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A keke hire purchase business can be quite a lucrative venture if implemented with a good strategy.

How Much Do I Need To Start A Transportation Hire Purchase Business



Transportation business in Nigeria is still growing with the increase in population which is estimated at about 180,000 million as at 2018. Going into transport business in Nigeria is a viable proposition since the market is there for you and beside those in the business already are racking handsome profit.



Transportation business in Nigeria is still growing with the increase in population which is estimated at about 180,000 million as at 2018. Going into transport business in Nigeria is a viable proposition since the market is there for you and beside those in the business already are racking handsome profit.
What makes the business economically viable is that the demand by commercial bus users surpass the supply. Even car owners use commercial transport so it is safe to say that up to 70% if the Nigerian population use public transport.
Before I go into how to start a transportation business, I will first of all show you the types of transportation business in Nigeria today. They are many and varied and different entrepreneurs choose different types of transportation business because of their interest and experience.

Types of transportation business

1. Motor cycling (Okada):

This is the use of motor cycle to carry passengers within a town, city and villages. Motor bike, popularly known as okada is used to carry one or two passengers at a time, though some states discourage carrying two passengers. But the days of using motor cycle as a means of transportation is numbered since some states have banned the use of “okada” as a means of transport, particularly in the cities, other states are likely to follow suit in due course.

2. Tri-cycling (keke napep):

This is an improvement to motor cycle and officially meant to carry three passengers, some drivers carry four passengers, even others in some states carry five passengers. Keke napep is in vogue and it is likely to be used as a means of transportation in the foreseeable future. Some state government have proposed replacing motor cycle with keke napep.

3. Commercial luxury bus and mini-bus :

These are used for both town and inter-city services to carry passengers. Workers that commute to work or others travelling outside the state use this means.

4. Car town service (taxi):

This is also used to convey passengers within and out of the state. It is a more secure means of transport than the unregistered and unpainted “kabu-kabu” because each owner registers the car with the state government agency . There is also another form of car service known as “kabu-kabu”, also used to carry passenger but for a short distance journey.

5. Haulage transport service:

This is the use of different types of automobile to carry goods for a charge. Different types of vehicles include, tanker, trailer, tipper, etc. are used to convey different kinds of goods.

6. Offer hire purchase services:

This type of business is spreading to all the states of the federation. It is a new way to transportation business in which you get regular income, more or less, it is a guaranteed income. It works in this way: you buy whatever type of would be commercial vehicle at a particular price and hire them out to different type of drivers at higher prices.

The driver will pay for the price agreed installmentally. For example, an entrepreneur buys ten tri-cycle at ₦500,000 each and hire each one out at ₦700,000 each with ten months instalment of ₦70,000 each month, after which the hirer becomes the owner. So with the instalment payment of ₦70,000 per month, the total amount payable at the end of the 10th month is ₦700,000. Assuming the entrepreneur received all the instalments, he makes ₦200,000 from each of the tri-cycle. It is a cool business, is it not?

7. Other classes of transportation business

such as the use of aircraft, train, ship or canoe and pipeline are outside the purview of this article. Since the article is designed for an average Nigerian who want to be an entrepreneur as a transporter.

Before you start…

To make a headway and be highly successful in transportation business in Nigeria, you must be aware of the following:

• You must as an entrepreneur and have a reasonable knowledge as a driver and/ or mechanic. The reason for this is simple, the average commercial driver is dishonest. He will tell you lies about police arrest today, the next day it is about the vehicle breaking down, all in an attempt to make extra money . Sometimes he would absent himself from duty with the excuse he is feeling unwell, would you allow your vehicle to be idle for how many days before he reports back to duty?

• You must pay close attention to the activities of the drivers, monitor their trips over time before you can have some level of confidence in them. You must investigate what is the average daily costs of running transportation business and the average revenue that is feasible and possible before you agree with the driver how much he would deliver on daily or weekly basis.

• Have a reasonable idea what action of the driver constitute an offence for which he can be arrested as well as know the route of your drivers. In fact study the traffic laws of the state in which you are operating.

Steps to start a transportation business

Here is a breakdown of how to start a successful transport business, concentrating more on commercial buses.

1. Decide on the type of transportation business you want to carry out
2. Choose your location and the routes that are lucrative
3. Obtain your vehicle either through lease, hire purchase or an outright buy
4. Driving it yourself
5. Engaging a professional driver
6. Grow your transportation business
Below are the steps in details:

1. Decide on the type of transportation business you want to carry out

If it is tri-cycling business or Okada business, they are slightly different from commercial bus business. The capital investment and the regular vehicle maintenance and running costs is much higher than tri-cycling business, however the daily return is also different.

2. Choose your location and the routes that are lucrative

Do your research properly to make sure your location is best suited for the transportation business you want to operate in terms of the financial demands of the Area Boys and the State Government.. I would recommend that you start small and acquire good experience before you grow big.

3. Obtain your vehicle either through lease, hire purchase or an outright buy

You must register the vehicle with the licensing authority, obtain vehicle insurance and other necessary documentation that will enable you to operate in your location without hindrance. You must also belong to the National Association of Road Transport Workers.

• Nigerian Association of Road Transport Owners (NARTO)
• Road Transport Employers Association of Nigeria (RTEAN)
• National Union of Road Transport Workers (NURTW)
• National Association of Government Approved Freight Forwarders (NAGAFF)

4. Driving it yourself

My advice at this stage is that you should be the professional driver to drive your first commercial bus or tri-cycle since at this stage you have one vehicle, you will manage it more prudently than the best driver.
So you make sure you have a driving licence and be a member of the transport union. If you drive a commercial vehicle for a year, you are no longer a stranger in the transportation business and you stand to gain so much when eventually you buy your second vehicle and then engage a professional driver.

5. Engaging a professional driver

If you have other businesses you are running, engage a professional driver and negotiate favourable memorandum of understanding between you and your driver. These may include: the return the driver must deliver every day/week and what happens if the driver does not meet the agreed return obligations.
The amount agreed with the driver is sometimes dependent upon the location, type of vehicle as well as size of vehicle. For example, an entrepreneur in Ibadan operating commercial transport service and using a professional driver would demand far less return from his driver than his counterpart operating in Lagos state.
Don’t forget that the professional driver must be familiar with the vehicle engine he is going to drive and other vehicle peripherals, this is necessary so that the driver will always be able to drive the vehicle to the mechanic workshop whenever the unexpected happens, i.e. vehicle break down.

6. Grow your transportation business

Plough back your profit to your business and buy more vehicles. It is only by prudent management of your resources and hard work of your transport business that you become successful. You should also consider option of inter state transport business in Nigeria.

A keke hire purchase business can be quite a lucrative venture if implemented with a good strategy. Hire purchasing is a business arrangement which allows a keke driver possess and control your vehicle for an agreed term, while paying towards the purchase of the keke in regular instalments. The fee should factor in depreciation of the keke and interest to cover your initial capital cost. At the end of the term, the driver fully owns the vehicle.

Most people find this arrangement more financially viable than a rental agreement where the driver just pays a regular fee in instalments with no hopes of owning the vehicle. If the driver understands that he is paying for an asset which will definitely become his someday, he is likely to take better care of it. If on the other hand he feels that he is being tasked to make the “oga” as much money as possible, without consideration for his future, then he’s likely to use the vehicle as he pleases, and dump it when he receives for a better offer.

Keke hire purchase business is profitable, just like any other higher purchase business. I describe the meaning of hire purchase business in the previous post. An entrepreneur purchases keke and give it to somebody who is ready to use it especially for busiiness. The person will in turn pay for it on installment until he is able to pay the stipulated agreed amount and the keke becomes his own. But he still needs to deposit some money before carrying the Keke for use, it can be 15% of the amount sold.
The entrepreneur will give the keke out twice or more of the price he boughtt the keke in other to make profits. And the buyer accepts the terms because he doesn’t have large sum to purchase directly from keke dealers. The terms of payment can be weekly, forthnightly or monthly.
The best option is weekly if you don’t want stories.
This is a good venture because you are making money every week without stress. And you can invest the money that is coming into a business that yield quick returns.
A new keke is about #700,000 now and it’s hire purchase is about 1.2 million depending on the location. First grade keke is between #350,000-#400,000 and hire purchase is between #700,000-#800,000

There are many names given to keke, like keke Maruwa, keke napep, trycycle etc.
Keke hire purchase business is very lucrative because maintenance is cheap and the engine can drive for 5-7 years if proper maintenance is done.

Popular Brands of Keke in Nigeria Market are:

Bajaj
TVS
Paggiio
Suzuki
Others are
Daylong
Zongshen
Vespa

TVS is very common and out numbers other brands because they have the highest number of second hand value.

• Research viable transport routes

Investigate the routes and areas which you would like your vehicle to ply. Some routes are more financially rewarding than others, and it is up to you to do the work involved to find out which routes these are, and whether you can position yourself to take advantage of them.

• Devise a strategy on how to manage your drivers

Your human capital (in this case, drivers) will make or break you in this business, so this is where you will need to draw on your best judgement. If possible, drive it yourself for a start to get a ‘feel’ of what the driver might experience on the roads, what routes work best and realistic earning expectations. This might not sound conventional, but then the most successful business people are usually unconventional.
One guys uses our culture of elders to his advantage and always uses the drivers parents as guarantors when signing the contract. He meets their parents at their homes and explains the situation and also asks them to hold their children accountable for fulfilling their end of the contract and so far, this has worked.
“One driver tried his luck with me, and tried to miss one weeks payment. I immediately went to his mother who asked me not to worry, and she was right – after speaking sense into him, he paid up in a couple of days”.

Requirement for Starting Keke Business

Decide on the Brand of Keke to Purchase

It is better to buy something that will last especially when it concerns mobility. It should a brand whose parts are available in the market. With fairly use keke you can break even quickly but buyers don’t like fairly use. This is because it will not last long as the brand new ones and for something that will become their own they rather go for tear rubber keke. Since it is your business you have to strike a balance by buying fairly use keke whose body is fine and the engine sound.

Get A Good Driver

Look for drivers that can be regulated because it is one of the major keys to keke hire purchase business. The faster you break even the better the business but in 6 months or within a year you should break even. The earlier you break even the more established you are in the business. That is why so many hire purchase business entrepreneurs go for fairly use so they can recoup their investment quick with profits. The rider should be able to afford 10% for the initial payment.

Write Agreement

A valid and well written agreement is necessary It doesn’t matter if the person buying is your blood relation, make sure you write agreement and both parties should sign it. The rider has to bring not less than 2 quarantors either their family members who are doing fine or civil servants. So they can pay back your money in case of default. Because it is hire purchase, the person hiring it takes responsibility for the maintenance which is included in the agreement.

Challenges of Keke Hire Purchase Business

The discouraging side of this business is that keke parts doesn’t have second hand like cars and other engine equipment. Every part of keke is bought brand new that is why to rebuild its engine cost between #100,000-#150,000. Dubious and inexperienced riders are also a major challenge to the business. The key to succeed in Keke hire purchase business is to get a good keke because a bad keke will bring little profit if at all.

Tips on Keke Hire Purchase Business

Educate your Buyers on the Engine Oil to Use

You must educate the riders to always replace the engine oil filter with original oil; it can be Total engine oil or Mobil. The replacement should be after every 3 weeks or 4 weeks at maximum. Let them know the implication of using cheap and adulterated oil such as palm oil.

Know The Classes of People To Give Your Keke

Some people say that married keke buyers/riders complain a lot because of the responsibility before them and should be avoided. Enthusiastic young men who are just starting out life or those living with parents are said to be the best to use because of the small responsibility in their hands.

Inspection

Always inspect your keke to determine the extent of damage or maintenance level. Hire a manager. You can use the chairman of the branch the keke will be plying as your manager. They are used to the business and will manage it successfully for you.

Install Trackers

Install trackers on your keke napep so as to monitor the movement and to know where it is at a particular point in time.

Use Experienced Mechanic

Before buying any tricycle use a keke mechanic for inspection he is in a good position to advice you whether to buy or not. Avoid inexperienced mechanic. Use a trusted mechanic to inspect and assess the keke before purchasing it.

Where to purchase keke maruwa

Buy from a dealer who has a shop and many keke for choice. Every state has keke dealers. In Akwa Ibom you will find them in Aka Road. Abuja has different places to purchase keke napep and Lagos has many places too. If you want to know where to buy first grade keke and you are not sure of their location then locate those selling brand new ones first. Tell them you only have money for fairly use, they will direct you where to get a good one.

Hire Purchase Agreement for Keke

* Provide two guarantors
* Proof of address
* Proof of ID card
* Sign a legal contract with a lawyer
* Give a copy to the buyer and keep one for yourself
Get a good lawyer to draft a proper contract terms for you, include many clauses to protect your business but it should not be a weight on the buyer.

Profits in Keke Hire Purchase Business

An average keke rider will make at least #6,000-#8,000 daily. The rider makes a return of 18k-20k every week to the assets owner for second hand keke. Weekly account is between #25,000-#30,000 for brand new.

1. Registration for the keke and other things will cost #50,000.
2. Buying of keke=350k for second hand
3. Total 400k
4. Give out at 700k
5. Rider should pay 20k every week until it reach when the keke napep will be signed out to him.
6. 20k×4=80k every month
7. Within 9 months the rider would have finished payment. And you would have made 350k
If you have up to 3 keke tricycke within a year you would have recorded 1m without stress.

Click here to get the complete guide on the above business plan  Click Here

Uses of this Business Plan (PDF and Word)

This business plan can be used for many purposes including:

•    Raising capital from investors/friends/relatives
•    Applying for a bank loan
•    Start-up guide to launch your business
•    As a business proposal
•    Assessing profitability of the business
•    Finding a business partner
•    Assessing the initial start-up costs so that you know how much to save
•   Manual for current business owners to help in business and strategy formulation

Contents of this Business Plan (PDF and Word)

This business plan include:

•    Marketing Strategy
•    Financial Statements (monthly cash flow projections, income statements, cash flow statements, balance sheets, break even analysis, payback period analysis, start-up costs, financial graphs, revenue and expenses, Bank Loan Amortization)
•    Industry Analysis
•    Market Analysis
•    Risk Analysis
•    SWOT & PEST Analysis
•    Operational Requirements
•    Operational Strategy
•    Why some people in this business fail, so that you can avoid their mistakes
•    Ways to raise capital to start your business

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Oyibo E. Moses8 Posts

Transportation business in Nigeria is still growing with the increase in population which is estimated at about 180,000 million as at 2018. Going into transport business in Nigeria is a viable proposition since the market is there for you and beside those in the business already are racking handsome profit.

3 Comments

  • Jide Reply

    01 Dec 2019 at 11:12 pm

    Transportation hire purchase is a very good business, I have tried it before long time and failed, wish I had seen this article then. Thanks

  • Oyibo E. Moses Reply

    02 Dec 2019 at 11:08 am

    Hello Mr. Jide, am sorry for your past experinces, I hope you can learn from your mistake and go into it again.

    • Mummy Rose Reply

      05 Dec 2019 at 09:53 pm

      Please how can I get a Lawyer, i just bought a keke napep and plan giving someone this week, i was searching on how to get a lawyer and saw your website.

  • Oyibo E. Moses Reply

    07 Dec 2019 at 11:24 pm

    Yes we can get you a lawyer, send us a message so we can forward you his details.

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