Do you know how business works in Nigeria? It’s important you understand the basics of doing business in Nigeria before starting one. You should not venture into a business if you are not grounded on the simple knowledge of how business works in Nigeria.
The failures associated with businesses in Nigeria can be avoided if only the starters understood the terrain they ventured into. Business, like every other thing that we do, follows a principle and a concept. They guide you into knowing what works in Nigeria, what to do, how to do it and to whom you should do it for.
Business in Nigeria is more like construction work. When you are building a house, you are not guessing if it would eventually become a house. You surely know it would be a house. Those reasons that made you believe that you are building a house, and that you don’t expect it to become something else than a house, can be applied in the same way to building a business.
That implies, if you follow how business works in Nigeria, it doesn’t matter what business you are building, it will surely become successful, if not very successful doing business in Nigeria.
The Principles Of Business
Also, you need to go by the principles of business. There are no mysteries in how business works in Nigeria than just doing business the very way it should be done but with some unfactored twist. These principles lays out what you need to put in place or in consideration when starting or running a business in Nigeria.
Business principles provides us with ideas of what makes business work. That means, you are to be guided by the principles of business if you hope to make your business succeed. These guiding principles of business work for every type of business in Nigeria.
According to American National University, there are 8 fundamental principles of business you need to Know if you must succeed in business anywhere in the world. These principles would work for any kind of business, wether small, medium or large scale business. If you follow these principles correctly, you can beat your chest and say, I know what I’m doing Works!
Well, for Nigeria, there’s a little tweak to it. Everything about how business works would work but without including the Nigerian factor to the equation, it may never work.
Here are the principles for you:
- Make quality products for Nigerians
- Know your industry and competitors
- Protect your intellectual properties
- Pick a great Nigerian team
- Organize your structure and design properly
- Use cash flow wisely against corruption
- Understand the accounting and finance
- Take care of your customers
In a simple way, the principles can be better understood as product, market and competition, marketing, workers, structure and design, money, report and customers.
All these are what make business to work in Nigeria. If you carefully learn about each one, how they work in the overall plan of the business, and how to utilize them collectively to achieve your set objective, you would have known how business works in the Nigerian context more than anybody else.
Understand How Business Works
The idea of business is derived from a product or service aimed at target consumers with a promise of value, in exchange for monetary compensation. However, the concept may involve a new product or just a novel approach to marketing or delivering an existing product to a target Nigerian audience.
This idea can be better expressed as follows:
- Service or product
- Target demographic
- Unique selling proposition (USP)
So, for the concept to work it must include all the three basic information of a business idea. That’s even the first steps of the principles of business.
What Is Business in Nigeria?
Business in Nigeria is better defined as a regular occupation, a trade, or a profession that a person engages in, as a commercial activity in Nigeria. If you have any occupation that you engage as a commercial activity you are already involved in a business in Nigeria.
What makes a business is the idea of service or product that is offered in exchange for value. A business in Nigeria is an organization where people work together to make or sell products or services. The word “business” is derived from the word “busy”, and that means doing things. This business or doing things should earn you a profit for the products and services it offers to Nigerians.
However, to have a business in Nigeria it should have these characteristics:
- It should have individuals working together
- It must satisfy a Nigerian need
- It must seek to make a profit
Where a business in Nigeria is not designed to make profit, it’s categorized under another label; non-profit organization or not for profit organization. These kind of business meets the two characteristics of a business but willingly reversed the third one, which is to make profit.
Types Of Businesses
There are three major types of businesses in Nigeria one can engage in that represents a commercial activity.
- Service business
- Merchandising business
- Manufacturing business
It’s a kind of business that one offers services that are intangible. The products have no physical form or shape. They simply provide some form of professional services, like skills, expertise, advice, etcetera. Some examples include, salons, repair shops, banks, hospitals, law firms, etcetera.
This kind of business is also known as “buy and sell” business. It’s a kind of business that deals on physical products, but primarily as in a trade transaction. It involves buying products at wholesale price and offering the same to the consumers at retail prices. Some examples include, resellers, distributors, eCommerce stores, convenience stores, grocery stores, etcetera.
A Manufacturing Business transforms raw materials or other existing goods into new products. The primary role is transforming already existing products into better products for the consumers.
Note: Some Nigerian businesses may fall into more than one classification. Some may be engaged in manufacturing and also merchandising of the products. In that case, such business could be classified into multiple types of business. That makes them hybrid business.
A very good example is a restaurant, being a food ‘manufacturing outfit’, it also engages in the direct sale of the food to Nigerian consumers.
Starting A Business In Nigeria
Starting a business in Nigeria is not entirely different from building a house. Once you decide on the kind of house you want to build, which is like doing your research, wisdom demands that you design a building plan. A building plan is akin to business plan. It’s how to put into imagery what you want to build, and in the case of a building how you want to build it.
Now, with the building plan you can start the foundation. This stage is where you dig for solid ground and you lay strong iron with concrete mixture. You can relate this with the principles of business. Without a solid foundation your business might collapse if you begin to add the building blocks, as it gets heavier with each blocks added.
Moreover, you need to take care of all the legal requirements when starting a business in Nigeria, which include:
- Register your business Name with CAC
- Apply for FIRS Tax ID Number
- Obtain necessary business permits and licenses
- Protect your business with insurance policy
- Open a business bank account
- Consult with professionals
3 Forms of Business Ownership In Nigeria
When you talk about forms of business, it refers mostly to ownership structure than the organizational structure. You can form a business in any of these 3 ownership structures. These are the basic forms of business ownership:
- Sole proprietorship
Nigerian Sole Proprietorship
This kind of business is registered as owned by only one person in Nigeria. It’s the least formation of a business to form in Nigeria, also with the least ownership structure. It’s liability is unlimited, and it’s faced by the owner, but it’s limited to the personal assets if the business cannot pay.
Nigerian Business Partnership
This type of business is owned by more than one person in Nigeria, with contributed resources in form of equity. They also divide the profits from the business among each of the partners. However, there are 2 types of business partnership; a general partnership and limited partnership. While general partnership attracts unlimited liability, which puts their personal assets at risk, the limited partnership enjoys protection against their personal assets.
A Nigerian corporation is a legal business entity that’s separate from its owners. The ownership of a corporation is represented by shares of stock. However, the board of directors, which the stockholders elect, are mandated with control of the corporation activities.
What’s A Business Plan?
Wikipedia describes a business plan as a formal written document containing business goals, the methods on how these goals can be attained, and the time frame within which these goals need to be achieved.
That makes a business plan an essential part of starting any business. However, it’s necessary while writing a business plan, for you to understand the main purpose of having one. Here are just a few:
- It helps to maintaining business focus
- It helps to securing outside financing
- It can help in fueling ambitions and mapping growth
Your business plan serves as your company’s resume to investors, partners, vendors and employees, in explaining your objectives. It’s effective in defining your goals and explaining the steps needed to be taken to reach them. It’s also in your business plan that you can detail out your purpose, the company’s vision, as well as your means of operation.
Types Of Financing Business
In business you need money. The power of money in business cannot be over emphasized. Money is the life of every business. Without money, your product cannot spread better than the competition.
Finding money for business is one of fundamental principles of business. That’s how important it is for your business. It’s not an optional decision to find money for your business, it’s how business works. Your money is the oxygen that keeps the business alive.
There are two main types of financing business, and they are:
- Debt finance
- Equity finance.
Debt financing deals with funds borrowed from a lender that is repaid with interest, while equity financing is about capital exchanged for part ownership or for the shares of the company.
The Purpose Of Business
One thing is clear about business, it must have a purpose. A business purpose is the reason the business is formed. This reason is distinguished from the company vision or mission. Business purpose can be industry specific or general, and includes support services and future business activities.
Therefore, the purpose of a business can be better described as a value proposition offered through products or services to customers, who in return pay for the value with cash or its equivalent. In order words, the purpose of business activity is the provision of goods and services that customers want, at a price they are also willing to pay.
Interestingly, you have to define your own purpose of starting a business. Your purpose should be based on your personal goals, starting from whether the business is for profit or non profit organization. You can start from these three generally accepted reasons, and they are:
- To make money
- To gain satisfaction from working in a field of interest
- To benefit others
Nigerian Business Models
A Nigerian business model is simply Nigerian business way of doing things. It describes the rationale behind how your business creates value, delivers value and captures value, in the context of economic, social or cultural values. This model forms part of your business strategy.
However, here are simple steps you can follow to define a strong Nigerian business model.
- Identify your specific audience
- Build business processes
- Identify key business resources
- Create a strong value proposition.
- Partner with key business partners
- Create a demand generation strategy
Also, Nigerian business models are broadly divided into four basic types that any class of business falls within. They are:
The Nigerian Factor
if you are doing business in Nigeria and haven’t heard about the nIgerian factor, you are dealing with foreigners and not Nigerians. There’s no how business works in Nigeria without the Nigerian factor.
Sometimes, you can’t even pinpoint exactly what this factors are but they are largely visible in every transaction you do in Nigerian business. The problem is that you won’t be told what you have to do, but at every turn you make you would hear it, but no one wants to admit that’s what they are saying.
The best way to describe the Nigerian factor is that thing the intentionally slows down business processes until a bribe is given to speed up the process. These factors exist everywhere, both in the public and private sectors. Don’t misunderstand it, that’s actually how business works in Nigeria, different from how it works elsewhere.
You can not plan without factoring into it this Nigerian factor. So, if it would have cost you N10 million to get something done, you should probably plan for N12 million, because of the Nigerian factor.
There’s so much you need to know about busines in Nigeria. This entire article is just to help you get on with the basics. How much success you can achieve in Nigeria would depend on this three simple factors, which are, wisdom, knowledge and understanding. You may not know how much those three words could mean to your business until you are in Nigeria doing business.
Finally, you also need to understand a simple fact. There’s a huge difference between being a business person and being an entrepreneur who knows how business works in Nigeria. A lot of times these qualities are used interchangeably, but they are nit really the same. A business person merely flips items for marginal profit, while an entrepreneur creates things for maximum profit.