The dream of most entrepreneurs is to start profitable businesses that give them fulfilment and helps them earn a respectable income. Starting a profitable business is valuable because it helps the entrepreneur independently function in a value-driven environment while earning income. But, the truth is that starting a business in Nigeria is not all roses and sunshine; you may encounter a lot of difficulties when trying to start a business in Nigeria. Due to the effect of years of operating a loose system, entrepreneurs often find it quite cumbersome to start a business in Nigeria.
This guide is designed to help entrepreneurs and business people navigate the often complicated process of starting a business in Nigeria.
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Steps To Take When Setting Up A New Business In Nigeria
See Also: Small Business Startup Checklist
Choose A Business Idea
To start a profitable business in Nigeria, you need to choose a business idea that has the potential to do well. Typically, when choosing a business idea, entrepreneurs study the market, find a problem, then build a solution to it. These solutions may be in the form of products or services.
Here are some proven steps to choosing a great business idea:
Evaluate Your Skills, Experience And Passion
When looking to choose a business idea, it is important that you start with evaluating yourself. What are your strengths? Do you have a passion that can be turned into a strong business idea? Are you experienced in some fields that will make for a great business idea? Then you should consider them as business ideas.
Take A Look At Your Environment
Another way to generate amazing business ideas is by taking a look at your environment. Are there problems in your community that need solutions? Will people pay you for providing solutions to the problems that abound in your environment? If your answer to those questions is “yes”, then you should consider starting a business that caters to that problem.
Tap Into Your Own Experiences
If you have previous work experience, you can tap into your experiences and create an amazing business. For example, if you have worked severally as a digital marketing executive, it is sensible for you to consider starting a digital marketing agency. The idea is to tap into your personal and work experiences, create something missing in the market, or do some things differently.
Generate Some Ideas
Now that you understand how to generate business ideas, you have to actually generate some. Start by writing down a list of the business ideas that you are interested in. Writing these ideas down helps move them from a thought to a possibility. Ask people around you for their ideas, consult family and friends, research about ideas to start- just make sure that you write all of them down.
Select The Best Idea
After writing down your business ideas, you need to select the best idea to run with. Prune down your ideas by considering their viability, profitability, and other yardsticks such as your passion for it, your knowledge about the industry, and the profitability forecast. When you run your ideas through those lenses, you should be able to select the best idea.
Research Your Idea
Now that you have selected the best business idea that you want to run with, the next step is to further research your business and test for its market viability. Additionally, researching your business idea will help you know where to innovate in the market and stand out from the competition.
Test Your Idea
Finally, to make sure that you are choosing the right business idea in Nigeria, you have to actually test the idea. Step out of the building and talk to your prospective customers. Find out if they will be willing to pay for your solution. Do you have mentors, business associates, or a network of entrepreneurs whom you can bounce ideas off of? Test your business idea with them to see if it will work.
We have already done the work for you! We have researched and found 35 of the most profitable business ideas that you can start in Nigeria. Get them here and plug and play.
Conduct Market Research
After choosing the best business idea, the next step when starting a business in Nigeria is conducting market research. Market research is very important when starting a business in Nigeria because it is integral to understanding the challenges and opportunities that abound in the marketplace.
Here are some critical questions you should seek to answer with your market research:
- How large is my target market?
- Who are my potential customers?
- What are my customers’ shopping and buying habits?
- How much are potential customers willing to pay?
- Who is my competition?
- What are my competitors’ strengths and weaknesses? (A SWOT analysis will help here)
- How can I take advantage of my competitor’s weaknesses?
Successfully answering those questions will help give you important information on how to position your new business for success as you enter the market. Additionally, the market research will help you reaffirm if your business idea is worth pursuing or not.
Create A Business Plan
A business plan is very central to starting a business in Nigeria. A business plan is a document that details the financial and operational objectives of a business. It goes into details about the mission and vision of a business; who the business plans to sell to, what the business offers, its selling point, the business goals and objectives to mention a few. The business plan is actually a simple tool to achieve and manage business growth. It is used to define business strategy, goals, deadlines, budget, etc.
Here are some things you must put into perspective when creating a business plan:
Decide on the structure, marketing strategy, and finance for the business. This information makes your analysis and forecasts more likely to be accurate.
Determine The Purpose Of The Business Plan
Decide whether the plan is to be used internally, by third parties, etc. This helps in determining what sort of information to concentrate on. It’s important that you determine what sections of the business plan are relevant to your business before starting the business plan preparation.
Get professional help for your business plan if you aren’t confident in preparing it. While you have help, pay attention too, because it is important that you understand the contents of your business plan and can defend it.
Take Note Of Actual And Estimated Figures
When you are starting a business, and you are using expected figures, you need to communicate that properly, so as not to mislead investors. Of course, if you are already running your business, you should have actual figures.
Write The Executive Summary Last
I suggest this and in as few words as possible since a page summary filled with important information is enough.
Narrow Down What Makes You Different
Before writing a business plan, think carefully about what makes your business unique. Differentiate yourself from the numerous other same products or service businesses in your area.
Keep The Business Plan Short And Format For Easy Skimming
Business plans are shorter and more concise than they used to be in the past. Don’t include all the results of your market research, for example. Keep these details elsewhere for your own use or in the appendix. Formatting is important, therefore use headers, bullets, and italics to highlight key information for the readers.
You Can And Should Change It As You Go
The business plan is a living document hence should be updated as situations change and as required for particular uses.
Decide On Business Legal Structure
Choosing the right legal structure for your business is very important when you are starting a business in Nigeria. A lot of business owners have made the costly mistake of registering their business under the wrong legal structure and when you do that, it sometimes means that there are some types and volumes of businesses that you cannot do. Therefore, the importance of choosing the right legal structure for your business cannot be overemphasized. There are factors you have to consider before you choose a business structure.
Here are the popular business legal structures that you can choose from in Nigeria:
A Business Name which most refers to as an enterprise or venture is for a sole proprietor or two people who are trying to form a partnership. It is simple to register and you can register yourself online on the CAC platform. Or reach out to our sister company, ReDahlia Workspaces at email@example.com or call them at 08188122223 for all your business registration and trademark needs.
Limited Liability Company
A Limited Liability Company can either be a Private Limited Liability Company or a Public Limited Liability Company. Public limited in the sense that the membership is unlimited. The core feature of a Limited Liability Company is the share capital divisions and directors who make decisions.
Incorporated Trustees/Company Limited by Guarantee
These two falls under what we call Non-Governmental Organization. They are more expensive to register. Because they are social enterprises, they have access to funds especially from international bodies that are interested in corporate social responsibility in Nigeria. They are exempt from company income tax. There is no profit sharing; whatever revenue is generated is put back into the organisation. Registering a company limited by guarantee requires the authority of the Attorney General of the federation.
Trademark is simply protecting your name, brand, logo, etc. against theft from competitors, friends, colleagues, etc. When you trademark your brand, you can sue anyone who uses it without your permission.
There are about 45 different classes of Trademark, so find the one that suits your kind of business and trademark it under that class.
Choose A Business Name
Now that you are sure about the legal structure that you will be adopting for your business, the next stage is to choose your business name. Choosing a business name is very important to the process of starting a business in Nigeria. This is because you need a business name for you to conduct business in Nigeria. You need a business name to open an account and receive payments from customers.
To choose the best business name, you need to review why you want to start the business, what it is to be known for, the visions, mission, and selling proposition for it. Also, consider the industry you are in and ensure you are personally happy with the final choice. This is important because your business has to live with the name for a long time. It should be a unique unforgettable name.
Here are some tips when choosing a business name:
- Choose a name that can stand the test of time
- Be descriptive but not too general or vague
- Keep it simple.
- Don’t copy your competitors
- Avoid using your own name
- Make sure you have a related domain
We put it all together here, “How To Choose The Perfect Business Name“. With the guide, you will learn how to choose the right business name.
Register Your Business
Registering your business is very important to running your business in Nigeria. Unless you want to run your business illegally, you are required to register your business in Nigeria to fully operate.
The commission in charge of business registrations in Nigeria is the Corporate Affairs Commission (CAC). And, although you can do your business registrations on your own, it is very advisable that you engage professionals to do the business registration so that you do not commit costly errors.
Our sister company ReDahlia Workspaces has a team of professional lawyers who can help you register your business for a small fee.
Apply For Licenses And Permits
There are some businesses in Nigeria that you cannot engage in without applying for the necessary licenses and permits. Obviously, the first license you need is the business registration certificate, but you might be required to apply for some permits before operating depending on the type of business.
Here are some businesses that you need a permit for in Nigeria:
- Fintech companies
- Oil and gas companies
- Freight forwarding companies
- Import Companies
- Health-product companies
- Security guard companies
- Television companies
- Waste management companies
- Power and electricity companies
- Telecommunications companies
- Mining companies
- Liquor companies
- Educational organisations
Open A Business Bank Account
Opening a bank account is integral to running a successful business in Nigeria. A business bank account is important because you need it to receive payments and conduct business in Nigeria. To open a business account in Nigeria, you will need to have registered a business name and also have a tax identification number in some cases.
With your business registered, you should be able to open a company account and start transactions immediately. Depending on the legal structure you choose for your business, you might need to obtain a tax identification number after registering your business before opening an account.
Just make sure that you understand the requirements to open a company account in your country and state before proceeding to open the account.
Build Your Team
To start a profitable business in Nigeria, you need a team to take off and survive. You need a core group of people who buy into your vision to transform your small business startup from an idea to the reality you want.
So, you need to start with a team that you can trust to get the job done. In the beginning, it is important that you only hire the people that you really need to build your small business startup.
Grow Your Business
Now with your strong and vibrant team, you can now go ahead to growing your business. To enter the market successfully, you will need to market and promote your business.
There are many small business promotion tactics that you can use to grow your business in Nigeria. For one, you can use social media to your advantage. Additionally, you can use search engine optimization and even public relations to grow your business.
Starting a business in Nigeria could be very complicated and tiring especially due to the Nigerian system. However, if you follow the guidelines detailed in this post, you will be well on your way to starting an amazing business in Nigeria.
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