Introduction
This business idea is for manufacturing and marketing of wire nails. The nails consist of hard drawn bright mild steel wire with a head, which helps in driving the nail inside. They are made in various sizes. Wire nails are used for roofing, fastening in carpentry and woodwork, fencing, etc. With the rise in construction activities, both commercial and private, the demand for wire nails is bound to increase. Setting up a plant to make wire nails would thus meet this demand. This business idea is premised on manufacturing 769 kilograms of three inch wire nails per day which translates into 239,928 kgms of wire nails per annum. The revenue potential is estimated at US$55,583 per month translating into US$ 667,000 per annum with a sales margin of 33% and total investment requirement of US$ 71,300 for the first year of project operation.
Production Capacity
The plant at the onset of production has a minimum capacity of 20 tones of nails each month. As a bigger segment of the market is captured, output can be increased.
Manufacturing Process Description and Technology
The manufacturing technology involves feeding steel wire in the form of coil into a wire nail-forming machine. At first, cold heading forms the head and then the point takes shape. The nails are tumbled in a tumbling barrel with sawdust or similar materials to remove burrs. The finished nails are weighed and packed for marketing.
Investment Scale Capital Requirements and Equipments
The Investment scale depends on the set goals and objectives of the project and the market for the products.
The Capital Investment Requirements in US$
| Capital Investment Item | Units | Qty | @ | Amount |
|---|---|---|---|---|
| Automatic Wire Nail making machine | No | 1 | 25,000 | 25,000 |
| Grinding machine with 1-horse power Motor and four Grinding Stones | No | 2 | 12,000 | 24,000 |
| Steel Polishing Drums | No | 4 | 700 | 2,800 |
| Wire Drawing Machine with 5-horse power Motor | No | 2 | 4,500 | 9,000 |
| Delivery Van | No | 1 | 8,000 | 8,000 |
| Other Tools | 2,000 | 2,500 | ||
| Total | 71,300 |
Production and operating costs in US$
| Cost Item | Units | Unit cost | Qty/ day | cost/ day | cost/ month | cost/ year |
|---|---|---|---|---|---|---|
| Direct Costs | ||||||
| Iron and steel oar | tone | 680 | 1 | 680 | 17,680 | 212,160 |
| Lubricant Oil | Liter | 3.2 | 200 | 640 | 16,640 | 199,680 |
| Cotton Waste | Kg | 0.3 | 200 | 60 | 1,560 | 18,720 |
| Packing materials | No | 2.4 | 10 | 24 | 624 | 7,488 |
| Sub-total | 411 | 1404 | 36,504 | 438,048 |
General Costs (Overheads)
| Other materials | 1,000 | 12,000 |
|---|---|---|
| Rent | 750 | 9,000 |
| Labour | 1,000 | 12,000 |
| Utilities (Power $ water) | 250 | 3,000 |
|---|---|---|
| Preliminary Costs | 250 | 3,000 |
| Miscellaneous costs | 250 | 3,000 |
| Depreciation (Asset write off)Exp | 1,485 | 17,825 |
| Sub-total | 4,985 | 59,825 |
| Total Operating Costs | 41,489 | 497,873 |
- Production costs assumed are for 312 days per year with a daily capacity of 769 Kilograms of 3 inch wire Nails. But other nails like 1 inch nail, 2 inch nail etc, can also be manufactured using the same production process.
- Depreciation (fixed asset write off) assumes _4_ years life of assets written off at _25% per year for all assets.
- Direct Costs include materials, supplies and other costs that directly go into production of the product.
- A production month is assumed to have 26 days
Project Product Cost and Price Structure
| Item | Qty/ day | Qty/yr | Unit cost | Pdn cost/day | Unit cost | T/rev |
|---|---|---|---|---|---|---|
| Wire Nails of 3 inches | 769 | 239,928 | 2 | 497,873 | 2.78 | 667,000 |
Profitability Analysis in US$
| Profitability Item | Per day | Per Month | Per Yr |
|---|---|---|---|
| Revenue | 2,138 | 55,583 | 667,000 |
| Less: Production and Operating Costs | 1,596 | 41,489 | 497,873 |
| Profit | 542 | 14,094 | 169,127 |
Market Analysis
The market for wire nails is high throughout the year both in rural and urban areas.
Source of Supply of Machinery and Equipments
Equipments and Machinery are imported from Chain and Japan while raw materials are imported from Iran or South Africa
Government Incentives Available
There can be a saving in terms of taxes since there is no VAT charged on raw materials.
