I’m sure you’ve seen several hardware stores near you. And maybe, the idea of opening one struck you. But do you know the cost of starting a hardware business in Kenya?
Well, I have met several hardware business moguls in the last six months and right now, I have everything you need to know before starting the business.
Thus, this blog explains the cost of starting a hardware business, the profitability, and the challenges to expect in this business.
This blog is based on facts, from different hardware businesses in the lower eastern part of Kenya. So brace yourself to learn all you need to succeed in this business, and what you need to stock to the business’s profitability.
Factors to Consider When Starting a Hardware Business in Kenya
Location
You’ve all heard that location is everything when starting out any business, let alone the hardware business. Well, that’s true. The location you choose for your hardware business in Kenya determines the amount of rent and the licensing fees you pay.
Furthermore, the location also determines how stable your business is gonna be since the amount of traffic varies in both urban and rural areas.
Janet, one of the hardware vendors in Massi town said that it doesn’t matter where you set up your hardware business. According to her, stocking your business with everything is what will attract customers. And then you work on retaining them.
However, James, another vendor, said that setting up your business in rural areas is better, only if you stock it well. He also added that in rural areas, competition is less, and once you stock your business well, you are really going to reap big.
James added that you will pay less rent and business permits compared to setting up your hardware business in urban centres. He added that starting up hardware in rural areas, especially if you are new to the business is better. However, if you have enough capital to cope with the high competition in urban centres, then well and good.
Well, both Janet’s and James’s arguments are right. One, they have experience in running these businesses, and they are accurate. And two, they have a strong network in the construction industry.
So, as a new vendor in the hardware business in Kenya, consider starting your business in an aggressive small town in your rural area.
Cost considerations
Once you’ve settled in the best location to set up your hardware business in Kenya, it’s high time you do your maths and see how much you are willing to invest in the hardware business.
So, what is the real cost of starting a hardware business in Kenya? Let alone the stock, you should get a spacious business stall in your best location. The larger the stall, the higher the rent, I hope you know that.
If you get a big stall in rural areas, the cost of rent will range from Ksh.7k to Ksh.10k. While the cost of big stalls in urban centres will be above Ksh.20k. That’s one reason you should really consider starting up in rural areas.
Something else you should consider is the business permit cost in your county of operation. Three hardware businesses in Makueni county, whose owners are well known to me, pay between Ksh.5k to Ksh.10k depending on the size of the business. The county government officers assess your business before invoicing you.
However, in large towns and cities, the business permits can be higher than this, so be prepared with around Ksh. 15k for a business permit. And that’s not all, some counties like Makueni charge a health permit of Ksh.1k to all non-food businesses across the county.
Another cost consideration is labour cost. If you have an employee for your business, most hardware stores pay their employees between Ksh.8k to Ksh.15k monthly. So be ready for that.
And an employee brings in another cost for a Point of Sale system and CCTV cameras of course. A good computer, CCTVs, and POS costs around Ksh.30k.
You also need to set up a secluded area for the counter where you will have the POS. This counter could cost around Ksh.10k.
So these overall costs would range between Ksh. 50k to Ksh.75k. Remember that minimizing these costs will help you save more money for the main stock for the hardware business in Kenya.
So this gets us to the next consideration, which is where you will source your business stock.
Suppliers
It’s really good to know where you will source your stock before you can think of starting a hardware business in Kenya. Unlike other businesses like Malimali, hardware wholesale stores are not decentralized that much.
Thus, you should be careful when selecting your supplier for hardware materials. For instance, several hardware shops in every county sell their items wholesale. However, if you are financially strong, you can start sourcing your stock directly from the manufacturers.
For instance, the top-moving product in hardware businesses is cement. Therefore, you can consider a trip to Simba Cement or Bamburi Cement where you can get the best deals. You can also pay a visit to Steel and iron sheet companies.
You should also consider partnering with tanks and plastic pipe manufacturers for better deals. This will elevate your business to higher heights by stocking a wide range of products.
Apparently, you need at least Ksh. 500k for a reasonable stock level. Alternatively, you can start with cheaper items such as iron sheets, nails, pipes, cement, and timber before you can upgrade slowly.
Marketing
Don’t tell me you will rely on walk-in customers for your sales. Oh no! In today’s digital space, you need to think outside the box and invest in marketing your business out there.
I talked with a hardware vendor in Machakos (name withheld) and he told me how he’s using Google My Business to drive more customers from his hardware business.
So in Google My Business, you enter your business name, type, location, and contact details. With this, Google can enlist your business online and anyone can find it by simple search. This will bring you traffic without more costs. Just enlist your business, sit and wait.
In addition, this is also a good way for satisfied customers to leave reviews about your business and positive reviews are equal to more success.
You should also do Social Media Marketing through official business channels and you can also convert more traffic into willing buyers. That said, don’t forget about updating your WhatsApp status for people to learn what you do and you can also attract customers.
So, now, I have shown you the good parts, how to set up your business, from location, costs involved, and suppliers for your stock. Now let’s see what you can face while in the business.
Items to Stock in Hardware Business in Kenya
- Cement
- Paint
- Plumbing tools & materials
- Tanks
- Metal rods
- Iron sheets
- Nails
- Construction tools
Challenges in the Hardware Business in Kenya
From the research I have done in the last six months, hardware stores have their special share of challenges.
Money
It’s like money is a challenge for every business now. For most businesses I have visited for the last few months, money seems to be a problem. This challenge doesn’t leave the hardware businesses.
However, I seem to understand why money is always the culprit. One, stocking of businesses, including hardware businesses in Kenya requires a lot of research.
You shouldn’t stock products that are not fast-moving in your location. Thus, once you open your hardware business in Kenya, ensure to do a stock take after one or two weeks, whichever seems convenient to you. That’s why you should spare some little cash to add on the stock that moves faster.
Remember, I’m not saying that you should abandon some products, but you should if it feels unnecessary to have them. This criterion helps you stock items with fast turnover, and soon you will realize more cash circulation.
Another reason why money is always the culprit is due to improper management. For instance, some business vendors have agreed that they set up a business, and then they start eating from it immediately, not bothering to know whether it has made profits or not.
If I would advise you on managing business money, I would say that you keep off from it as much as you can. Before investing all your money in the hardware business in Kenya, ensure you have spared separate cash for upkeep before your business stabilizes. This idea will save you from spending business money anyhow.
Untrustworthy Employees
It’s so sad how businesses have been suffering at the hands of rogue employees. All of the business vendors I have interviewed in the last six months have complaints about employee theft.
It’s very unfortunate to learn that the people who come crying that there are no jobs are the ones who end up ruining their employer’s businesses. This is indeed so bad.
Anyway, what I would advise all business vendors, including the hardware business owners in Kenya is that they should install systems such as CCTVs and stock maintenance systems.
At least, this will save you from long-term losses without knowing.
Something else you should do is to ensure you visit your business regularly if you have employed people. In addition, ensure that you do a stock take once or twice a month.
Hardware Businesses in Kenya: What Next?
At least, now you have everything you need to know before starting a hardware store in Kenya. Always ensure you do research before starting any kind of business, instead of regretting later.
Now, if you need a detailed business plan for a hardware business in Kenya, just contact me for a quote.