In developing countries like India, there is always a demand for construction. So obviously there is demand for construction materials too.
So you can easily start a building material business using this opportunity. The business is to trade materials needed for construction.
In this article we will give you complete information related to the building material shop business, which includes a business plan, licenses and certificates required, building materials business cost, profit margin, etc.
Building material business plan
- The first step in the building materials business is to choose a good location for your business. The sup-urban and rural areas are the ideal location for construction material business.
- You need a minimum of 2000 square feet of space to start this business. Choose a location where large vehicles like mini lorries, pick-up trucks, and goods vehicles move around
- For this business, a shop rental of 15,000 to 25,000 rupees can be considered safe. It depends on the location and the total space.
Sourcing Materials and Type of materials to sell
- The next step is sourcing materials. For this, you have to contact different companies or dealers like cement companies, steel suppliers, brick making companies, sand suppliers etc.
- Always try to deal with one brand or a company. Then the chances of getting big discounts are high. You will get aggregator or ballast dealers from places like crusher.
- In a building material shop, you can sell products like cement, steel bars, sand, different types of bricks, aggregator or ballast, iron, bamboo round poles, ladders, construction equipment etc.
- In the initial stage of stocking, every type of construction material is not mandatory. You can start with materials which are in high demand, later you can add the remaining materials.
In a construction material shop, you may require at least 2 to 3 employees. You need people for loading and unloading materials, shopkeeping and the driver if required.
For employees, you can set salaries between 15,000 and 17,000 rupees per month.
If you are starting this business on a small scale, then it is always better to focus on house owners instead of builders.
The builders always buy materials on credit and demand heavy discounts, since they have many other options.
The house owners buy small quantities, but you can deal with cash and also can except a good margin.
Challenges in the building materials business?
- Material overstocking is one of the major challenges in the building materials business. Material overstocking ends up in lots of dead stock.
This causes a shortage of working capital and you will be left with limited money for the new material purchases. In order to stop this, you should learn to judge the customer demand and stock material accordingly.
- Building material business is a seasonal business. You will see a huge drop in sales during the rainy season from June to September. Generally, construction activities are at their peak after Diwali and till May month.
- Prices for building materials fluctuate frequently depending on the market. So buying the stock at the right time and determining the selling price of materials is very crucial to succeed in this business.
- Controlling debt is one more challenge in the construction material business. The builders always buy materials in credit. So you have to list out trusted builders and plan the credit system accordingly.
Licenses and registration required
To start a building materials business, you require these licenses and certificates,
- Shop and Establishment Certificate
- MSME Registration
- GST Registration (required only if your annual turnover is more than 40 lakhs)
- Business Registration – Sole proprietorship is enough
- Business insurance if required
MSME registration helps you in getting a business loan from the bank. You can also approach banks like SIDBI.
Building material business cost
To start a building material business in India, you require an investment of 8 lakh to 10 lakh rupees.
As you know, the total investment depends upon the variety of types of building materials you are going to sell and the stock volume. So the investment relies on the scale on which you are going to do the business.
In this type of business, you require large working capital. If you have limited stock in your shop then you will not be able to trade big orders.
The other initial expenses are shop security deposit, goods vehicle for delivery ( you can buy a second hand), office setup, signage board etc.
To start a construction material business on a large scale you may require up to 25 lakh rupees investment.
The ongoing monthly expenses are shop rent, employee salary, material purchases, utility bills, etc.
Building material business profit margin
In the Building material business, you can expect a profit margin of 10% on your revenue.
This business is a high volume low margin kind of business. Generally, the construction materials are sold in bulk quantity for low margins.
For example, in a 50kg cement bag, you get a 10 to 20 rupees margin and in bricks one rupee per brick and in steel bars one rupee per kilogram, etc.
Usually, the orders placed by the builders are of high volume but you have to give them big discounts because of the competition in the market.
Therefore, you can earn 6 to 7 lakh rupees annually in the building materials business.
Of course, if you run the business on a large scale, then you can earn more profit.
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How much space is required to start a building material business?
You require a minimum of 2000 square feet of space to start the business.
How much investment is required to start a building materials business?
You can start with a 6 lakh to 7 lakh rupees investment.
What is the profit margin in the building material business?
You can expect a profit margin of 10% on revenue.
I hope this article has resolved many of your doubts related to the building material business. If you have any suggestions feel free to mention them in the comment box below.