Distributorship business in Nigeria is an ideal business for those who want to be their own boss, as the business makes you a CEO and a substantial amount of money.
This business is very profitable and works in all parts of the country whether rural or urban. A distributorship business can be started by anybody, although it requires reasonable capital to start, but makes a lot of money in return.
A distribution business is very easy to start, as there are lots of goods you can start with, of which all are profitable. Even though it is very easy to start, you need to know where and how to get started.
That is why we’ve come up with this post to show you exactly how to start a distributorship business in Nigeria, the cost of starting, what profits to expect, how to succeed with the business, and so on.
Without further ado, let’s get started!
What is a Distributorship Business?
Distributorship business can also be referred to as wholesaling or wholesales business. It involves the purchase of goods in bulk from manufacturers and reselling (distributing) them to retailers, and sometimes small wholesalers for cheap prices.
The owner of a distributorship business is known as a distributor. In this business, a distributor is a person who has an official business relationship with the company or manufacturer he/she represents. That means distributors can also be seen as manufacturers’ direct point of contact for wholesalers, and sometimes retailers.
Is Distributorship Business Profitable in Nigeria?
Yes, the distributorship business is profitable in Nigeria. From dealing with a specific type of goods to working with different companies, you can make a lot of money as a distributor in Nigeria.
Although the common or first profits come from the profits of the goods, some manufacturing companies offer incentives to distributors, and also give them bonuses when they reach certain milestones.
Distribution business is also profitable because of its quick turnover advantage. In business, quick turnover equals quick profits. Most goods that distributors deal with are high in demand, which means they sell fast and bring in fast money.
Realistically, the profit margin of a distributorship business in Nigeria ranges from 20% to 70%. Although this depends on some factors including the type of goods, and location. That means you can get more or less.
How Much Does it Cost to Start a Distributorship Business in Nigeria
I believe knowing how profitable a distributorship business inspires you a little to get started, but how much do you need to start the business in Nigeria?
Distributorship business in Nigeria is capital intensive. That is to become a distributor, you’ll need a huge capital to get started. This is because you’ll be buying in bulk from manufacturers, and usually, many manufacturers in Nigeria have a start limit for distributors.
That means as a distributor, you must start from a certain number of goods. For example, to become a Dangote cement distributor, you must be able to purchase at least a trailer load of cement at once.
That’s not all, but as a distributor, you’ll need to have some equipment like trucks, and warehouses, and also register your business which all come at their own cost respectively.
Starting a Distributorship Business in Nigeria
Distributorship business is very easy to start in Nigeria, as there are lots of manufacturing companies that keep looking for distributors in all parts of the country.
You have a lot of choices to make in terms of the goods to deal with as a distributor. The business is also easy to scale, as it can be started in any state, town, and/or local government area in the country. Although it requires a lot of patience, and knowledge to make it a success.
As a distributor, you need to possess some skills including business management, negotiation skills, networking skills, and so on. Also, some documents and licenses are required to become a distributor of any goods in Nigeria.
Types of Distributorship Business in Nigeria
With a lot of manufacturing companies in the country, there are lots of different types of distribution businesses you can start, and they include:
- Beverages (e.g becoming a Chivita distributor)
- Water (pure water and bottled water distribution business)
- Building materials (zinc, nails, and cement distribution business)
- Phone gadgets and accessories
- Drinks (Alcoholic and soft drinks distribution business
- Foodstuffs (Tomatoes, noodles, egg, rice distribution business, etc)
- Cosmetics distribution business
- Electronic and home appliances
- Petroleum distribution business
- Cooking gas distribution business
- Snacks (e.g becoming Yale distributor)
How to Start a Distributorship Business in Nigeria
1. Decide on the Type of Distributorship Business to Start
To start a distributorship business in Nigeria, first, you need to take your time to find out and pick the best type of distribution business for you.
In this stage, find out what are the most popular types in your area, which one moves the fastest, and which is the easiest to start in your area. After finding out all these, pick the one that meets all the criteria. Also, make sure that the type you choose meets your budget and fills your purpose.
2. Carry Out a Market Research
After picking a type to start, the next thing is to carry out in-depth research on how it operates in your area. During this research, find out where the type of goods you want to be a distributor for sells well.
One important part of your research is making some findings about the best, and most popular company or brand for the goods you want to start with. Here, you’ll need to find out about the company’s requirements to become a distributor, how to go about becoming one, and so on.
Your research doesn’t end there, as you’ll need to carry out competitors’ research. Find out the companies your competitors work with, how they operate, their prices, and lots more.
3. Draft Your Business Plan
You won’t want to start a business worth millions of Naira without having a strategic plan that will serve as a road map towards your success.
In your plan, you’ll need to outline firstly your objectives and vision. There, you’ll point out your financial projection, marketing plan, business operations plan, and also team management strategy.
Breaking it down, write down where you want your business to be in the next few years, outline how you want to get customers, point out how much goods you want to buy from manufacturers weekly and monthly, and also how you’ll want your staff to work including opening and closing hours.
4. Arrange for Funding
With the distributor business in Nigeria being expensive to start, funding is an essential part of getting the business off the ground. From tapping into your personal savings or partnering with friends and/or family, to seeking venture capitalists and/or taking loans from banks, there are lots of ways you can go about funding your startup.
5. Get a Warehouse
After getting your capital ready, the first thing to invest in is a warehouse where your goods will be stored. Since you’ll be dealing with large quantities of goods it is ideal to look for or build a big warehouse that can contain multiple trucks and lots of goods.
In this stage, make sure you find a suitable location where your target customers can quickly locate you. Also, you’ll want to go with an area with little to no criminal records to avoid shop breaks or looting.
6. Register Your Business
To be able to work with some manufacturing company, your business must be registered, this way they can trust you and be willing to work with you.
Starting, your business must be registered with the Corporate Affairs Commission (CAC) to make it legally operate in the country. Although the CAC is accepted by many companies, some companies may require certification such as LLC, and so on.
You also need to have a corporate bank account as a distributor in Nigeria. This is because some companies may request your bank statement to make sure you have what it takes to become a distributor of their products.
6. Find a Manufacturer to Work With
After all, registration is done, the next thing is to look for manufacturers to work with based on the type of goods you want to distribute.
This is where the real work begins. As a beginner in the distributorship business in Nigeria, it may be difficult to gain a distributorship right with established companies especially. This is because your application will be reviewed and most certainly you are likely not to meet their criteria as you’re just starting. Some of these criteria include proof of a specific turnover amount and some limitations regarding the locations.
Although not all anyways, some companies are always open to new distributors regardless of their level. However, for those with difficult requirements, it will be easier to start as a sub-distributor by collaborating with one of the company’s existing distributors and then walk your way up from there.
7. Get Some Distribution Equipment
As a distributor, there are some tools needed to operate your business successfully. There are many, but the most essential one is a truck. You need to get a truck that will help deliver goods from your warehouse to your customer’s place.
8. Hire Staff
Distributorship business involves working with bulk goods and lots of customers at the same time, so you can’t expect to be a sales rep, marketing agent, truck driver, loader, and CEO at the same time.
You need to hire staff for every aspect of the business including sales, marketing, truck driving, goods loading and offloading, and even a branch manager if you have multiple warehouses.
9. Get Started and Get Working
With everything from warehouse, and goods purchased to start, to equipment and staff to run the business, the next thing in line is to get started.
Now is when your marketing agents will get to work. Since the purpose of starting a business is to drive sales, you need customers who will buy for you to make money, and the only way to achieve this is through marketing.
First of all, you need to identify your potential customers, then market your products to them. You can do this by printing some flyers and having your marketing agents hand them over to various retailers of your products, then you can go from there.
You can also use other means of advertisement such as radio broadcasts, word of mouth, internet marketing, and so on to promote your business.
The distributorship business in Nigeria is a very lucrative one that anybody can start in any part of the country whether Lagos, Abuja, Onitsha, Kano, Asaba, Ibadan, etc. If you want to become a distributor in Nigeria, I believe this post on how to start a distributorship business in Nigeria has covered all you need to get started.