The difficulty in starting a tractor hiring business in Nigeria is less compared to the one experienced when starting a business that involves the sales of tractors and other farm machineries.
The reasons are obvious. The inconvenience of the logistics involved in the continuous importation and clearance of tractors at the seaport apart from irregularity in the cost of purchasing the tractors due to the fluctuating exchange rate is a strong case for starting a tractor hiring business in Nigeria.
Also, the market for this business is readily available. This is because it is very easy for most farmers to hire a tractor than for them to purchase one due to their financial status.
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Again since they are just hiring the tractor for a certain period of time, the farmers do not have to bother about the maintenance of the tractor after use.
In this article, we will be looking at how to start a tractor hiring business in Nigeria. We will start by explaining what it entails, look at the benefits and how to go about it.
What is Tractor Hiring?
Before we continue, it is important to explain the term “tractor hiring”. Tractor hiring is the process of releasing a tractor to a client or customer for use for a period of time at a particular fee.
In other words tractor hiring is the same thing as renting out a tractor for use for a certain period of time. Another synonym for the word hiring is leasing. So tractor hiring can also be seen as tractor leasing.
Most businesses involved in this venture charge on a per day basis. The model of leasing out a tractor on a per day basis works on the principle of the normal working hours in a day.
Of course you know that officially a day consists of 8 working hours. Extra hours attract additional costs that is if a client demands for an additional hour, an additional cost is incurred by that client.
The cost of hiring a tractor in Nigeria is between 8000 and 15000 naira per day depending on the size and capacity of the tractor being hired.
As mentioned earlier in the last paragraph, the most popular model for the tractor hire business is on the pay per day basis in Nigeria.
The hire per hour model is really rare in Nigeria if it exists at all. So if one is thinking of embarking on this venture, it is advisable to set a flat fee per day based on the official working hours of the day instead of using hire rates per hour.
Read Also: Cost Of Hiring A Tractor In Nigeria
Advantages of Starting a Tractor Hire Business in Nigeria
Apart from the fact that tractor hiring is a very lucrative business, this venture has some other advantages. As an entrepreneur, it is very important for you to know these advantages so that you will be able to maximize the opportunities provided by this business. Some of the advantages of the tractor hire business are:
- It is relatively easy to start up.
- Quick returns.
- There is a huge market for this business.
It is Relatively Easy to Start Up
Compared to some other businesses, especially businesses in the agricultural industry, the tractor hire business is easy to start.
One can start this business with any tractor of any size. Well we have tractors of various sizes ranging from the micro hand operated or hand pushed tractor to the mega or tractors of very big sizes.
One can start this business with one tractor and over time scale it up by purchasing other tractors depending on one’s financial capacity.
If one cannot start with the very big tractor, one can start this business with the micro hand pushed and operated tractor.
The price of a fairly used micro hand pushed or hand operated tractor is between 300000 and 500000 naira. Since one can start this business with one tractor, the other logistics such as setting up a machine shed, hiring personnel and maintenance is not as complicated as other types of businesses such as the manufacturing of farm machines and accessories.
As an entrepreneur, the Returns of Investment (ROI) is very fast and high. It was mentioned earlier that the price for leasing out a tractor based on the pay per day model of 8 hours in a day is between 8000 to 15000 naira depending on the size of the tractor.
For instance, if the micro tractor is leased out at the rate of 8000 naira per day and it is rented 6 days in a week, one is talking about 48000 naira in one week. Multiplying 48000 by 4 weeks in a month, we have 192000 naira in a month.
Let us imagine that this tractor was purchased at the price of 500000 naira, then the money invested in purchasing this tractor will be recovered in at most 8 months assuming that there are no unforeseen circumstances occurring during this period.
Huge Market Available for this business
There is a huge demand for this type of service in Nigeria. This is because most farmers in Nigeria cannot afford to purchase even the tractor of the smallest size because of their financial status.
For this reason, some will prefer to rent a tractor for their farm operations. Again it is relatively easier for farmers to pay for the services of an organization involved in tractor hiring than to purchase a tractor.
This is because there are other things involved apart from the cost incurred in purchasing a tractor. The other things involved are the logistics of maintaining the tractor after purchase, employment of personnel that will carry out the maintenance of the tractor and also keeping the tractor.
So paying for the services of a business involved in tractor hiring will eliminate the need for these other activities as these logistics is handled by the tractor leasing company.
Steps involved in Starting a Tractor Hire Business in Nigeria
One has to take the following steps to start a tractor hire business in Nigeria.
It is advisable to start with this step. This step is very important to give one a good legal standing to build trust. One can do this through the organization which has been commissioned with the task is to register a business in a particular state and city.
In Nigeria, the institution established by the government to register businesses is the Corporate Affairs Commission (C.A.C). One can start by registering the business name of one’s tractor hiring organization.
Find a Suitable Location
The location where the tractor hiring business will be located is also important. The location wof the tractor leasing business should be considered looking at some factors.
The factors to be considered are the type and size of tractors, the number of tractors, the number of personnel as this will determine the number of offices to be built and the ease of transporting the tractors from the shed to the site where the tractor is used.
These factors must be considered to reduce cost and maximize profit. For instance the issue of transportation. If the proximity is such that the place where the tractor is kept and maintained is too far from the main road, then the cost of transportation might affect the overall profit of this exercise. So it might be very advisable to site the business in a location which is not far from the main road.
Source for Capital
Capital is a very important factor of production in any business. The tractor hiring business is no exception. After taking the steps explained in the previous sections, one must get the required capital to purchase the needed items and also to pay the personnel employed to get the business off the ground.
Money is needed to purchase the tractor or tractors to be used for hire. Money is also needed to erect farm structures such as the shed where the tractors will be housed and offices where some members of staff will carry out their activities.
Lastly part of the capital will be used to pay the salary of workers. So one must source for capital. One can get the required capital from the following sources:
One’s personal savings
Loan from friends and relatives
Loan or grant from banks, financial institutions
Financial reward from agricultural competitions.
Well some financial experts advise that if one does not have the required capital, it is better one approaches the banks or financial institutions as they are in the best position to give counsel on the use of money to fuel this type of venture.
But in the next section, I will explain one very easy method of obtaining capital if one does not have the required amount of money to start this project.
Obtaining a Tractor through Hire Purchase
If one does not want to go through the normal route of obtaining loan or credit facilities from banks and financial institutions, one can obtain a tractor through hire purchase.
The process of obtaining a tractor through hire purchase is one in which one makes installment payments for a tractor for a period of time after making a deposit.
The deposit made is a percentage of the total price of the tractor. For instance, if the cost of a tractor is one million naira, and someone decides to obtain this tractor through hire purchase, an agreement could be reached in which the buyer could make a deposit of 100000 thousand naira after which a monthly installment of 40000 naira will be paid for a period of 30 months to complete the payment for purchasing the tractor.
Now, one can apply this principle to purchase a tractor to later lease it out for service. Once the hire purchase agreement has been reached, one can decide to release the tractor for hire depending on the terms of agreement. The revenue generated from the service can be used to make the installment payments.
Once the payment has been completed and one gains full ownership of the tractor, the business begins to reap the full benefits of this machine.
Read Also: Costs of Lathe Machines in Nigeria
Venturing into tractor hiring business in Nigeria is a potential fruitful exercise. This is because tractor hiring is very lucrative. If there is proper planning, the profit of this business will not only be enjoyed by the business owner. The benefits will be enjoyed by the customer and society at large.Click here to see the latest Jobs opportunities in Nigeria.
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