How to Start and Run a Profitable Electrical Shop in Kenya

Electrical tools are in high demand across the country due to their wide use. Almost every household and office use them making it an attractive business for investors. Let us break down how to start and run a profitable electrical shop in Kenya.

If you want understand the dynamics of this business, think about how many times you have to buy key items such as a bulb, an extension, or a cable. The reason for this is these are the items you will be dealing with if you start an electrical shop.

Is an electrical shop business profitable in Kenya?

Am always hesitant to give a yes or no to this question. The reason is that business profitability is based on so many factors that all connect to give the reward. For any business, as long as you follow the right process and strategies, you will be profitable. Electrical shops are no different.

However, when starting, it is prudent to focus on getting it right across all areas. If you do so, the end return is almost guaranteed even if it is not immediate.

In terms of numbers, you could make an average of 20% per month in profits on your investment capital for an electrical shop. This translates to 20,000 shillings in profits for a 100K business capital.

What is an electrical shop?

For this piece, let’s identify an electrical shop as a business that deals with buying and selling various electrical items.

Items to sell in an electrical shop

Some of the most common items sold in an electrical shop include;

The above list comprises some of the items you will be dealing with in this business. Hence, it is important to familiarize yourself with how they operate.

However, depending on the business location and customer type, some will be in higher demand than others. This calls for a balance when stocking to avoid having dead stock or idle capital in the business.

How much capital do you need to start an electrical shop in Kenya

There is no standard amount set on how much to set up this business. However, there are bare minimums that you can’t avoid. Some of the factors that determine the startup capital include

• Business Location
• Size of the business
• Number of employees
• Licenses and permits

A business location will determine the amount of rent to pay. As an example, setting up a shop in Nairobi will cost more than doing the same in Nyeri. This is because rent is higher in Nairobi.

Bigger size business will require more space, employees, and stock and hence needs more capital than smaller one. Finally, business permits cost different depending on the location.

Below is a cost breakdown of the approximate capital you require to set up a small shop;

The cost is based on various assumptions such as for rent, you need to pay a deposit beforehand. Hence, the real cost is 30,000 shillings.

Single business permit costs on average 15,000 shillings in Nairobi. Here is a detailed breakdown of how to get a single business permit.  However, you may need to pay other compliance costs such as marketing rights and a Music Copyright Society of Kenya license.

Now that we understand the basics of an electrical shop in Kenya, let us look at how to start the business in detail.

How to start and run a profitable electrical shop in Kenya

1.  Market research

This step enables you to identify key variables in the market. Most importantly, the opportunities and threats.

There are no timelines as to how long the research takes. Hence, you should do it until you get confidence that all the necessary information is available. Sometimes, it could take years. Hence, be ready to do it as long as necessary.

When doing research, there are various items you should be seeking to understand;

• Competitors – Such as business already have many existing competitors. To gain a share, you need to understand what they do and identify opportunities in that. Some of the details to get from competitors include their products and pricing.
• Customers – You should only start a business when you are sure of ready customers for your goods and services. To get this info, spend time engaging the potential customers to understand their needs. This may be in the form of items, quality, quantity, and pricing. This information helps you identify opportunities that will inform your business strategy. Without this understanding, you could end try to fill a gap that doesn’t exist in the market resulting in business failure.
• Suppliers – These are important parties to the business. Without them, you will have no products to sell. Use the market research stage to identify reliable suppliers. you should also negotiate the prices to get a competitive edge. Suppliers could either be local or foreign. It all depends on where to get the best deal.
• Licenses and permits – To ensure compliance with the set legal policies, you need to find out the necessary permits and licenses you require to operate the business. You can do this either by visiting the local county offices or through a legal professional. However, this may come at a cost.

2. Getting the capital

The information you get through market research will help you come up with a budget for the required capital to get the business started.

Capital covers all aspects of the business such as;

• Rent costs
• Fittings costs
• Permits fees
• Purchasing stock

These variables are key to getting the business started and hence you require adequate resources. Some of the available sources of capital include using savings or borrowing.

Savings are better because there are no costs associated with sustaining them. However, if not adequate, you will need to borrow. Depending on where you are borrowing, there could be costs involved such as interest costs for the case of a bank loan.

A new business takes time before it can break even. Hence, you must factor this into your capital plans to ensure it sustains the business until such a time it is financially stable.

On average, a business could take between 1-3 years to achieve break even.

3.  Business startup

With the capital in place, it is time to start and set up the business. A good electrical shop should be in a location that is accessible. The shop should also have the necessary security fittings and cameras to help protect against theft.

Ensure the rent/lease agreement is ready in case of future disputes. You should also consider taking insurance cover for the business to remedy losses that could lead to business closure.

Some of the best areas to set up your business include along busy streets. In most towns, electrical shops are located in almost the same location to offer customers choices. Hence, being further from these areas means fewer customers and more business challenges.

During start-up, you should have the stock ready and available for customers.  

4.  Marketing

Marketing will assist create business awareness in the market to grow your sales and in return profits.

The level of marketing depends on various factors such as capital availability and target market. If there is some extra capital, you can target to do paid marketing. Some of this includes paid posters or sponsored online advertisements.

However, if the resources are stretched, there are numerous free marketing tools that you can use such as free social media pages and word of mouth.

Branding your shop will also help customers notice it with ease across the streets. However, ensure to have the relevant permits to do this branding.

Tips on how to succeed in an electrical shop

Due to the competitive nature of this business, here are some tips that will help you get and remain at the top.

• Offer repair services – You can add value to your business by offering value added services such as electrical repairs. This will help tap into those customers that need repair services. To do this, you require to have expertise in repairs. If not, you should partner or engage someone who can do repairs.
• Do after-sale services – These are services such as installation and home delivery. Some electrical devices could be technical to use for a standard customer. Hence, helping them with processes such as installation is key to growing customer loyalty and hence more sales.
• Offer customers product choice –You should ensure to have almost all products that a customer may require. This offers them choice and comfort knowing that they can meet all their needs one stop shop. In the long term, this will grow both your customer base and customer satisfaction.

Below is a recap of how to start and run a profitable electrical shop in Kenya.

1. Market research
2. Getting the capital
3. Business startup
4. Marketing