how to start a small scale business in Nigeria

So, you want to start a small business in Nigeria – A company!

Starting a successful business in Nigeria isn’t as difficult as you might think. There are plenty of opportunities out there for people who are willing to work hard. If you’re looking to start a business in Nigeria, then you should consider reading through this article first.

As a practising serial entrepreneur and business owner in Nigeria, I know what it takes to go around operating a small business, especially in a country like Nigeria, where almost everything works anti-clockwise.

Surprisingly, most first-time business owners, traders and intending entrepreneurs have one major setback: not knowing the best ideas to invest in.

Read: Top 500 Small Business Ideas For Anyone That Wants to Make it Big in Entrepreneurship

Your chances of success or failure in business depend on the market need that your product or service is trying to solve; the market target (demographics and economic power of that market segment), and your ability to Forecast Revenue and Position a Company for Growth.

So for an entrepreneur to start a business, he or she must have the ability to identify opportunities where others feel discomfort. It must be stated that though entrepreneurship always seems a better way to financial success, there is no much of a guarantee of success.

Quoting a well-researched article by CompanyDebt,
5 of the Biggest Struggles for Small Businesses in 2020, despite the huge number of small businesses out there in the UK, more than 5.8 million at the last count, life can still be hard.

So, to improve your chances of success as a Nigerian entrepreneur, there are proven steps that successful entrepreneurs have taken, steps we believe would improve your chances in entrepreneurship in Nigeria.

Below is a list of steps any aspiring entrepreneur must take to start a lucrative business. These steps were arrived at from careful research, interviewing more than 50 successful Nigerian entrepreneurs.

  1. Understand yourself
  2. Scout for opportunities
  3. Develop the big idea
  4. Conduct market research
  5. Write a business plan
  6. Get expert feedback on your business plan
  7. Get legal covering – Register your company
  8. Open a bank account
  9. Setup a simple bookkeeping and accounting system
  10. Seek funding for your business
  11. Build a strong team behind your business
  12. Grow the business
  13. Factors that affect how to start a business in Nigeria
  14. Conclusion

Consider reading this high ranking article if you want to learn how to start a drop shipping business for the Nigerian Market and more – Click here.

Unfortunately, Nigerians are not “angels”, it is extremely difficult to ask a Nigerian, most of whom struggle with their individual finances, to give angel funding to a business.

How to guide – A step by step guide towards how to effectively start and run a successful business.

Total Time:

Contents

Understand yourself

The ability to understand yourself as an entrepreneur is one of the very essential attributes entrepreneurs must have to be successful.

Understanding yourself has a lot to do with why you would want to become an entrepreneur and not sit behind a desk working a nine to five job. Read more on understanding entrepreneurs here.

You need to also understand why you intend to start a business: Are you seeking freedom from the stress of having to work for someone and have more control of your time, or are you trying to make more money and believe that you would be more successful as an entrepreneur?

Scout for opportunities

Opportunity discovery or otherwise known as entrepreneurial discovery – has been defined by many thought leaders as the process of systematically scanning for changes in technology, social, demography, the political and regulatory landscape of a people or place to come up with new products, goods, services or service delivery methods.

As an entrepreneur, you must develop the capability to sniff out opportunities where other none trained eyes may see despair and frustrations. Remember, without pain, there are no entrepreneurial opportunities

Develop the big idea

I cannot stress this enough – At the very heart of a business, is the idea it is anchored on. Once you identify opportunities, the next thing is to develop an idea to seize the opportunities discovered.

Fortunately, like opportunity discovery, idea generation also has a process to it. There are lots of documented articles on developing ideas, please take your time to read up on the one I feel suits Nigeria the most here.

Conduct market research

Most entrepreneurs take the leap from having an idea to set up a business without seeing the need to go through the steps highlighted here. A majority even go-ahead to hire experts to write their business plans without first taking the time to conduct market research.

Please do note that it is imperative to carry out market research before going forward to writing your business plan. Failure to conduct market research could be likened to building a hostel in the Sahara desert simply because you heard once you build it they would come.

Yes, you may see a couple of guests from time to time, but a carefully conducted market research would save you from unnecessary surprises.

Luckily, separate market research is needed and should be conducted for different stages of a business life cycle. The need for pre-launch market research differs from market researches needed to grow from one business stage to the other.

Read up on the 5 stages of business growth by HBR here

Write a business plan

I bet that you must have heard the saying: failure to plan is planning to fail. So, we are always planning to do something either consciously or otherwise.

In starting a new business, you must make deliberate efforts at planning and documenting how you want to see your business thrive; you must detail every thought you have given to the process, your goals, marketing, financials, etc.

According to Investopedia, a business plan is a written document that describes in detail how a business—usually a new one—is going to achieve its goals. A business plan lays out a written plan from a marketing, financial and operational viewpoint.

The main usefulness of a business plan to a startup is that it helps you see a helicopter view of your company and how it is positioned.

Major component sections of a business plan, according to Sequoia capitals, are:
Company purpose Start here: define your company in a single declarative
This is harder than it looks. It’s easy to get caught up listing
features instead of communicating your mission.

Problem Definition: Describe the pain of your customer, how this pain is
addressed today and what the shortcomings to current solutions are.

Solution: Explain your eureka moment. Why is your value prop unique and
compelling? Why will it endure? And where does it go from here?

Why now? The best companies almost always have a clear why now? Nature hates a vacuum—so why hasn’t your solution been built before now?

Market potential: Identify your customers and your market. Some of the best companies invent their own markets.

Competition/alternatives: Who are your direct and indirect competitors? Show that you have a plan to win.

Business model: How do you intend to thrive?

Team: Tell the story of your founders and key team members.

Financials: If you have any, please include it.

Vision: If all goes well, what will you have built, in five years?

Get expert feedback on your business plan

It is always a very laudable idea to write your own business plan as an entrepreneur and give it out to a business plan writing service for expert review and possibly a rewrite. What this would avail you is a view of all the processes and stages your business must follow to attain your desired objectives.

No business expert would be able to read your mind and write your plan the way you have envisioned it, and writing it yourself would also keep you abreast of most of the nitty-gritty and challenges you may encounter at different stages of your business.

Get legal covering – Register your company

Yes, register your company. Avoid using a business name to start and run a successful business unless of course that you are testing the waters.

It is good practice to hire a lawyer to help you with the incorporation processes. There are many advantages to registering your business, you may read up on some here – https://utibeetim.com/9-benefits-of-business-registration/

Setup a simple book-keeping, Invoicing, and accounting system

Setup a simple bookkeeping and accounting system

To an untrained eye, Accounting and Bookkeeping may appear similar, they are however different, though they overlap at various functions.

Bookkeeping involves the day-to-day entry of all financial transactions entered into by a small business or company, while Accounting is the high-level interpretation of records, viz classification, analyzing, and reporting of transactions.

In business, especially as a startup, you need a system for tracking all financial transactions and records. Not only is it a requirement for reporting finance, but it is also a means of projecting and reporting the overall position of a company’s performance.

For ease of accounting, I would recommend some products that take care of your accounting from invoicing down to inventory control. Such software include the likes of Sage, Invoice.ng, etc.

It is always in the interest of a startup to hire a professional to set up a proper system that fits into the operations of the company.

Seek funding for your business

Bootstrapping is always the first choice for startup funding for most entrepreneurs.

However, though this typically comes as a natural instinct for most entrepreneurs due to the simple fact that there is always the need to validate their own business ideas before asking someone else for funding, there are many other legitimate sources of funding out here in Nigeria.

Family and friends
Government institutions
Government grants
Local Venture capital firms
International venture capital firms

Build a strong team behind your business

A major error most entrepreneurs make is that because they are very good technically, they assume they are also good at running businesses. Unfortunately, most entrepreneurs going into business do so because they mastered the technical aspects of the business they intend going into.

The author of the E-Myth, Michael E. Gerber writes that most entrepreneurs make a fatal assumption, that is: “if you understand the technical work of a business, you understand a business that does that technical work.”

As a fresh entrepreneur, you would definitely lack a lot of skills with most of those skills essential to the successful running of your business.

Create a team around your weaknesses, try to get people better than you and pay them well. If you cannot afford to build a team immediately, try and start from the most essential skills and gradually build your way up.

Business success is more about the team than the idea. The stronger your team, the more capabilities you have at executive your business tasks and achieving your set goals.

Grow your business

Yes, ideas without proper execution When it comes to starting a business, not all business ideas are worth starting at all. Ensure that you carry out a feasibility study and follow the report generated to know the kind of business – Product or service that best suite your target market.

The best business ideas are unique, practical, needed by the market and easy to scale. In the search for a business idea, start by looking at what problems exist in your environment and try to provide a solution to such a problem and monetize it.

And if your business idea is completely new, think of what your business can offer and focus on how to create something better and cheaper.

You may need to ask questions from people, make your own research and as well seek advice from entrepreneurs.

Understand Factors That Affect Businesses

Businesses succeed faster within a functional ecosystem – this is a known fact. Researchers have carried out several pieces of research with the hope of pinpointing the success sauce that any entrepreneur or business owner can key into and have a fairly great chance at business success.

Fortunately, these researchers all agree on the same outcomes; to be a successful entrepreneur, 3 factors usually come to play. These factors are resources that shape the entire business landscape, regardless of geographical location and the type of business.

Access to markets, the supply of human capital, and access to funding have been identified as the foremost resources cum success factors common with every successful business. It is important that you locate your office or operational base close to either your raw materials, resources or market.

This article takes a look at these factors with a view to understanding how they affect the micro and small business concerns in Nigeria. Understanding how these resources affect the growth of micro and small businesses may help a budding entrepreneur better understand the business landscape and better design her business structures.
 
1. Access To Markets: This is rather a very controversial piece; Nigeria has a population of about 180 million people, with about 30% of these people as prospective markets regardless of the type of business ventured.

It, therefore, means that regardless of the type of business ventured into, the minimum possible market size being shared by all players within that market nation-wide is a minimum of 54 million possible clients – That is huge!

This, therefore, means that Nigeria is a viable market considering the market size and disregarding other determining factors. This finding, therefore, begs for the answer to the question of why Nigerian businesses would rather look to satisfying the foreign markets over their local markets.

2. Human Capital Development: Unfortunately, the educational system of this great country has been neglected by subsequent governments since the late ’80s.

The university system still finds it fashionable to take her under-graduates through seemingly obsolete programs and curricular, making their products unsuitable for market demands in terms of skills.

The backlash to this is that Nigeria is not well equipped to play competitively in the global market due to her skills and know-how deficiencies. Manpower is very critical in controlling product value, viz quality, and pricing due to costs associated with skills and labour.

With the scarcity of manpower, the available few that have sought ways of developing themselves mostly outside the current educational system are mostly absorbed by multinationals, and other high net-worth companies all competing within the same market as the micro and small enterprises. Only a few end up as entrepreneurs.

3. Access To Funding: This is one major issue plaguing Nigerian businesses. Raising capital for business in Nigeria is not an easy task. In several pieces of research conducted, angel investment and venture capital were the two sources of funding selected as most important for companies’ growth.

Unfortunately, Nigerians are not “angels”, it is extremely difficult to ask a Nigerian, most of whom struggle with their individual finances, to give angel funding to a business.

Only a few venture capital firms from outside the country invest in Nigeria, and unfortunately, the prevailing bank lending rate of over 25% makes it near impossible to do business with.

Conclusion

So, to start and run a successful, an entrepreneur must first seek ways to circumnavigate the identified issues; the government and other high-growth companies should help to find ways to increase entrepreneurs’ access to the identified resources.

To make one available without the other will not make any impact; the three factors must be dealt with and managed properly prior to starting a business.

Fortunately, with the establishments of companies like Experts.ng  the shortage of skills can be easily taken care of through the access to verified experts willing to carry out micro-consulting tasks for a fraction of their normal charges outside the experts.ng platform.

With the right skills taken care of, the Nigeria market is resilient enough to deal with possible shock from lack of funding, due to the size of the available market.

Just like Jack Ma’s Alibaba, the Nigerian entrepreneur must, therefore, find ways to create a chain of resources and partners readily available to form the much-needed ecosystem, even if it is virtual.

The best business ideas are unique, practical, needed by the market and easy to scale. In the search for a business idea, start by looking at what problems exist in your environment and try to provide a solution to such a problem and monetize it

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Quick Summary

Prefer the short version? Here is a concise recap of the key ideas in this article.

Understand yourselfScout for opportunitiesDevelop the big ideaConduct market researchWrite a business planGet expert feedback on your business planGet legal covering – Register your companyOpen a bank accountSetup a simple bookkeeping and accounting systemSeek funding for your businessBuild a strong team behind your businessGrow the businessFactors that affect how to start a business in NigeriaConclusion Consider reading this high ranking article if you want to learn how to start a drop shipping business for the Nigerian Market and more - Click here. https://www.youtube.com/watch?v=M0S9_J4cpms Unfortunately, Nigerians are not “angels”, it is extremely difficult to ask a Nigerian, most of whom struggle with.

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