Have you ever considered increasing your revenue by expanding into the petrol station business?

In recent years, the petrol station industry in Tanzania has been dominated by three major multinational companies.

However, the latest market study by Kalibrate has shown that the market is starting to shift. A number of strong, smaller investors and local entrepreneurs have plans for aggressive investment and rapid expansion across the country in the coming years.

The new Kalibrate market study has revealed that Tanzania is the land of opportunity for the petrol station business.

So, if you are a successful business owner looking to add new streams of revenue by starting a petrol station business, then this article is for you.

How Much More Could You Make from the Petrol Station Industry in Tanzania?

The success or failure of a petrol station depends on its location, accounting for 80% of the outcome. Choosing the right location can lead to faster sales, while a poor location can result in years of slow growth.

For example, our client who runs a petrol station in Mwanza sells 80,000 liters per month. So, 80,000 liters x 108 Tsh per liter = Tsh 8,640,000 per month. This is the total income he makes from his petrol station per month.

Similarly, our client in Arusha sells 200,000 liters of fuel per month. So, 200,000 x 108 Tsh/liter = Tsh 21,600,000 per month. Their total revenue from their petrol station is Tsh 21,600,000 per month.

The volume of sales depends on your ability to choose the right location. Therefore, conducting an in-depth feasibility study before building a petrol station is crucial to choose a location with high profit potential.

Requirements for Petrol Station Business in Tanzania

Now that you know the profit potential for petrol stations in Tanzania, the next step is to identify what it takes to build your successful petrol station.

Building a petrol station involves a multitude of costs, ranging from visible ones like office buildings, fuel pumps, storage tanks, concrete paving, and canopies, to hidden costs such as piping and signage installation.

Other hidden costs include preparing sites for storage tank installation, including excavation work, along with foundations for fencing. Components such as control panels, cabling, and lighting also add to the expenses.

Depending on the location of your petrol station, leveling terrain may be necessary to create a stable foundation and ensure proper drainage. Conducting in-depth research is crucial to avoid underestimating investment and to have proper budgeting.

Licenses and Permits

Understanding regulatory requirements for running a petrol station is essential, as mistakes in this area can delay the building process.

There are numerous permits and licenses required to run a successful petrol station business in Tanzania.

These include an Environmental Impact Assessment certificate from NEMC, a construction permit from EWURA, and an operational license from EWURA. Additionally, there are health and safety licenses from OSHA, as well as fire certificates and land title deeds from the Ministry of Land.

We hope this guide will aid you in expanding into the growing petrol station business. We recommend conducting proper research and planning before venturing into the project to increase your chances of success.

If you search online, you’ll find lots of articles talking about whether business planning is good or bad.

Some people say everyone starting a business needs a plan, while others say planning is a waste of time, including a few seasoned business  owners who matter-of-factly claim they’ve never had a business plan

This can be confusing for business owners.

Nobody wants to waste time if a business plan is not needed, but there are real benefits to having a plan.

Here’s the truth: Most people who say they don’t have a business plan actually do have some sort of plan, it’s just that they don’t think of it- or refer to it as a formal business plan.

If a business is thriving and profitable, it’s because there’s a plan behind it.

In the past, people could get away without a plan, like riding scooters on slow trains. But things are different now.

Trains are faster, and business is more complicated.

Nowadays, smart rail workers wouldn’t dream of going without a schedule, and entrepreneurs shouldn’t take risks without a plan either.

Having a business plan helps you in many ways:

1. It shows if your business will make money or lose it.
2. It helps you understand your money flow and when you might need to borrow.
3. It lets you see risks and how to avoid them.
4. It helps you come up with a plan to market your products.
5. It helps you make realistic sales predictions using market info.
6. It shows your business expenses clearly.
7. It helps you see if your business meets your personal needs and is worth your time and money.

In today’s complex market, you need a plan before starting or growing a business.

Smart pilots use maps, and smart entrepreneurs use business plans.

Many failed businesses didn’t have a plan, so don’t be fooled into thinking you don’t need one.

If you’re putting serious money into your business, you definitely need a plan. If you can afford to lose your investment, you might as well buy lottery tickets.

But if you want to succeed, having a business plan makes you stronger.

Building a petrol station in Tanzania involves a multitude of costs, ranging from the visible ones like office buildings, fuel pumps, storage tanks, concrete paving, and canopies, to the less apparent expenses that often catch investors by surprise.

In this article, we’ll explore five hidden costs to help you craft a robust budget and steer clear of unexpected financial hurdles during your petrol station project.

 Hidden Cost #1: Piping and Signage Installation

While the main structures of a petrol station are evident, the installation of piping and signage can quietly accumulate significant expenses.

Piping is essential for fuel distribution, ensuring that your station operates smoothly and efficiently.

Likewise, signage plays a crucial role in guiding customers and complying with regulatory requirements.

Failing to allocate adequate funds for piping and signage installation can lead to delays and regulatory non-compliance issues, ultimately impacting your project’s timeline and budget.

 Hidden Cost #2: Excavation, Fence Foundation, and Storage Tank Installation

Preparing the site for storage tank installation involves more than just placing the tanks.

Excavation work, along with the foundation for fencing, requires careful planning and execution, adding to your project’s expenses.

Factors such as soil conditions and regulatory standards can influence the costs associated with excavation and fencing.

Underestimating these expenses can result in delays and legal complications, potentially derailing your project’s budget and timeline.

 Hidden Cost #3: Compressor Control Panel, Cabling, and Lighting

Petrol stations rely on intricate systems to function efficiently and safely.

Components such as compressor control panels, cabling, and lighting are indispensable for ensuring operational integrity and regulatory compliance.

Budgeting for these essential systems is paramount to avoid unexpected expenses and operational disruptions.

Failure to account for these costs upfront can lead to project delays and compromised safety standards, necessitating costly retrofits in the future.

 Hidden Cost #4: Levelling

Depending on the location of your petrol station, levelling the terrain may be necessary to create a stable foundation and ensure proper drainage.

The cost of levelling can vary based on factors such as the topography of the site and the extent of the required adjustments.

 

Overlooking levelling costs in your budgeting process can result in construction delays and structural issues, jeopardizing the long-term viability of your petrol station.

 

In conclusion, navigating the hidden costs of building a petrol station in Tanzania requires careful planning and foresight.

 

By acknowledging and budgeting for expenses like piping and signage installation, excavation and tank installation, compressor control panels and lighting, and levelling, you can mitigate the risk of surprises and ensure the success of your project.

Remember, thorough budgeting and diligent oversight are key to realizing your vision for a functional and profitable petrol station.

 

To get the project off the ground, you need investors; you may need financial investors, and they take monetary risks.

If the business fails, they will lose their money, and you will have to start over again. So, bear the risk factor in mind.

Their money will get your business off the ground and give you future profits.

Banks and investors want to know if they lend you money, it will be in safe hands and used sensibly and correctly. This is why they need a business plan to see your financial estimates.

Why Investors and Bankers Don’t Read Boring Business Plans With Irrelevant Information?

To raise money from banks and investors, you need to prepare a business plan. There are many views on exactly what should be included and how much information is really necessary.

The academics would advise you to prepare as much information as possible, including extensive detail about the industry and charts.

There is no guarantee that you will get a loan because of a glamorous business plan, especially if the business idea is no good.

A great idea can be seen in 10 to 50 pages. It does not need hundreds of pages.

When you present a hundred-page business plan to an investor or banker, they get bored reading it.

They feel that you are trying to kid them or treat them like idiots by including irrelevant information.

One such occasion is when investors or bankers start to lose interest quickly. For example, if someone is considering opening a petrol station business and you tell them the fuel/energy industry is worth billions of Tanzania shillings.

They will think you are nuts to quote this figure.

The information on the overall market size has no relevance to the petrol station business.

It also suggests that the bank or investor is a fool and has no knowledge of business.

This is an attempt to mislead them into thinking that the potential business is going to be vast and that they should lend you money; this is crazy.

This is something I suggest you do not do.

Bankers or investors want to know what your share of the market is going to be, not what the overall business is for others.

Your business plan should be kept to a minimum. And only include charts and illustrations if they are really relevant. If they are not, don’t bother including them.

A Sample Successful Business Plan that Gets Investors and Bankers to Read, Listen, and Act

A good business plan is one that states on the first page what the business is all about, using the smallest number of words.

Something along the lines of, “I am going to make XYZ, it will appeal to my target audience, which (list them).

I will be producing the products at a lower cost than those on the market, or, producing far better quality items.” Or any other reasons.

 

“The current or estimated sales for this product is X dollars, and I estimate that I will get X percent of the market in X years. The sales target estimates are X dollars in years one, two, and three, and my return on investment (ROI) will be X dollars. And I will pay back all the money in X years.” In a few minutes, they will see what you are all about.

They will ask questions and refer to the latter pages of the business plan if they require more detailed information about operations, sales and marketing, or SWOT analysis and management structure.

You have to remember that funders have seen it all, done it all, and you cannot kid them with superfluous and irrelevant information. The business plan must show exactly the amount of money you need, including realistic financial estimates.

This is how they can see how and when their money will be repaid.

Give a detailed explanation of how every cent will be spent. Show what you are going to buy each month and how it will benefit the business.

Preparing to meet with banks or investors

To gain their respect, you need a clear understanding of your financial needs.

If a consultant is preparing a business plan, he must help you understand the financial aspect of your business before you present it to lenders. Or you should ask him to help you present it to the banker and investors.

You must take time to understand financial forecasts and cash flow so the funder can have confidence that you will manage the money properly.

Compressed Natural Gas (CNG) has been gaining attention lately as a cleaner and more affordable alternative to traditional fuels like diesel, petrol, and kerosene.

In Tanzania, for instance, government sources report a growing number of vehicles running on CNG, and this trend is expected to continue as CNG becomes more cost-effective compared to petrol and diesel.

If you’re in the fuel business, considering adding CNG to your existing petrol station could give you a competitive edge in your trading location.

Being proactive about this can help you capture market share before your competitors even start thinking about it, boosting your revenue and profitability in the long run.

Planning for the Future

Adding CNG to your petrol station requires some foresight and planning. Here are some key considerations:

1. Gas Pipeline Network: Firstly, check if there’s a gas pipeline network in your area that can deliver CNG to your station. Many regions lack such infrastructure, which means you might have to rely on expensive truck deliveries if there’s no pipeline nearby.

 

2. Supplier and Sourcing: Next, figure out where and from whom you’ll buy CNG supplies to resell at your petrol station. Establishing reliable supplier relationships is crucial for ensuring a steady and consistent flow of CNG to meet demand.

 

3. Infrastructure Costs: Lastly, calculate the expenses involved in adding CNG infrastructure to your petrol station, including the installation of pumps and other necessary equipment. Understanding these costs upfront will help you budget effectively and avoid any surprises along the way.

By addressing these market feasibility questions and planning ahead, you’ll be better equipped to make informed decisions about incorporating CNG into your business model.

This proactive approach can position your petrol station for growth and success in an evolving market landscape.

In conclusion, while adding CNG to your existing petrol station requires careful consideration and investment, it also presents an opportunity to stay ahead of the curve and cater to the growing demand for cleaner and more affordable fuel alternatives.

With thorough planning and strategic decision-making, embracing CNG could be a smart move for your business’s long-term viability and profitability.