The big dream of most Entrepreneurs is to have their own business one day; let’s discuss how to start a business in Nigeria — Africa’s largest economy.
Having your own business is nice because you have the opportunity to do things the way you want it without having your boss monitoring every movement you make. But, no matter how cool that sounds, starting a profitable business requires demanding steps that only a few people can muster the grit and determination to see through.
Business is work related to the production, purchasing, and sales of goods or services, according to Collins dictionary. Becoming a business owner or an entrepreneur as no limits.
You don’t need a large amount of money in your bank account or a degree to run your own business. However, what you need is a good business idea, a concrete execution plan, and a passion to wake up and crunch every morning.
In this post, we will explain how to start a business in Nigeria, highlighting the key steps and processes that you need to have a profitable business in this country.
This comprehensive guide will take a look at the following steps:
- Assess yourself
- Find a business idea/opportunity
- Develop the big idea
- Conduct market research
- Create a business plan
- Get feedback on your business plan from experts
- Business Registration
- Get corporate finance
- Open a bank account
- Set up a bookkeeping and accounting system
- Assemble Your Team
- Grow Your Business
The ability to understand yourself as an entrepreneur is one of the very essential qualities that entrepreneurs must have in order to be successful.
Understanding yourself has a lot to do with why you want to become an entrepreneur and not sit behind a desk working a nine to five job.
You also need to understand why you plan to start a business: do you want to free yourself from the stress of working for someone and have more control over your time, or try to make more money and believe that you would be more successful as an entrepreneur?
You also need to ask yourself these questions.
- Do I have the skills to run this business?
- Do I have what it takes to lead or manage a team?
- Do I have the ability to raise capital for the business?
- Do I have the motivation and passion to make this business a success?
If the majority of your answers to the above questions are “YES”, then you are ready to start your own business.
Find a business idea/opportunity
Not all business ideas are worth starting when it comes to starting a business. The unique, practical, needed by the market and easy to scale are the best business ideas.
Opportunity discovery — also known as entrepreneurial discovery — has been defined by many thought leaders as the process of systematically looking for changes in technology, social, demography, the political and regulator landscape of people or place to find new products, develop goods, services or methods of service delivery.
When looking for a business idea, start by examining problems in your environment and try to find a solution to such a problem and monetize it.
And if your business idea is completely new, think about what your business idea can offer and focus on how you can do something better and cheaper.
You may need to ask questions from people, do your own research, and also seek advice from entrepreneurs.
Develop the big idea
We cannot emphasize this enough if you want to start a business in Nigeria: At the very heart of a business is the idea on which it is based.
Once you have identified opportunities/ideas, the next step is to develop an idea to take advantage of the opportunities discovered.
Fortunately, generating ideas like discovering opportunities also has a process. There are many documented articles on developing ideas, please take the time to read them
Conduct market research
Most entrepreneurs make the leap from the idea of starting a business without seeing the need to do market research.
A majority even gave the go-ahead to hire experts who write their business plans without taking the time to conduct market research.
Before starting a business, make sure you have a good understanding of such businesses.
Try doing market research by asking your potential customers some questions about the problem you want to solve for them.
Please note that prior to creating your business plan, it is essential to conduct market research.
Also research on existing direct and indirect competitions that currently exist on the market.
Try to learn about their products and services and how you think your company can stand out among them.
Separate market research is required and should be done for different phases of a business life cycle. The need for pre-launch market research differs from market research required to grow from one business phase to another.
It is one thing to do market research when you want to start a business, it’s another thing to use the feedback you get from the research properly.
Essentially, it is about helping you learn more about the company that you want to start, and it helps you form a strong foundation for the business.
You wouldn’t want to start a business today and it will start to crumble tomorrow, or instead of seeing your business grow, it will start to fall. So you need to learn how to start a business.
Create a business plan
When you start a new business, you must make a conscious effort to plan and document how your business should flourish; you need to detail every thought you have about the process, your goals, marketing, finances, etc.
According to Wikipedia, A business plan is a formal explanation of the business goals, the reasons why they are achievable, and plans to achieve those goals.
It can also include background information about the organization or team trying to achieve these goals.
Every business, large or small, needs a plan for that business. When starting a business, a business plan helps you stay focused and organized.
Remember that organizational skills are part of the skills of a successful entrepreneur.
So when you write your business plan, look at some business plan samples online that can serve as a guide.
The main benefit of a business plan for a start-up is that it helps you get a helicopter view of your company and its positioning.
According to Sequoia capitals, the main component sections of a business plan are:
Company purpose: define your company in a single explanatory. It is more difficult than it looks. It’s easy to get caught up in traits rather than communicating your mission.
Problem Description: Describe the pain of your customer, how this pain is treated today and the deficits of the current solutions are.
Solution: Explain your eureka moment. Why is your value proposition unique and convincing? Why will it last? And how does it continue? Why now? Nature hates a vacuum—so why hasn’t your solution been built earlier?
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?
Financials: If you have any, please add them.
Vision: If everything goes well, what will you have built up in five years?
Get Feedback on Your Business Plan from Experts
It is always a very commendable idea as an entrepreneur to write your own business plan and hand it over to a business plan writing service for expert review and possible revision. What this would bring is an overview of all the processes and steps that your business must go through to achieve the desired objectives.
No business expert would be able to read your mind and write your plan as you envisioned it, and if you wrote it yourself you would be familiar with most of the details and challenges you may face at different phases of your business.
Registering a business is of paramount importance to anyone who wants to start a business in Nigeria. You should register your business with the government of your country or with the company registration office in your country.
In Nigerian, the company/ business can register with Cooperate Affairs Commission (CAC) at the federal level and then with the Chamber of Commerce at the state level.
Registering your business with the required commission gives your business validity and authenticity.
Get corporate finance
Starting a business requires not only your skills and dedication but also your money. Every business needs a startup capital that will be used in the financing of the daily operation of the business.
In the event that you do not have the capital required to start the business, there are several ways (bank loans, grants, equity investments etc.) to raise funds for a new business.
- Family and friends
- State institutions
- Government grants
- Local Venture capital firms
- International venture capital firms
Most businesses die from a lack of funds. So make sure you have enough capital to bridge the financial downtime.
Open a bank account
Opening a corporate bank account gives your company image credibility, gives investors confidence in your openness, and helps you to keep your financial records clean and separate from your personal account.
Set up a bookkeeping and accounting system
To an untrained eye, Accounting and Bookkeeping may seem similar, but they are different, even if they overlap in different functions.
Bookkeeping includes a daily record of all financial transactions made by a small business or company, while Accounting is the interpretation of records at the highest level, i.e. the classification, analysis, and reporting of transactions.
Every startup requires a system to track all financial transactions and records. It is not only a requirement for financial reporting but also a means of projecting and reporting on the overall position of a company’s performance.
It is always in the interest of a start-up to ask a specialist to set up a suitable system that fits into the company’s operations.
Assemble Your Team
A big mistake that most entrepreneurs make is that they assume that because they are technically very good, they are also good at running businesses. Unfortunately, most entrepreneurs who start a business do this because they know the technical aspects of the business they want to start.
If you plan to run your business on your own, you may not need to start building a team. But if you definitely want to hire people, you need to build a strong team.
As a new entrepreneur, you would surely lack many skills, most of which are essential for successfully running your business.
Put a team together around your weaknesses, try to find people who are better than you, and pay them well. If you can’t afford to build a team right away, try starting with the most important skills and gradually work your way up.
You build a strong team for your company because these people are meant to help your business grow, but if the team isn’t well built, they can also help bring your business down. So build it to grow and succeed?
A successful business is more about the team than the idea. The stronger your team is, the more opportunities you have to fulfill your business tasks and achieving your goals.
Grow Your Business
Growth is vital for a company’s survival. Any business that doesn’t grow surely dies, no matter how long it takes. You make sure you do everything possible to ensure the steady growth of your business.
The most important measure of a company’s growth is steady positive cash flow. The more cash flow a business generates, the more opportunities it has to grow and expand. So make sure you have the right tools in place to keep track of your cash flow from day one.
Make sure you conduct a feasibility study and follow the report that is created to know which of business – product or service – best suits your target market.
The best business ideas are unique, practical, needed by the market, and easy to scale. When looking for a business idea, start by examining problems in your environment and try to a solution to such a problem and monetize it.
And if your business idea is completely new, think about what your business can offer and focus on how you can do something better and cheaper.
You may need to ask questions from people, do your own research, and seek advice from entrepreneurs.
Understand Factors That Affect Businesses in Nigeria
Businesses have quick success in a functioning ecosystem – this is a known fact. Researchers have done lots of research in the hope of finding the success sauce that any entrepreneur or business owner can enter that has a pretty good chance of doing business successfully.
Fortunately, this research all agree on the same results; in order to be a successful entrepreneur, 3 factors usually play a role.
These factors are resources that shape the entire corporate landscape, regardless of geographical location and the type of business.
- Access to markets,
- The supply of human capital, and
- Access to finance
Were identified as the most important resources and success factors that are common to every successful business. It is important that you locate your office or operational base near either your raw materials, resources, or your market.
Understanding how these resources affect the growth of micro and small businesses can help a budding entrepreneur better understand the business landscape and better design her business structures.
Access to Markets: This is a very controversial issue; Nigeria has a population of about 180 million people, of which around 30% are potential markets regardless of the type of business.
So it means that regardless of the type of business ventured into, the smallest possible market size that is shared across the country by all players in this market is a minimum of 54 million potential customers.
So this means that Nigeria is a viable market if you take into account the size of the market and disregard other factors.
This finding, therefore, suggests the answer to the question of why Nigerian businesses prefer to satisfy the foreign markets rather than their local markets.
Development of Human Capital: Unfortunately, the education system of this large country has been neglected by subsequent governments since the late 1980s.
The university system still believes it is modern to guide its students through seemingly outdated programs and curricular, which means that the products do not meet market requirements in terms of their skills.
The backlash is that Nigeria is not well equipped to play competitively in the global market due to its skills and know-how.
The labor force is critical due to their skills and labor cost involved in the control of product value i.e. the quality and pricing.
Given the shortage of workers, the few available few who have been looking for ways to develop mostly outside of the current education system are mostly absorbed by multinationals and other high-equity firms that all compete in the same market as the micro and small businesses.
Few end up as entrepreneurs.
Access to Finance: This is a major problem that plagues Nigerian businesses. Raising capital for business is not an easy task in Nigeria. In several research projects, angel investments and venture capital were selected as the two main sources of finance for corporate growth.
Few foreign venture capital firms invest in Nigeria, and unfortunately, the prevailing bank lending rate of over 25% makes it almost impossible to do business with Nigeria.
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So in order to start a business in Nigeria and make it successful, an entrepreneur must first look for ways to work around the identified problems; the government and other high-growth companies should help to find ways to make it easier for entrepreneurs to access to the identified resources.
Providing one without the other will have no effect. The three factors must be properly handled and managed before starting a business. We hope you’ve learnt a couple of valuable tips in this write-up on how to start a business in Nigeria.