Starting a new business in Nigeria may not be difficult after all, but making it successful is rather an unpredictable scenario because of many factors. More than half of businesses started in Nigeria close down before the business celebrates its second anniversary. But in this article you will learn how to start a business in Nigeria, in a way that is sustainable.
Why businesses fail in Nigeria
The factors that give rise to large business failures for starters in Nigeria can be attributed to:
1. Lack of proper research and planning
There is lack of proper research and planning, inability to undertake feasibility studies and report at the outset.
2. Economic policies and economy in general
The economic policies put in place by the Nigerian government, workers don’t earn enough to boost business activity.
3. Poor economic infrastructure
Lack of economic infrastructure, e.g good roads network, electricity, water supply.
4. Lack of business knowledge by prospective entrepreneurs
Prospective entrepreneurs lack business knowledge in the area of production, distribution and finance.
5. Insufficient resources
Lack of resources, such as capital, engaging experts, shortage of raw materials.
However, all hope is not lost since genuine entrepreneurs including foreigners still go into business in Nigeria and achieve a measure of success. How do they do it? In this ebook, you will be shown how – what you need to do and know before you venture into business in Nigeria.
Before we continue, Take a look at our business ideas playlist
Before staring a business
First things first, you need to have the passion to go into business and have knowledge in any of the four areas of business: production, distribution, accounting or promotion. More importantly, as a prospective entrepreneur, you must have some attributes that will put you in good stead to carry on your business. The attributes are:
- You must have the ability to identify business opportunities
- You must be able to take risks
- You must have the ability to mobilise and organise the resources necessary to produce goods and services.
- You must have the innovative capacity (starting something new)
With these aforementioned in place, you are now ready to start your business in Nigeria. Let’s reveal how to start a business in Nigeria the right way.
Also Read: How To Start A Successful Online Business
How to start a business in Nigeria
Follow these steps to start a business in Nigeria:
1. Feasibility studies and report.
Feasibility study and report contains a demand forecast – the size of the market, the volume of sales required to break-even.
a marketing plan – how to market the product/service and realise the sales target and profit.
2. Business plan
- Table of contents – This enables the reader to quickly find the exact information as contained in the plan.
- Executive Summary – These summaries the entire business plan and is expected to cover the following major issues.
- The company background – very brief
- The product/service offered
- The potential market – which industry is the business in.
- Company’s description – This describes the company’s background
- The company’s product – is it protected by trademark, copyright or patent right
- Product viability – what is the likely demand for the potential product.
- Market potential – is it an existing market, having other competitors or a new market that has to be developed.
- How much is expected to be invested?
- Marketing – This informs the stakeholders how the entrepreneur wants to capture its potential market segments in terms of: packaging, pricing, distribute and promote the new business, etc
- Advertising policies and strategies- which promotion tools to be employed
- Management ownership structure. This section introduces the people holding or likely to hold leadership responsibilities, especially if it expected the business is going to be a private or public limited liability company.
- Competition – This section analyses competitors’ activities and focuses on their strengths and weaknesses.
- Financial statements and projections – This aspect deals on projected cash flows, financial forecasts, balance sheet. The initial capital, how to be raised.
If you need guidance on writing a business plan, this guide, how to write a business plan will be useful.
Also Read: How to market a business in Nigeria
3. Register your business
The business must be formally registered to operate in Nigeria. The government agency responsible for business registration is the Corporate (Affairs Commission (CAC) There are four categories of businesses that can be registered:
- Sole proprietorship – this calls the owners name or name associated with his name. it is called business name registration. The new business will pay to the CAC an amount for the business name registration, accompanies with owners three years tax certificates.
- Partnership – This is a situation where two or more persons do business in common intending to share profit or loss. Business registration fee is paid with the tax certificates of the owners
- Private limited liability company (LTD) – in this kind of business, a minimum of two people sets up a business with the liability of their shares in the business limited to the amount paid and unpaid. The fee payable to the CAC is in relationship with the share capital
- Public limited liability company (PLC) Here the minimum number of owners is seven without maximum. There is a lengthy legal requirement for incorporating a PLC, including of submission of five-year audited account.
Registering your business in Nigeria is not difficult. Follow this guide: Hоw tо do your business registration in Nigeria
4. Tax registration with Federal Inland Revenue Service (FIRS)
You are required by law to register your business for tax purposes with the Federal Inland Revenue Service. The FIRS is responsible for collecting company income tax, Value Added Tax and Withholding Tax
Also Read: Top 4 Funding Resources For Small Business
5. Obtain permits required to operate your business
It is a requirement that in some industries, such as pharmaceutical, beverages, publishing, etc, that you need registration with their respective association to operate. It is important to find out the relevant association you potentially belong to. The consequences of not acquiring the necessary business permits may land you in trouble with the relevant association, which may lead to sealing off your business premises.
6. Acquire an office space
Office space requires a lot of capital investment and so caution must be exercised when searching for office space. Moreover, the nature and size of the business should be the determining factor.
Don’t forget that some business can be anywhere, including your home, such as internet-based business until when such a time your bossiness expands to attract extra hands; when you look for an office space.
Moreover, some businesses require a factory or warehouse that should be close to the market. All these you must take into consideration before you rent or lease office space.
Also Read: How To Start A Business With No Money
7. Put in place a business website
The vast majority of businesses today are online and have a web presence is a requisite requirement for your business. This makes it easy for potential business visitors to locate your business
You should create an interactive website that will make your potential visitors interact with your business. To be able to create a good website, you must engage the services of a professional web designer. One of the features of a good website is the ability of the search engine to include your company when the proper keyword relating to your business has been included in the search. That is one way of increasing traffic to your site. You should read 4 Reasons Your Business Needs A Website
If you need helps setting up a website, our team can do it for you at a fee.
8. Implement the marketing strategies
This is the stage where you put into action your marketing programmes, in terms of;
- Choosing your market – you should choose a market where there is adequate demand, or at least you can locally source for raw-materials if you are into production, you can also source for experts to produce the products and repair the machines when it becomes necessary.
- Developing your product – you should develop your new product and allow the new product pass through the product development sequence of: screening your new product idea, testing the concept, doing business analysis and then making the new product in large quantity when the market has accepted the product.
- Packaging – the new product must be properly packaged to attract customers
- Pricing – the appropriate price must be fixed for a new product, either beginning with a low or high price and over time arrive at the right price.
- Branding – here you give your new product an identity to differentiate it from competitors product and begin to build an image for your new product.
- Promoting – your new business and product must be promoted in terms of advertising, sales promotion, personal selling and the use of social and internet media, otherwise, nobody will know about its existence.
- Testing your market with the new product – before you go ahead to produce in large quantity, you should find out from your chosen market whether the new product is acceptable or not. Test your product with a sample of the stakeholders to find out how they see your product in terms of quality, style, performance, aesthetes, etc.
- Commercially launch the product. – if the test market proves that the market accepts the product, go ahead and commercially launch it.
9. Evaluate and control your business
You must have a fixed time for monitoring the progress or lack of progress so that you find out how the new business is doing in the market place, modify or reverse your plans as necessary if the planned objectives are not met..