Hardware business in Tanzania: How to start a small hardware shop in Tanzania?

Highlighting the potentials, opportunities, challenges, risks, the regulatory environment and recommendations.

Building sector is growing fast in Tanzania. As a result demand for building and hardware materials is also growing fast. For this reason, we think we must discuss hardware business in Tanzania. But where do we start? Obviously we must start with a discussion of a small hardware shop. We can later discuss medium scale and large scale hardware stores.

So lets first lets define what we mean by a small hardware shop. For the purpose of this guide, a small hardware shop is a shop that sells building and hardware materials. Those materials include cement, roofing sheets, paints and the like.

Although small hardware shops are most common in the sub-urbans of the major cities like Dar es Salaam, Mwanza, Arusha, Mbeya, Tanga and Dodoma, it doesn’t mean that the opportunity is not there in the rural areas.

And even though most of the small hardware shops manage to grow and become large stores, there are few that end up becoming redundant and forced to exit the market.

What if you have enough capital? Do you still need to start small? For me, if you want to go into the hardware business in Tanzania, you need to start with small hardware shop(s). This will not only give you opportunity to learn, but will guarantee that you don’t loose your hard earned money along the process.

Estimated Cost : 4,000,000 – 10,000,000 TZS

Time Needed : 14 days

In summary, to start a small hardware shop in Tanzania, you need to (1) choose the hardware category you want to specialize with, (2) search for the right location, (3) do some research and compile potentials leads, and (4) prepare a plan.

You will then need to (5) lease or arrange for a business premise, (6) choose business ownership structure and register the business and (7) inject some fund and test the business idea.

You will lastly need to (8) review the business testing results, fine tune the business idea, put more fund and scale up. Lets discuss these steps one by one in detail.

  1. Step 1: Choose the type of the item you want to specialize with

    Small Hardware Shop Tanzania Cement ShopDemand for hardware items is growing fast in Tanzania. And competition in the sector is also stiff. Specialization can help minimize competition.

    Building projects go in stages from foundation to finishing. Requirements for those stages are not the same. In the foundation stage, materials like sand, cement, water, gravels, bricks, steel, aggregates will be required.

    After foundation stage, brick laying stage will follow, this requires bricks, cement, water and sand.

    Customers will normally visit stores that specialize in the items they need hoping for better prices.

    With that in mind and since a small hardware shop is started with small capital of not more than Tshs 10 million, then it is ideal to specialize in one or two categories of hardware items. The categories of hardware materials are:

    1. Bricks, sand and gravels
    2. Cement and related items
    3. Timber and related items
    4. Paints and related items
    5. Nails and related items
    6. Steel bars and steel pipes
    7. Corrugated iron sheets and related items
    8. Plumbing supplies and related tools
    9. Gypsum powder and related items
    10. Ceiling boards and related items
    11. Electrical supplies and related items
    12. Hardware tools and equipments

    Budget for this step: Nil.

  2. Step 2: Search for the right location

    Small Hardware Shop Tanzania Locations with Ongoing Building WorksObviously, a built-up area is not ideal for hardware shop. Instead, the right location will be those places where people are still building houses. Such locations are far from the towns hence be prepared to stay in the sub urbans.

    For Dar es Salaam, places like Mbutu, Majohe, Madale, Kawe, Wazo, Chamazi, etc are more ideal for this business. Please don’t open your shop in Magomeni or Makumbusho unless you want to sell electric bulbs and in small quantities.

    Keep in mind that the point is not just a sub urban, rather you should choose places with ongoing building works.

  3. Step 3: Do some research and compile potential leads

    Small Hardwar Shop Tanzania Generating LeadsPotential leads will obviously be the builders, electricians, tilers, plumbers and other people working in the building trade.

    One skill that is critical and useful in this stage is your ability to interact with people and make new friends. Business is a relationship game hence play it well and careful.

  4. Step 4: Prepare a small plan

    Small Hardware Shop Tanzania PlanningPrepare some sort of plans. Include the following in your plan: ownership structure, who will be in the shop, what should be the average daily sales to break even, what should be the daily sales to get some profit, how to get acclimatized with the locality, how much cash will be injected, how will the business idea get tested and validated.

    Plan the levels of starting stock, minimum stock and maximum stock. Plan cash flow management including the necessity of opening bank account and mobile wallets (TigoPesa, mpesa, etc).

    Define the problem statement in your plan and propose a solution that you will focus on. Define the key success factors in the plan, which include customer service, knowledge, good team, ability to leverage offline and online social networks.

    We can offer sample plans at a small fee. Contact us if you will need one.

  5. Step 5: Lease a place or make arrangement for office

    Small Hardware Shop Tanzania Rent a ShopRent a shop for the business. You can alternatively arrange for a place where you can start from for testing the idea. Sometimes you might be in a position to share a place where a friend or partner is using and avoid paying rent for a business that you want to test. If you have no option then you have to rent a shop as the lease agreement will be required in the next step.

  6. Step 6: Choose structure and register the business

    Small Hardware Shop Tanzania Register BusinessChoose a name for your business and I suggest that you start with a business name (sole proprietorship) as the ownership structure for a small hardware shop. This will reduce the compliance and regulatory complications and costs as you start the business.

    1. Register the business name with BRELA. To register a business name, you must have a national id number issued by NIDA. Click this link to read our article on how to register a business name/sole proprietorship online with BRELA ORS. Or call us to process the registration for you.

    2. Register the business with TRA and get TIN certificate and tax clearance. Click this link to read our article on how to register for Tax Payer Identification Number (TIN) from TRA in Tanzania. Or call us to process the registration for you.

    3. Apply for business license from Municipal Council. Click this link to read our article on how to get business license in Tanzania. Or call us to process the registration for you.

    4. Open a bank account and mobile wallet for the business. A bank account and mobile wallet are not mandatory but better to have them if you really want to do business that will grow and get extra finance from bank and other financial institutions. Click this link to read our article on how to open business bank account in various banks in Tanzania.

  7. Step 7: Inject some money into the business to test the idea

    Small Hardware Shop Tanzania Test IdeaDepending with the amount you want to put into the business, take not more than half and run the business for a while. Based on the hardware business category you choose, get orders and deliver. Test the whole process.

    For instance, if you decided to sell just paints and painting tools then get orders from painters and source the materials and deliver. See if you can make money from few transactions.

    I advise that you should deposit into a bank account/business mobile wallet the money you set aside for the business. This will help you track your business and prove that you are bankable in the future. Businesses that are transparent have more rooms to grow.

  8. Step 8: Review the business testing results, fine tune the business idea, put more fund and scale up

    Review the business testing results and fine tune the business ideaYou test a business idea with half of the capital you want to start with and after validating the idea, put the other half. Scale up the business and grow it.

    Note that if you had picked the right location did market research as part of step 2 and 3 above, then you will surely find the idea to be profitable and promising.

Tools
  • The Startup Capital required for a small hardware shop ranges between Tshs 4,000,000/= and Tshs 10,000,000/= depending with the category you choose to specialize on.

    If you take paints then Tshs 5,000,000 will be enough for rent, registration fees and inventory of more than 50 buckets of varieties of paints in 20ltrs.

    And since the paints will be a mix of 20ltrs and small packages then you can take 30 buckets.
Materials
  • You will be required to have your National ID number for registration purpose at BRELA (Business Registration and Licensing Agency) and TRA (Tanzania Revenue Authority).

    In case of foreigners, certified copies of their passports will be required.
In this article

Conclusion

Note that, starting a business is easy. But managing and growing it is very tough. New founders need to be careful with four aspects. These are finance, market, people and risks.

If you need assistance in choosing the right location for your hardware business in Tanzania, doing market research for your hardware business in Tanzania, or registering your hardware business in Tanzania, send us an email to controller@miamia.co.tz, whatsapp or text message or call us at +255 748 442 442.

Bonus

There are four key success factors of building materials business. These are professional knowledge, customer service, the right sales person and aggressiveness.

We can help in the following areas:

  • Assisting in preparing hardware business plan
  • Providing details of building materials suppliers in tanzania
  • Guiding you on the best and fastest moving hardware store items
  • Providing information on the cost of building materials in tanzania
  • Providing information on the MDF board price in tanzania
  • List of building material importers in tanzania


If you want to get in touch with us.
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Published by Kessy Juma

Kessy Juma

Kessy Juma is the founder of Miamia Trading Company (miamiatz). He is a Techpreneur with roots in accountancy. He believes that any business is good as long it caters the right market using the right strategy.

miamia miamia miamia miamia


Published by Kessy Juma

Kessy Juma Kessy Juma is the founder of Miamia Trading Company (miamiatz). He is a Techpreneur with roots in accountancy. He believes that any business is good as long it caters the right market using the right strategy.

miamia miamia miamia miamia
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