If you’re looking to start a business from scratch, and grow it in Nigeria, then this comprehensive guide is for you.
Generating not just any idea, but a good business idea in Nigeria is a Herculean task. Let alone to start a successful business in Nigeria, which is by far, more difficult.
However, this article was created singly to help you.
But for the meantime, below these lines, you’d find a detailed outline on how to start, and be counted as the owner of one of the successful businesses in Nigeria.
The economic downturn Nigeria experienced in the last couple of years, leaves you at the mercy of starting your own business as an escape route to financial freedom.
Large, little or no capital, the big question remains: how can you start a business in Nigeria?
This article would set out a practical step by step guide on how you should start a business in Nigeria.
- Brainstorm and Find Business Ideas
- Conduct a Market Research
- Build a Business Plan
- Secure Finances and Startup capital
- Register your Business with CAC
- Obtain your Tax Identification Number (TIN)
- Purchase your Business Insurance Policy
- Choose Your Business partners
- Build your Business Team
- Brand Your Business and Advertise
- Manage and Grow Your Business.
1 Brainstorm and Find Business Ideas
The first and perhaps most important step in starting a business in Nigeria is generating a viable business idea. A business idea should describe clearly what product and service you plan to offer to your potential customers.
A good business idea (whatever product or service you want to roll out) must seek to resolve a flaw, it should seek to solve an identified challenge that your potential customers in Nigeria are facing now, or could face in the near future.
The bigger the problem your idea seeks to solve, the higher your chances of getting the needed customers for your business.
Every business arises from someone’s frustration on a service or product and your idea should focus on solving those frustrations.
The higher the number of people facing these challenges and frustrations, the bigger the size of your potential market.
As part of developing a business idea and plan, it is also advisable to conduct a market research before finalizing on what business idea and plan to pursue.
2 Conduct a Market Research
Market research would help you confirm if indeed the problems you are trying to solve is real, the number of people affected, and it would also help you determine how best to deliver the product or service and at what price to offer them.
In your market research, there are certain aspects you have to focus your interest on.
For starters, there is the market size. This explains as how big the market you are looking at is, and what is the potential size of the people who need the product or service you want to roll out?
Also, the market growth is also important. What are the potentials of growth available in the market?
You should ascertain in your research that at what point in the business you intend to take your service to the next level, the market should have that growth and expansion potential.
Market share is another aspect you should be interested in when conducting your market research.
If you eventually roll out that product or service, what share of the market can you have completely to yourself?
A thorough research into these aspects of your market gives you a great level of control of the proposed market.
Market research can be done by researching the Internet, but it is advisable you do it on the ground or in the field research as this helps you validate your results and brings you face to face with the realities on the ground.
The outcome of the research can be used to refine your business idea and write up a simple business plan.
It’s advisable not to go with a voluminous business plan, but a smart one focusing on your idea, the cost of setting up, the business, marketing plan and forecasted revenue, best to keep it simple.
A business plan becomes important if you are seeking to get finance at a very early stage.
3 Build a Business Plan
The point of having a business plan is to communicate to potential customers and investors what your business opportunity is and what the business is all about.
This is very important, even though you intend to start a small business in Nigeria with low capital.
A good business plan rolls out your entire idea in a glance.
Before you start, be clear and convinced in your mind that your idea presents a great business opportunity. It is very likely you would have to write and rewrite your plan many times, but once you start, have in mind that you have to think of ways to make your business plan more attractive.
In creating a business plan, there is always a problem of getting a perfect finishing touch to the plan. A few of these components will help you build a perfect business plan:
- Research everything: your product or service, the market, the competitors, the potential challenges, the strengths, everything. You have to spend as much time here researching on these factors to enable you to build a perfect business plan. You have to spend time knowing all these.
- Be clear and concise: write every part of the business plan as clearly as possible with facts and every information needed. Do not pad up data. Keep it concise and simple.
- Use the executive summary wisely: this is the most critical part of the business plan. You include the goals of the business, objectives, strategies, vision statement, mission statement, description of the whole plan.
- Clearly state the strengths and experience and expertise of your management team. Your business plan has to outline how you intend to handle other vital components of managing the company if you are a one-person management. It’s about clearly defining the expertise available to running the business.
- Ensure your financials add up: Double check every projection and figure. Include your cash flow projection statements. Your business plan should include a design and prediction of your financial expectation for the near future.
4 Secure Finances and Startup Capital
An entrepreneur’s first rule of starting up a business is NEVER START UP A BUSINESS ON A LOAN. Why you should not start up your business on a loan:
- It is a startup and so it is an ‘unproven’ business. You have not put that idea of yours to a test, you have not proven your approach if it will work or not so doing that on a loan, supposing it fails? Hence you have not ‘tasted the waters’ with that business, it is a bad idea to start on a loan.
- At the level of start-up, a loan may seem like an easy money and so may not get the desired commitment a startup requires and you may pack up sooner than later.
You would be testing your ideas to make wealth for another individual (entrepreneur) and if it fails, you may never recover.
Alternatively, to handle the fund issue:
- Start out with the barest minimum: you believe your idea is great, right? It needs work and time to grow it, so start small on your own without having to be in debt (borrowing a loan to start up).
- Roll out on a low budget: For a startup, cut off that baggage you do not need. Do not take up bills you cannot afford but can avoid.
- Seek alternative funding: preferably loved ones or friends or even from your savings.
It is not wrong to start up on an investment or idea that requires low funding to set up. understand that you do not start from the top, you start from the bottom so for a startup entrepreneur a low investment idea would do you no foul.
The first and major source of capital for your business is savings you have made over the years while preparing to start your business. This is an important source of fund that you can pull to start a business.
Another source of fund is contributions or soft loans from members of your family or friends. Do not underestimate this source of funding. If your idea is really great, it can be relatively easy to source funds from your family members to start up.
You may also source funds from banks, especially those favorably disposed to small businesses, despite the high lending rate.
A growing source of capital in Nigeria is Venture Capital. Venture capital companies are organizations who invest in ventures at an early stage of a company. To get venture capital firms to invest or risk their capital into your small business however, certain criteria must be met.
Your company must be driven on the foundation of great ideas and a great management team to get the venture capitalist to take the risk of investing in your company.
There are quite a good number of companies that have gotten these individuals and organization to invest into their startup. Companies like Jobberman raised their capital series from US-based Tiger Global.
Rocket Internet invested in Jumia, Easy Taxi, Kaymu and Jovago.
It is good to test and validate your business model before seeking for a loan from a financial organization.
Bizintelng.com is open to funding start-ups that have validated their business model, so feel free to reach us if you think you have a viable idea.
5 Register Your Business with CAC
Having finalized your business idea, market research, and business plan, the next thing is to register your business.
To do this, you first must consider what business structure to use in running your business.
Options to consider include sole proprietorship, private limited liability company, and public limited liability company.
A sole proprietorship is the simplest form of enterprise. You only need to register the business name, which makes it your enterprise. This will exclude other businesses from trading by the same name.
The owner of the enterprise has unlimited liability to all debts and legal actions, unlike in a limited liability company.
A private limited company is a legal entity owned by shareholders. Personal possession of a shareholder of a private limited company is separate from the company and so owners risk is reduced to only the money they have invested in the company.
This company must be registered with the Corporate Affairs Commission (CAC).
A public limited company is different from a private limited company in that it can sell its shares to the public and may be quoted on the Nigerian Stock Exchange (NSE).
They must have at least N500,000 authorized share capital and the subscribers must take up at least twenty-five percent (25%) of the authorized share capital.
Registering is relatively easier these days as you can complete some of the steps via the Corporate Affairs Commission company registration portal.
There are 3 steps to completing a company registration as follows:
- Public (Name ) search
- Reserve a name
- Pre-incorporation and Post-incorporation.
Registering a business gives you the credibility to do business, and it signals to everyone that you are serious.
6 Obtain a Taxpayer Identification Number (TIN)
A Taxpayer Identification Number (TIN) is an identification number used by the Internal Revenue Service (IRS) in the administration of tax laws.
Small businesses with the TIN enjoy a number of advantages that businesses that don’t have it never enjoy.
Getting a Taxpayer Identification Number (TIN) is quite simple:
- Make a visit to any of the tax offices close to you and obtain relevant application forms.
- Fill in the needed information in the forms.
- Submit completed forms to the tax authority office with a valid proof of identification (International passport, national identity card, driver’s license, voters card).
- Biometric verification would be required from you at the point of submission, and a capture of your passport and fingerprints.
- For corporate bodies, a letter to the tax comptroller is required with all the details of your company’s certificates
It is that simple, after verification of your details, you are issued your taxpayer’s identification number.
For a starting a business in Nigeria, having TIN is beneficial in a number of ways:
- If you’re an entrepreneur wishing to have a banking history for your company and have access to credit, the TIN is needed and would give you an edge in doing this.
- It gives your business identity, security, and credibility.
- Looking into the future, having TIN helps you withhold taxes, thereby generating income for the business
7 Purchase your Business Insurance Policy
In starting a business, having an insurance policy is very important to the survival of the business.
An insurance policy protects you from the unexpected cost of running the business. It serves as the shock-absorber that cushions the effect of the unexpected happening.
These policies serve as a backup plan and that is why it is important you buy into an insurance policy.
Let’s take a look at a few relevant policies to consider in setting up a business in Nigeria:
- Life insurance policy: The life insurance policy protects an individual against death. It is important to sign for a life insurance policy as it gives you some rest of mind that in the eventuality of death, there is something to fall back on for your beneficiaries.
- Property insurance: This is needed for the security of your assets. This is a relevant insurance policy as you start up your business. You will acquire assets, properties and it is wisdom to get them insure and avoid loss.
- Workers Compensation: this policy provides insurance to workers and employees injured on the job. This policy provides wages and medical benefits to those who are injured while working. In exchange for these benefits, the employee loses his rights to sue his employer for any incident in the workplace.
- Health insurance: This is about the first insurance policy to check for as a good health is needed to function in the business properly. When starting a business, consider getting a health insurance policy as it is vital whether or not you have employees.
8 Choose your Business Partners
Starting and running a thriving business in Nigeria requires you have a sound partnership base.
No matter how small or big the business venture you are getting into is, you cannot entirely do it alone. As you set out you need the right partners for your business.
A partnership in business sounds great but not everybody can make a good business partner.
Choosing your business partner needs a careful assessment to avoid conflicts in future.
If you get it wrong at this point, your business may be headed for the rocks.
So to get it right, your due diligence is key. You need to bring someone on board that you agree with on a whole lot of issues.
The following tips would help in your choice for business partners;
- Passion: It is easier to work with someone who is driven by same passion as you are. A person with the same passion as you have would be easily driven to achieving the company’s goals. So look for someone who is ready to throw their weights behind the company.
- Business networks: It is a fundamental error to pick an amateur as a partner when starting your business. It is advisable to look for a partner whose network has wide connections you can tap into to grow your own business. Pick a partner who can provide business solutions for the business.
- Experience: Experience is key in partnership. As you already know, for every business you want to start, it falls into an existing sector. So look out for those experienced hands in the sector you are delving into and form to partnerships for your business. This will help the business come out strong in the difficult days to come.
- Financial power: This could also be a cheap source of funding for your business when you pick a partner that has financial stability and strength. You would have known that no business can run without fiscal power because funds are vital to business.
You would be doing your startup a great disservice if you do not get your partnerships right.
9 Build Your Business Team
One fundamental error most entrepreneurs who set out to start businesses make is to think that they can pursue the goals and dreams of their business alone.
It is wrong to choose to run alone as against building a core business team.
Creating a startup business is a difficult task and one that requires you, the entrepreneur, to function in many roles.
Why not make things a lot easier by building yourself a team?
Remember, two good heads are always better than one!
The question is not whether you need a business team, the real question is how do you build the right team? Because it is a necessity for business success in Nigeria.
The first step to building the right business team is being sincere about the skill set you lack and this is the most important step.
Be honest in assessing yourself. Look at the SWOT analysis of your business with an emphasis on your weaknesses in terms of skills to run the business.
It will be a failure from the onset if you are not sincere about this assessment. Be frank about it.
What skills do you need that you do not have?
The answer to this question will help you pick out the roles you want to fill and the skills you must bring onboard.
Don’t just choose anyone, choose the professionals. If you consider it expensive to hire them to the team (as a startup), how about making them partners?
In that way, you have professionals in the team providing you with skills that you lack.
Secondly, in building your business team, ensure to find people who believe in your idea.
You may get the very best of professionals and experienced hands on board, but do they believe in your idea?.
Without faith and belief in your idea, these team of professionals no matter how good they are won’t have vested interests and once that happens, despite their expertise would bring no added value to the business.
This is a good reason why you have to be clear and concise when building your business plan as pointed out earlier. This would help everyone you are bringing onboard the team at this point to understand the goal and it would be easier to know if they believe in the idea or not because it’s clear enough.
Another step to building a great business team is to maintain clear boundaries with familiars. This may sound simple but most entrepreneurs get it wrong here when building their business team.
Avoid mixing friendships and business!
You must take extra caution having personal friends as part of your core business team.
Their judgments and feedbacks would most times be subjective as they will avoid being real and often times want to stir you up even when it is not real.
They avoid real feedback!
Build a team of professionals and keep the relationship that way so the business does not suffer from such familiarities.
10 Brand Your Business and Advertise
Your business brand should be unique to just you.
Your brand comprises of the experiences your customers and potential customers have with your company.
Having a strong brand is a brand that communicates what your company does, and how it does it establishes credibility in the process.
As you set to start up your business, have in mind to build a brand that lives in everyday interactions with your customers with the marketing content you set out there, the tone of your message, the advert materials you post out there and all.
To build a strong brand, you need to know what your brand stands for. Take note of the attributes that describe what you stand for and what perception about your company you would want to create.
Once you build and launch with a strong brand, it makes the aspect of advertising easier because you would have created lasting impressions in the mind of your potential customers.
For a startup, the following suggestions would help you hit the ground running with a strong brand:
- Be unique: while intending to start that business, what makes your business unique? What is it you do that others in the industry you are entering do not do? What is your story? Capitalize on that different thing about you to wow your potential customers. Do not want to be like another person, maintain that uniqueness about you.
- Have a legible, good name and logo: coming out with a strong brand demands you are easily recognizable. This starts with the name of your business, as this would appear on all your promotional materials and pretty much everywhere. A recognizable name alone is not enough. People want to associate your brand with a logo an example is companies like Toyota, Mercedes and even institutions like Apple, and the rest. Even without the name, seeing the logo you know what company it is. Keep your audience in mind when thinking about a logo to launch with and know that your logo has a certain emotional appeal to your prospective customers.
- Be consistent: many businesses fail immediately after startup because they make the mistake of changing their message. This can throw your potential customers into confusion. Every aspect of your brand should be as good as the product or service you are rolling out and be consistent in presenting your brand.
- Keep your promises: to ensure a strong brand and get your prospective customers to be loyal, keep your promises. Irrespective of whatever marketing or advertising you deploy, your brand dies when you fail to promises made to your customers. Do not promise what you cannot deliver, your brand should be known for keeping its promises.
Once you have defined your brand, you have to get the word out through advertising.
Write down your branding message, what are the key messages you intend to pass across?
Everyone should be aware of your brand attributes.
Also, you have to integrate your brand into every aspect of the business. Have a voice to reflect what you stand for, in your commercials, both online and offline. Be conversational! Most importantly, be true to your brand!
Advertising is the most overlooked aspect of running a business in Nigeria. Trust me on this one. However, you can only succeed as a business if people about that your great product or services.
The only they can do is if you advertise, period. If companies as big as Coca-Cola, YouTube, Google can advertise in Nigeria, then you should.
We strongly recommend online advertising as it is relatively easy and cheap, but the best channel to use depend on your targeted customers’ base.
11 Manage and Grow Your Business
Growth is a prerequisite for business success in today’s market economy.
Now that you are equipped to start that business, have in mind that there is the need for growth.
You need to expand that business from what it is at the moment you are starting now.
There is a need for expansion, seek out new ventures and opportunities, expand your market and like we said in the market study earlier, keep in mind the growth potentials of your market to enable you to take your business to the next level.
The first step to growing your business is keeping your customers satisfied at all times.
You have built a strong brand, made promises to your customers, now you have to keep those promises to grow your business. Satisfying your customers reduces your cost of advertising as they (customers) will bring you referrals thereby growing your business. Always strive to leave your customers with a ‘wow’ feeling.
Satisfying your customers will strengthen your brand and leave the emotional appeal needed for the brand. As you do this, increase your market share in the market your business thrives.
As part of your market study, you would have known the market share that belongs to you. Growing your business entails you strive to increase that market space. Being content with the share you control isn’t good enough to grow that business.
Another step to managing and growing your business is developing in feedback channel with your customers in determining new products and services.
Feel the pulse of your customers. Have their input in the course of action you intend to take next.
This makes them feel special and valued and thereby gives you accurate feedback on what the reality in the market is. By working with them, they help refine your products and services and help you tackle the problems out there.
As an entrepreneur who wants to build one of the fastest businesses in Nigeria, you have to be open to new potentials and pursue every opportunity that makes business sense.
This whole growth dream of your business revolves around your customers.
So you must treat them like they matter.
Even that new customer that is patronizing you for the first time is key to the growth of your business.
Did you find this article useful? Are you considering starting a business in Nigeria?
We would love to support you to implement any aspect of the steps outlined in the article, just drop us a line at Bizintelng.com