5th year based on yearly growth in sales and profit of over 20% respectively. Based on the following startup costs an investment of 38 million would be recouped completely at least by the 5th year.

Startup Costs  
S/N  Item
                               Cost (N)
1
Personal Computers
120,000
2
Office Furniture
1,000,000
3
Equipment and Machines
14,715,000
4
Packaging
220,000
5
30 KVA generator set
4,000,000
6
Renovation and Decorations
1,250,000
7
Raw materials
150,000
8
Ice Cream Display Stands
800,000

Subtotal
22,255,000
9
Miscellaneous
4,020,000
10
½ year Salaries
4,080,000
11
Marketing Budget
1,800,000
12
Professional/Legal
600,000
13
Contingency
1,500,000
14
2 years Operations Costs
5,700,000

Subtotal
16,700,000

Grand total
38,955,000





I am Paul Onwueme and I have been writing professional business plans since February 2014. If you are looking to write a professionally sound business plan on ice cream production and sale in Nigeria send me an email to: paulonwueme@gmail.com or call me: 0803 206 4106

Sunday, January 27, 2019

How to Start a Mini Real Estate Development Business in Nigeria


Intro: Real Estate business involves providing residential and commercial apartments and spaces for individuals and corporate organisations. The real estate development aspect deals with building from scratch or renovating houses or commercial buildings either for resale or rent. The two business models are very profitable but over a medium to long term period. The business is a cash cow because of its tendency to recoup huge funds over an extended period that can be ploughed back to acquiring other assets or upgrading existing ones plus the added benefit of capital appreciation due to ever rising demand for more living space by rapidly urbanizing towns and cities. Real estate development is also very secure and stable compared with many other types of investments. 

In Nigeria, there is a housing deficit of over 17 million housing units meaning that if the housing problems today are going to be resolved, at least 17 million would have to be made to accommodate at least 102 million urban dwellers to live conducively. 

Market Trends in Real Estate Development in Nigeria
Trend
Description
Population Growth
Lagos, Abuja and Port Harcourt are growing at over 5% per annum
Demand
Housing demands rise with increased urbanization which is very rife in major Nigerian cities
Locations
Lagos, Abuja, Port Harcourt, Ibadan, Aba, Onitsha, Owerri, Lokoja and Kano are major target market locations
Purchasing Power and Market Size
At least 15% of most city dwellers can reasonably afford to pay rent of over 100,000 per annum and at least 3 million persons have applied to obtain loans to complete or start their houses
Return on Investments
For mini housing projects expected payback period is 5 to 7 years for residential housing projects where such projects are situated in densely populated areas

The Opportunity
Rising populations in major cities create two major housing problems; high cost of rent and inadequate living spaces for city dwellers. The cities suddenly become enmeshed in a jungle like battle for living space between the haves and have nots. The former settle for more expensive yet exclusive accommodation in upscale suburbs and settlements while the latter reside in densely populated areas characterized by slums and poor infrastructure and city services. Lagos for instance has a population of 21 million residents as at December 2018 with less than 5 million of these having decent, livable accommodation. The remainder has to reside in some cases 10 persons to one room, in inhabitable housing scattered in unplanned and poorly planned towns. This trend is observed in most cities in developing countries. Meanwhile a sizeable portion of the city dwellers are moving out of poverty and can now afford more decent accommodation putting pressure on the few existing ones thus causing the rent costs to rise. Land isn’t increasing in size as it is a finite resource but not so for the population meaning two things – prices on home values and rent will continue to rise in major cities provided the rate of urbanization keeps going up and the increased demand for more decent accommodation which is matched by the inadequate finance to develop further real estate will cause a scarcity for decent homes making such homes either too expensive or located at disadvantageous locations (sprawling middle class neighbourhoods very far from city center).

Summary on Real Estate Development Opportunities in Nigeria
·        Quick return on investment (5 to 7 years) compared with other African countries because the Nigerian environment encourages high demand
·        More people trooping into a city will always create housing shortages
·        Housing Shortages implies higher rent cost and capital appreciation on real estate properties due to population pressure
·        The long term benefit in real estate i.e steady rent and capital appreciation offers secure returns on investments
·        By 2030, Nigeria will have 8 cities with population over 10 million which means more opportunities to invest
·        Real estate developers can also use customer funds to complete their projects even prior to finishing such projects

Challenges of Mini Real Estate Development in Nigeria (10 Challenges, only 5 in this post)

  • Activities of Omonile – tends to limit the growth of real estate development due to extortion and community disputes
  • High cost of building Materials – can both delay recouping investment and
  • Infrastructural deficits which frustrates development of pristine properties and affects property values adversely
  •  Finance to build and develop properties is a steep challenge for investors and developers
  • The problem of ‘over regulation’ (more details on request)

Where should Nigerian Real Estate Developers/Investors be Focusing?
In a nutshell, the most lucrative option should be in the area of providing developing very affordable but decent low cost housing. If the lower middle class is giving very decent accommodation it will drive massive revenue and profits (more on this available on request to only serious enquiries). There are proven real estate strategies that chase this specific opportunity. Whereas
  • Student Hostel Accommodation
  • Block of Self Contained Apartments
  • Small Family apartments (2 or 3 bedroom flats)
  • Middle Class Family Houses (4 bedroom bungalows and duplexes)
  • Small sized shopping Plazas
Financial Summary
Based on the following assumptions used in this income statement;
  • Rent cost will determine sales rather than actual sale or capital gains
  • Projected costing is covers maintenance
  • First 5 year projections will assume loan repayment inclusive in income statement
  • This income statement is for a two storied residential block of flats (self-contained) with 24 units
  • Annual rent cost for first year = 200,000 naira
  • Average annual rent cost increase = 15%
First Year Income Statement
Gross sales
4,800,000
Margin on sales
600,000
Expenses
960,000
Profit before tax
2,240,000
Taxation
672,000
Profit after tax
1,568,000
Dividend
900,000
Retained Earnings
658,000
Breakeven Revenue
1,560,000
Payback period
7th to 9th year

NB: due to low margins, the real benefits of real estate development tends to be long term therefore favoring patient investors.

Startup Summary for Mini Real Estate Developer
Item
Cost

Office Setup
960,000

Legal and registration
600,000

Land/property acquisition
15,000,000

Others (3 years salaries, rent, insurance etc)
5,100,000

Total
21,760,000


More details of this financial breakdown available on request. Kindly note that this estimate is for a small sized property developer targeting middle to low income unmarried people engaged by corporate establishments in a densely populated suburb.

If you need a business plan on setting up and running a viable Mini Real Estate Devekop in Nigeria with a detailed and customized blueprint to compete and thrive call me on: 0803 206 4106 or email me: paulonwueme@gmail.com for details