How Much Profit One Can Earn from a Mineral Water Plant ?
This question is often asked to us by many website visitors from time to time. And it is a very important consideration indeed as far as an investor is concerned. I will say, not just Profit Margin, but also the consider the R.O.I. (Return on Investment) . This profit margin is considered in terms of percentage on the total sales or they say “Cost per Bottle“.
The Downside of Profit Margin Generalisation
You will see many people declare “Cost per Bottle” with a Chart. Even we too, some time back used to publish this on our site & articles. But over the time, have come to know the downside of that. What is that ?
The basis on which the Profit Margin is calculated should be a fixed set of Product Mix which you have decided to produce and their quantities with a stipulated time period. For Example, let’s compare 2 entrepreneurs Ramesh & Suresh head to head :-
Product Mix by 2 Entrepreneurs
| 1 Ltr Bottles (Case of 12 Bottles) | 20 Ltr Jar | Daily Total Sale | Daily Total Sales | |
|---|---|---|---|---|
| Ramesh | 800 per Day @ Rs.80 to Distributor | 200 per Day @ Rs. 40 to distributor | Rs. 64,000/- + Rs. 8000/- | Rs. 72,000/- |
| Suresh | 500 per day @Rs.90 to Distributor | 500 per day @ Rs. 30 to distributor | Rs. 45,000/- + Rs. 15,000/- | Rs. 60,000/- |
From the table above, you will notice a few things :-
- To calculate the exact margin of profit, you require further data like how much sale made direct, how much to distributor (their rates also vary)
- The actual profit made by selling 1 ltr bottles by both of them is different due to different selling rates.
- The Cost for Ramesh and Suresh might be totally different. So the profit as well.
- The whole data, if collected should bear certain time period , say 6 months, 1 year etc.
- From season to season, the rates differ. Not to the direct customer, but to the distributor. Again the profit money will vary.
(You can read an article where we have discussed whether a Mineral Water Business is really profitable.)
Mineral Water Plant Profitability Costing
Watch the Video and you will understand how we train you on calculating your detailed Plant Cost Calculations. Even existing Plant Owners also attend this Training which actually brushes up their knowledge on this aspect and helps them further on choosing right products in future as well !
5 Steps To Arrive At Profit Margin :-
1) Know Your Business Model
This is the starting point to all. Whether you are going to Produce your own brand, or just to Distribute other’s , Going for a Franchise Model or getting it done from other manufacturer on a Tri Party Agreement. What is your Driving Factor, will decide your Business Model.
# During our Live Training, we conduct a Session in Which We Discuss Various Models and their features in details.
2)Decide the Market
This is also the primary consideration. Market to Market the Selling rates differ, so the Profits as well. The Costs also vary. This too affects the Profit Margin.
3)Define Your Product Mix
This is the variants you decide to introduce into the market, with quantities defined clearly. A Financial Statement can only be drawn on exact figures. Begin with some hypothetical figures, even if you haven’t yet decided this. During our Live Training, we do guide you on how you can do a Local Market Survey Initially.
4)Define Your Costs
Mineral Water Plant Cost is not just the prices of machines put together. It’s normally a totally wrong consideration by entrepreneurs before they are willing to setup their plants. We have explained in details on the following 2 posts very clearly about the subject. Look at them :-
- Mineral Water Plant Cost :- Why one needs to calculate this himself
- Mineral Water Cost Components :- What Are They ?
5) Create Time-Bound Financial Projections
As we have seen from the above table; you will arrive at the profit margin percentage only over a period of time. Typically 3 years. Once you are ready with the above 4 steps, you should approach a financial advisor to get the Financial Projections done in a proper way. During our Live Training, we conduct a special session in which we compare 3 popular Models head to head and arrive at the most important consideration :- the R.O.I. which we discussed at the very beginning of this article.
Conclusion
The profit margin calculation is not as easy at it seems. So, do take conscious decision before setting up a mineral water plant. After understanding that almost 50% mineral water units close down every year; we have concluded that they do not close down due to competition; but due to wrong calculation basis, and taking steps in a wrong direction. If possible, attend the next Mineral Water Plant Training.
Watch the Video Below which covers a brief history of the Mineral Water Plant Trainings we have been conducting since 2015.