No doubt there is an unlimited number of business ideas in Kenya. We have a great economy with incentives to start businesses and succeed.
Every Kenyan at one point in time has imagined a business idea that would change the course of their lives.
However, transforming these great business ideas is a big challenge. Annually, 6.5 million new businesses are launched worldwide.
Half will survive up to their 5th year and only 30% will cross their 10th year. The stats might be graver in Kenya due to poor business practices and lack of preparedness of entrepreneurs.
So, having a good business idea is just that, an idea. Unless you can materialize it, it serves no good.
But, here is the thing, we don’t need to have big ideas to succeed.
You don’t have to invent the next big thing or have unique innovative solutions to be an entrepreneur. We can pick what has worked before and run with it.
Some of the people we meet out here have very simple businesses that are bringing in millions every month yet they lead normal lives, never in the mood to flaunt.
I remember one time in a club, my friends went to have some drinks after a week of numerous CATs.
The sponsor of the night looked at us after paying the bill and mentioned something I have never forgotten.
That guy I just paid the bill is the owner of this club. Very down to earth and discrete. He goes around here making sure white collar and government workers with big vehicles are served well, calls everybody ‘boss’ or ‘madam’ yet he is the real boss.
That was eye-opening to me. Besides the aspect of owning a business, it excited me because a club is a simple business idea which anybody can materialize.
Any business idea you have has the potential to grow beyond your imaginations. But you need to conduct research, get some capital, hire good people and put on some serious work.
In this article, we shall go through a lot of business ideas in Kenya, some small and easy to start, others very profitable, and some additional ideas that might require more capital and experience.
To make your research a little easier, I have indicated some of the critical details you must consider. I have also selected ideas that are relevant now and will stay relevant for the next 10 years at least.
Your work is to go through ideas you find interesting and zero into one that you can start.
1. Agrovet Retail Business
Agriculture is the engine that runs the Kenyan economy. According to the Food and Agriculture Organization, it contributes 53% of our GDP both directly and indirectly and employs over 40% of the country’s entire workforce.
So the need for Agrovet businesses is beyond doubt. But before we get into details let me ensure we’re on the same page.
An Agrovet is a shop that sells farm inputs like seeds, fertilizers, animal feeds, pesticides, herbicides, acaricides, knapsacks etc. directly to farmers. Agrovets are essential for the growth of the agriculture industry. We cannot do without them.
If you can locate an area with high agricultural dependency and demand for farm inputs yet few or no agrovets in existence, you have just discovered a gold mine.
I’m pretty sure there’s no place with no agrovets. However, in most cases, the existing agrovets are either not meeting the needs of farmers well or offer low-quality services. Doing research and meeting these needs is your secret to success.
You can start as a retailer, offer great services and incentives and as you grow, transform into a wholesaler or distributor which is much more lucrative.
A good example of a success story in agrovet business Joe Mukundi who used to make Ksh 200,000 in a bad month from his agrovet while studying in Meru University
You need to have 3 licenses to operate an agrovet
1. County Business Permit which averages at Ksh 7,000 depending on the county.
2. PCPB Certificate (Pest Control and Products Board) which costs Ksh 1,000 for retailers and Ksh 4,000 for distributors and wholesalers renewable annually
3. KEPHIS License (Kenya Plant Health Inspectorate Service) which costs Ksh 1,000 for retailers, Ksh 5,000 for a wholesaler and Ksh 30,000 for a distributor.
Also, there exists a couple of organizations in the agrovet industry which would be beneficial to join. They include
- Kenya National Association of Distributers and Agro-dealers (KENADA).
- Agricultural Market Development Trust (AGMARK)
Factors to consider when setting up and Agrovet
You can’t just go anywhere and blindly set up your Agrovet, no matter how much money you have, you will lose big time. A bad location is the 3rd most significant reason why most small businesses fail
So the very first thing and the most critical factor to consider is the location. Look for a location with many farmers and low agrovet competition.
Remember competition is subjective. If you can offer better solutions to farmers’ problems, you have a chance to survive anywhere. Nonetheless, avoid places with a highly capitalized player or monopoly.
Also, ensure that your shop which must be located on a high moderate of high traffic street is well branded and renovated to attract customers.
Research the most popular products in that area, their prices across several existing agrovets and invest most of your capital in providing what farmers are looking for. If you have limited capital, focus one a few products first then expand as you grow, don’t start with everything first.
This table provides the approximate cost of setting up an agrovet retail business anywhere in the country.
|Licensing||Single Business Permit, KEPHIS, PSPB||10,000|
|Stock||To adequately equip your shop with all the essentials||200,000|
|Premises||A good location with rent of 10,000 to 20,000. Deposit and rent for the first month plus branding and renovation costs.||50,000|
|Labor||A shop keeper or assistant||10,000|
|Working Capital||Operating liquidity to deal with duties and items popping up anytime, electricity, water, airtime, and logistics.||50,000|
ROI (Return on Investment)
Depending on the location of your business, the profit margins of an agrovet business range from 15% to 30%. This is especially true for a new business. However, as you grow you can achieve higher profits margin to the tune of 100% especially of you establish monopoly in your area or operation.
It also takes around one year to break even, but this depends on the farmers’ density, competition, weather and general state of the economy since farmers are the most affected.
Therefore, having at least Ksh 500,000 for launching your business and sustaining yourself for the next 12 months would highly motivate you to push on until your business becomes sustainable.
2. Bank Agency
In the quest to expand their footprints in the country, Banks have resulted in hiring agents who can provide banking services to customers in remote areas where the establishment of bank halls would be unprofitable.
These agents offer services such as withdrawals, deposits, the opening of accounts, among others which you’d normally get in a bank hall.
In Kenya, you are more likely to be financially excluded if you are older, come from rural areas, lack education or are informally employed. However, the presence of MPesa, a revolutionary mobile money transfer platform with affordable transaction costs, has enabled even the most remotely located citizen to have access to bank services.
But banks ain’t taking this lightly, that why they are on an aggressive campaign to reach new customers everywhere led by Equity which introduced its sim card.
Other banks making use of agents include KCB, Co-operative Bank, Family Bank and National Bank.
And the best part about this is that they need you. They need you to help them expand and woo new customers.
Today you can hardly walk a few meters in any town and fail to see a bank agent shop beside or together with an MPesa agent shop. The two function almost the same and are complementary.
But you might be wondering why this is still a viable business idea. Well, most people in rural towns still complain about a lack of bank agents to serve them. They thus have to travel to the nearest towns to get bank services.
If you can spot this gap in your rural arear, there is potential for a good business here
Sadly I think this business idea will become less viable as time goes by since technology is filling the gaps currently existing in our inefficient systems.
All banks have their demands for anybody wishing to open an agency under them. However, these requirements revolve around the same issue; verifying that you are the most viable person for that job.
First, you need to visit the bank you wish to work for as an agent. It’s only by visiting their offices that you’ll learn the entire process of opening a bank agency for them.
You might be interviewed or grilled to ensure you pass the bare minimum requirements then asked to bring various documents before you begin the registration process.
You know the drill.
So, let me list down the various requirements you might have to fulfil.
- Have a strategic business physical location, approvable by management,
- Permanent Structure with Physical security features
- An existing business that has been operating for a minimum of 12-18 months
- Business permits for the existing business
- Current statements for the last 6 months
- Bank or loan statements (certified) from any other institution for the past 12-24 months
- National Identification Document (ID)
- Two Passport Size Photographs
- Copy of KRA PIN
- CV of Business Owners
- Credit Reference Bureau Certificate/Report
- Witnessing by Commissioner of Oath (necessary forms from the application)
- Personnel dedicated for agent banking
- Completed CBK application forms
- A certificate of good conduct
- Business profile
- Certificate of registration of business
- For companies and partnerships: articles and memorandum of association, board resolution for partnership and companies, audited financial records for the past 12 months for companies
- Agency application fee averaging at Ksh 1,000 and a deposit of Ksh 100,000 which acts as afloat.
These are just some of the items you might be required to submit or provide proof of for instance physical locations. However, you must check with the specific banks first before going through the hustle of ensuring everything is ready only to be asked to submit a few things needed.
These are estimates which don’t include miscellaneous items.
|Documents||ID, Passports, CV, CRB Certificate, Good Conduct Certificate,||1,000|
|Float||Operating liquidity for seamless transactions||100,000|
|Premises||A good location with rent of 10,000 to 20,000. Deposit and the first month of rent plus branding and security renovations||50,000|
|Labor||A shop keeper or assistant||10,000|
Return on Investment
Bank agents are paid commissions for services rendered. This is partly why agencies have proved to be cheaper ways for banks to serve customers in remote areas without investing a lot of money.
These commissions are dependent on the banks but are generally similar. Equity for instance pays the agents’ commissions depending on the amount of money being transacted.
|Customer Cash Withdrawal||Agent Commission|
|2501 – 5000||25|
|5001 – 10000||35|
|10001 – 20000||60|
|20001 – 35000||70|
|35001 – 50000||90|
On the other hand, Co-operative Bank pays a percentage (50%) of the transaction fee it charges customers. So if a customer is charged Ksh 250 for withdrawing Ksh 50,000, the agent makes Ksh 125.
So to make money out of this kind of business, you need to locate your shop in a perfect location where there is an actual need for banking services and very minimal competition. If you discover a place with many customers of a certain bank yet few or no agents available, this business idea can be very lucrative for you.
The best part about this is that you can do it together with another business. For instance, a pharmacy or agrovet would greatly complement bank agency services in places with dense workforce population.
3. Butchery Retail Shop
When did you last have some meat for supper? Yesterday? Last week? It doesn’t matter but as long as you are a Kenyan, there is a 90% probability that you had at least 1 kg of meat in the last one month unless you are vegan.
By 2007 Kenyans consumed on average about 600,000 metric tons of meat annually. Right now that figure might have doubled. Meanwhile, there is a deficit of 300,000 metric tonnes annually of meat which is met through importation. Which makes me think cattle rearing as another profitable business idea. A story for another day.
Meanwhile, 75% of meat consumed in the country is accounted for in Nairobi and Mombasa where there is a dense population of people with disposable income.
Considering that the middle-income population has been increasing over the last few years, it is likely that the meat consumption rate will grow in the same trend and this gap is what you as a prospective entrepreneur can exploit.
Also, you have to put in mind the fact that high most people are shifting to white meat especially poultry following the growing concerns on the health effects of red meat.
Meat is a delicate commodity which is why you must be licensed to operate one. Consequently, there are three documents you must acquire before anything else.
- Single user business permit; the cost depends on county, size of premises and location but ranges between Ksh 7,000 to Ksh 15,000.
- Public Health License; awarded after a full inspection of premises by public health officials. Normally costs around Ksh 3,000
- Medical Certificate; this document is obtained from a hospital or clinic and is used to show proof that you don’t have any communicable diseases.
When starting, you might wish to start a simple butchery or an advanced butchery. Either, depends on the amount of capital you have in store and the location you’d wish to set up your business.
For a simple butchery, basic equipment to consider acquiring include: Knives, Axes, Chopping Boards, Hooks, Apron, weighing machines, bowls and basins, packaging, display etc. Ksh 50,000 is enough to get everything ready.
Meanwhile, for an advanced butchery, additional equipment might include; Bone Cutting machine, Mint Mincer, Fridge, deep freezer, cash register, etc. Some of these pieces of equipment are pretty expensive but with Ksh 300,000 you will be fine.
Also, you must factor in other rent and deposit, working capital, labour, branding, security, amenities etc. Approximately, Ksh 100,000 would be enough for a simple butchery to get on its feet and operate for months without hitches. For an advanced butchery, Ksh 400,000 can do you wonders.
Another thing you need to put in mind is whoever will supply your meat. This is very crucial to ensure you not only get the best quality meat but at a good price that can sustain your business.
Conducting a bit of research beforehand would help. Go around making friends with butchery owners away from your location to avoid misinformation from competitors.
There are two types of meat suppliers; slaughterhouses and abattoirs. The latter are perceived more professionals in their services and hence have better quality meat. However, it comes at a cost. You must strike a balance and see which one suits you best.
Return on Investment
The average estimated time you are likely to break even in 7 months. However, this can take much longer especially with fluctuating conditions of the markets due to issues such as inflation, natural calamities, political upheavals, etc.
The average mark up (percentage of profit over the cost) is 24% but ranges between 15% and 40% depending on the location and competition.
The first few months will be all about experimenting with different services and prices to see what works well so don’t be afraid to try. Also makes sure you incorporate other types of meat besides beef to spread your risks.
4. Bookshop Business
Education is the key to success. That’s the mantra that runs the world of children in Kenya although I don’t believe it’s the only key. Nonetheless, every year 15 million children in pre-primary, primary and secondary levels, are supposed to be in school studying to secure their lives.
These children require books, not only to write but also to read. Yet books to read are significantly more expensive than books to write. Which is why 95% of its expenditure on education is pegged to buying textbooks as estimated by the Kenyan publishing industry.
Meanwhile, the government in 2013 introduced VAT on books which raised the costs of books by 14% without any consequent increase in the budget for free education. This meant that parents had to dig deeper into their pockets to purchase books for their children.
So the demand for books especially textbooks which cannot be sold at any shop is still high and will continue to grow as time passes since the middle-class families are also growing tremendously. More parents will continue to purchase books for their kids so it depends on where you locate your bookshop.
However, this business is not future proof considering the advancement in technology especially with the introduction of tablets which can hold unlimited copies of every textbook needed by a student. If the government champions the use of technology to enhance education, then the textbook industry will be affected.
But considering the current state of the country where many students are still learning under trees and many more from rural areas remain neglected, which would make no sense to have tablets and no desks, the future is uncertain. If you see an opportunity, make use of it while having an exit or innovative plan.
First, as required for any other business, you need to acquire a county license to operate the business. This normally ranges between Ksh 3,000 and Ksh 10,000 depending on the county and location of the business.
Secondly, no special licenses are required to start a book shop. But it’s highly advisable to join the Kenya Booksellers and Stationers Association to be listed as an approved bookseller on the Orange Book. This comes in hand if you’re considering supplying books to schools.
Starting and Capital Requirements
First, acquire the Orange Book which contains a list of recommended books by the Kenya Institute of Curriculum Development. Also, parents and schools purchase books based on this reference book.
Secondly, look at the dynamics in the area of operations such as the number of primary schools, and secondary schools then stock accordingly by considering fast-moving books especially when you’re starting. Don’t forget to find out fast-moving stationery such as pens, exercise books and pencils
Also, you must identify a great location for your shop, suppliers of books and stationery, and get your licenses. Locating your shop on a high traffic street in a town with many surrounding educational institutions gives you a better chance to succeed.
|Licensing||Business License, Kenya Booksellers and Stationers Association||20,000|
|Equipment||Bookshelves, Display, Chairs, Point of Sale||70,000|
|Stock||Buy enough stock of numerous variety while getting started||40,000|
|Premises||A good location with rent of 10,000 to 20,000. Deposit plus 1st month of rent plus branding and security renovations||50,000|
|Labor||One or two assistants||20,000|
|Working Capital||Operating liquidity to deal with duties and items popping up anytime; marketing, electricity, and logistics||30,000|
Return on Investment
The average time it takes to break even with a bookshop business is 12 months and this highly depends on location, marketing, customer experience and competition.
The average margin on new books ranges between 15% and 35%. Normally it settles at around 25% which mostly applies if the bookshops purchase directly from publishers. For second-hand books, the margin is higher averaging at 40%.
Lastly, most profits are achieved during school opening periods since parents flock to bookshops to purchase books and stationery for their children. Hence this is a highly seasonal business and it would be advisable to complement it with another business that is more stable throughout the year.
5. Bottled Water Business
Bottled Water became a major thing less than a decade ago. Suddenly numerous brands were popping up every place with well designed and labelled bottles trying to woo customers. Others dropping the cost of their products to try and reach the small income earners.
Right now, it feels like the industry is overcrowded. There are uncountable water brands out here and every town has its local water brands that thrive beside the national bigwigs.
So, why is this idea still viable?
Three factors have influenced the growth of the bottled water industry. First, people are becoming more concerned with health and therefore opting bottled water over tap water which one can never be sure is clean.
Secondly, as more and more people travel due to improved infrastructure, bottled water is becoming a necessity. Lastly, due to lifestyle changes as the middle-income class grows and bottled water becomes a mark of prestige.
These factors have created a lucrative market for bottled water which supplies 1% of all freshwater needs in the country.
Nonetheless, several big players control 60% of this industry courtesy of being the first companies to be established. They include; Keringet, Dasani, Aquamist, Highlands and Quencher.
The remaining 40% is shared among 600 small and medium-sized companies.
While this industry (valued at 14 Billion by 2016) seems almost saturated, it has been proven that gaps still exist especially in terms of quality. Apparently, most small companies don’t have full certifications for their businesses and rarely undertake the full purification process before bottling water.
The way to survive in this industry requires a good investment in quality, branding, cost management, marketing and distribution. Therefore, unless your area of focus is highly underserved, diving into this business without enough capital will be tough.
The biggest investment you’ll have to make when starting will go to equipment purchase. Therefore you need to consider these three factors when purchasing equipment
Market. The equipment capacity that you need will depend on the size of the market your catering to. At least ensure that the system is capable of treating sufficient volumes of water to meed the demand. This allows you to reduce start-up costs which give you time to see whether the business idea is viable before investing a lot.
Capital. You have to put in mind what is available to spend and allocate it appropriately. Besides equipment, other essential items include rent, labour, renovations, bottling, marketing and transportation. These cannot be ignored so they must be factored before deciding how much you’ll spend on equipment.
Ease of use. If you are getting into the industry for the first time, operating the machines might seem intimidating at first. That’s why you need to choose equipment that is easy to operate and which comes with training for staff members. Ensure you check with the equipment supplier regarding training and maintenance when making the purchase.
Water source. Depending on the source of water, the kind of purification systems you need will defer. So you need to first take samples of water and submit them for lab testings. Once the results are out, present them to your supplier who can prescribe the best machines for you based on the types of purification needed.
Examples of contaminants that determine purification model; microbes, suspended solids, salinity, industrial contaminants, agricultural contaminants, naturally occurring contaminants.
Types of treatments methods include; physical filtration (removes suspended solids), Ultraviolet irradiation (kills pathogens) and reverse osmosis (traps almost all contaminants). A combination of reverse osmosis and UV irradiation would be perfect.
Kenya Bureau of Standards Certification. KEBS only awards certification after inspection of your installed plant and the annual cost is around Ksh 32,000.
County government license. As always, you must have a county license to conduct any business in the country. The cost ranges from Ksh 7,000 to Ksh 15,000 depending on the county and the location of the premises.
Public Health Department. Water is a delicate commodity. Therefore, you must acquire a public health certification as proof that all employees are in good health before beginning operations. A general health license can cost between Ksh 1,000 to Ksh 7,000 annually. Meanwhile, each employee must have a certification which costs Ksh 600 each.
Water Resource Management Authority. You need a WRMA abstraction permit for the use of either surface water or groundwater.
National Environment Management Authority. If you have to construct buildings, boreholes or abstraction points, then you must be approved by NEMA.
Kenya Revenue Authority. Three nominal taxes apply for water treatment and vending businesses: Value Added Tax, Excise Tax and Corporate Income Tax. Visit KRA offices and register for these taxes.
These are just estimates. Take note that there are many items you might need to consider besides those listed below.
|Buildup and Renovations||The average cost of preparing the premises for installation of equipment||80,000|
|Storage||Water storage tanks depending on the size of the market you will be serving||75,000|
|Water Treatment Equipment||Water treatment equipment depending on your specific needs as discussed earlier||500,000|
|Goodwill||The unrecorded cost paid to the owner of premises for intangible items such as good location||100,000|
|Security||Improvement of Security in the premises||60,000|
|Inventory||Initial Bottle Inventory||30,000|
|Rent||Deposit plus 2 months rent||60,000|
|Licensing||KEBS, County License, Public Health, KRA Taxes,||100,000|
|Working Capital||Six months working capital: Electricity, Office expenses, marketing and labels, wages, salaries, commissions, etc.||300,000|
Return on Investment
The margins in the business range between 20% and 40% and highly depend on the branding, costs and efficiencies. To break even most small and medium-sized companies have to sell between 7,500 and 15,000 litres of water a month. However, most companies, almost 70% have a low turn over and would require a year to break even.
Competition is the biggest challenge in this sector considering the many small firms fighting for space in the market and using inferior purification methods such as boiling water which enables them to sell their products at very cheap prices.