Nigeria has witnessed a sudden boom in the number of incubators and accelerators available to support entrepreneurs. With this network of support, the country has become a major hub for African startups. Nigeria also attracts entrepreneurs and investors with its relatively low tax rates and large, multiethnic population with purchasing power. In addition, the country represents Africa’s largest national economy, and it has a low debt-to-GDP ratio. Despite the obvious benefits, many would-be entrepreneurs do not know how to start a new business in Nigeria
For those who are interested in turning a great idea into a thriving business, the following tips can help them get on the road to success.
Write a solid business plan.
The success of virtually every company lies in the amount of planning that goes into its creation. Writing a business plans helps entrepreneurs think through their ideas and create a logical, stepwise process for reaching their goals. The business plan serves as a guide throughout the life of the business. Entrepreneurs can return to it at any time to get back on track or to get a better idea of the next steps to take to expand the business. For many, the plan becomes a source of inspiration and motivation. The startup path is a difficult one, but the ability to refer to a document that provides a comprehensive game plan makes these struggles easier.
Some estimate that more than 85 percent of Nigerian small businesses operate without a business plan. Without this all-important document, business owners won’t know when they have strayed from their original plan, and more importantly, they will have trouble getting back on track. A solid business plan is moreover necessary to receive funding, whether from investors or banks, because it demonstrates that an entrepreneur has more than just a good idea. A solid business plan shows that an entrepreneur has conducted the necessary research to answer major questions about the business’ target market, product or service, operations, and leadership structure.
Get acquainted with the market.
Before launching a business, individuals must have a thorough understanding of the market, meaning both the local market and the broader industry. People should understand where their business fits into the larger picture, including the competition, and they should know what value they offer to customers. Once people get a handle on the market, they must continue to follow it closely because changes can occur quickly and the company that responds the quickest is usually the most successful. It’s also important to remember that changes occur both within local markets and across an industry as a whole.
Market research is an invaluable aspect of the feasibility study, which asks why and how a startup will succeed, given current market conditions. While entrepreneurs should trust their gut in many situations, the truth is that they need more support than that before risking their livelihoods on a new venture. All information upon which decisions are based should be researched and verified. Starting a business blindly sets the venture up for failure.
Secure registration and licensure for the business.
Entrepreneurs should pay close attention to regulations in order to avoid missteps that could potentially cost a great deal of money, or jeopardize their business entirely. Most businesses in Nigeria operate as sole proprietorships, but entrepreneurs should seriously consider also registering a business name with the government’s Corporate Affairs Commission. Other business type options include public or limited liability entities. Other licenses and permits may be necessary depending on the industry and the market as well. Ideally, entrepreneurs should enlist the help of a reputable lawyer to guide them through the process, in order to avoid mistakes and bureaucratic red tape. Lawyers can also help entrepreneurs draft sound business policies and legal terms of operation.
Look for startup capital in a variety of locations.
Anywhere in the world, financing is always the most difficult challenge for entrepreneurs. Nigeria presents its own challenges, but securing funding has become easier in recent years. The right approach to funding largely depends on the type of business than an entrepreneur want to create. Smaller operations may not need much money to get off the ground. In these cases, an entrepreneur may already have enough capital in the bank or may be able to fundraise enough from their friends and family to get the business running. In other cases, more traditional funding routes may be necessary.
Entrepreneurs should exercise caution when approaching a bank for a business loan. If the company starts off with a massive debt on its shoulders, it is that much easier for the business to fail. Business owners should make sure that they are getting a decent deal and that the terms are favorable and flexible enough to accommodate the typical fluctuations in startup revenue streams.
Entrepreneurs should not be afraid to be creative when it comes to funding. Some companies can open their doors without any loans by negotiating a line of credit with their suppliers. Other companies have created strategic partnerships with larger organizations capable of financing them. In this situation, the terms of the agreement should be scrutinized by a lawyer to ensure they are fair. Companies may also want to approach potential customers to secure a contract that guarantees immediate income and precludes the need for loans.