Soap production is the business in Nigeria is a very tedious but profitable business to do in Nigeria. In this sample business plan on soap making factory in Nigeria, we are going to look at the opportunities and challenges of running a small sized soap production factory. This plan briefly summarizes the startup costs and a miniature first year financial projection.

Bar soaps production is a viable business venture which is capable of returning over 35% on your investment within 12 months and break even by 10th month with N150,000 daily sales. For instance an investment of 10 million naira can yield over 3.6 million in profit after tax within 12 months and payback period is 3 years

Introduction on Soap Production Business in Nigeria

There have been many companies involved in producing soaps for the Nigerian market as far back as independence. The likes of Unilever and PZ cussons have produced various types of soaps for use in the Nigerian market. There have been companies that produce millions of bar soaps targeting various market segments in the urban areas just as there have been unknown companies that produce bar soaps targeting rural dwellers.

The fact is soap is an essential commodity used for cleaning that all strata of society uses for different reasons. They serve domestic use such as; laundry, dishes, general home cleaning (floors, toilets, kitchen etc), car wash etc. They serve commercial purposes as well such as; rug cleaning, industrial cleaning, Janitorial use to name a few.

Everybody needs soaps for and the extremely poor such as; beggars, destitute and mentally unstable persons either cannot afford it or do not buy and that is less than 1% of the total population. This therefore means that there is a huge demand for it in Nigeria. But there is one small problem. Most Nigerians are poor and do not earn enough money to buy premium soaps. That means there is an unmet gap within the market of people who need less expensive and less premium soap options for people’s cleaning needs.

Types of Soaps in Nigeria

There are more than 10 types of soaps depending on what they are used for as explained in the list below;

· Bathing Soap – for washing the skin and bathing

· Toilet Soap – for use in toilet only

· Table Soap – for cleaning hands before and after meals

· Bar Washing Soap – for laundry (in tablet bars)

· Detergent – powdery soaps used for mainly laundry

· Medicated/Antiseptic – bathing soaps designed to prevent and treat skin infections

· Liquid washing Soaps – used for both laundry and table use

· Disinfectant cleaners – used as germicides for killing off germs and odour removals

But in this sample business plan, we are focusing on bar soaps for washing because they are the most popular and easiest ones to produce.

Opportunities

The yearly demand for use of bar soaps in Nigeria according to the National Bureau of Statistics reported monitored in the Guardian newspaper of June 2020, there was an estimated 800,000 tonnes worth about 18 billion naira per week was sold in Nigeria for the year 2019. In my humble opinion this is an understatement as the informal market which is much larger than the formal market has not been adequately represented in this estimate. The real market size as soaps must take into that nearly 180 million people spend at least 100 naira weekly excluding commercial bulk users of soaps. The lower income class therefore provides the largest market share of the entire markets contributing over 60% of quantity consumed.

Major buyer segments of soaps in Nigeria include; housewives, students, dry cleaners, office cleaning businesses, laundry service providers and boarding schools to name a few. Each of these segments consist of individuals and groups running into 1,000s of potential buyers willing to spend between 200 and 500 naira per individual per week.

The good thing about this business is the low entry barrier. The startup capital is minimal with as little as 300,000 naira you can start a soap making factory and the technical knowhow is also minimal as you do not need too much skills except the soap making production process.

The bulk of bar soaps consumed in Nigeria are by rural dwellers whose incomes are much smaller compared to city dwellers. Most rural soap consumers spend 100 naira or less per bar soap

Challenges

Being that every manufacturing business must struggle with production costs, logistical costs and cost effective marketing strategies, the bar soap factory will likely struggle to make a profit if the location of the factory is too distant from the key target market regions. Location itself is not an easy challenge to overcome for new entrants into this business. Secondly, power supply is limited all over Nigeria which contributes to both startup and running costs. There is the problem of over-competition. Too many people will venture into soap making because of the low entry barrier and potential for quick sales. This will not augur well for profit.

You can read the complete article from the source: https://lagosbusinesses..com/2020/08/sample-business-plan-for-soap.html