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| Adewale Fayinka, 08037126699 |
Why? Elon Musk was a cleaner of the boiler room in a lumber mill; Linda Ikeji started blogging in a cyber cafe because she could not afford Internet at home; Cosmas Maduka hawked Akara on streets at age 4, and became apprentice at a spare parts shop at 9; Mark Cuban sold garbage bags door to door, and Michael Dell was a dishwasher in a Chinese restaurant. Need more inspiration?
In our discourse last week, we mentioned 7 distinctly proven ways to achieve financial independence. One of the proven ways is to start your own business as an Entrepreneur.
Becoming an Entrepreneur or building your own business is probably one of the most difficult ways, but it has proven many times to be the most profitable way. Check through the Forbes' list of 100 wealthiest individuals in the world, and you are likely to find entrepreneurs dominating that list. But there is no guarantee that you will succeed in business, just as there is no guarantee that you will succeed fin life - the choice for a happy, peaceful, loving and healthy life is all up to you. But if you want to succeed in business, and build a hefty residual income that can gain you financial independence, you must build your business on sound principles. Such principles include the following:
1. Fill a real Need, or huge market gap.
2. Be passionate about what you need to do to get your business going.
3. Build your business on a solid customer service principle.
FILLING A REAL NEED OR MARKET GAP
The first step to becoming an entrepreneur is choosing the ideal business. The business you choose will be determined by its feasibility as well as the distinct customer need that it fills. For example, when the GSM companies came to Nigeria with mobile phone technology in 2002, there is already a huge market gap which is based on unmet customer need for telecommunication services.
Is It Feasible?
Feasibility of a business describes how simple it is to accomplish the goals of the business. To determine if an idea is feasible, ask yourself the following questions:
- What customer need or market gap is your product filling?
- Would you have a sufficient customer base for long-term success?
- Is there a sufficient market for your product?
- What is the future outlook for the market?
- Can you price competitively?
- Do you have the necessary funding?
Any successful venture requires an understanding of the market and the competition. You need to discover if the market is profitable and how you can compete in it. Once you understand the market dynamics, and how it affects your business, you will be better prepared to face the challenges that will come your way and increase your likelihood of success. Before you begin any new venture, you must also discover if it is lucrative. This requires you to understand the niche market that you wish to serve.
Is There Competition?
Once you know your market, your first job should be to identify the competition. Your main competition will be the product/service closest to your own offerings. You need to unravel their strengths and weaknesses in order to give yourself competitive advantage.
Pay close attention to the objectives of your competing businesses, and see how you compare. Some businesses focus on the customer experience, while others are solely focused on low prices. If you pay enough attention to their objectives, you will discover weaknesses in them that you can exploit.
PASSION AND DRIVE TO GET THE BUSINESS GOING
"When the going gets tough, the tough gets going" - Joseph P. Kennedy (1888-1969),
If you have sufficient passion and drive, you can become a successful entrepreneur as long as you can also do the planning and execution well. Ask yourself the following questions in order to be well acquainted with your strengths and weaknesses, and the purposes for which you are setting your business up.
What Are Your Interests?
Becoming an entrepreneur is not easy. If you do not enjoy what you do, you are unlikely to be successful. Before you choose your business, you must consider what you enjoy doing and think of a way to make this task profitable.
Do You Have the Necessary Experience?
Experience is something that you gain from observation, encounters, and actions. Once you identify your experiences, you can use them to help choose your business. Years in customer service, for example, would help prepare you for a business that is customer service oriented.
Are You an Expert?
Expertise is knowledge and skills that come with education, and experience that come with on the job training. Being an expert at a business makes you more capable of running it. If you are passionate about something, take the time to become an expert. For example, you can learn necessary skills by taking classes or interning at other businesses.
BUILD YOUR BUSINESS ON A SOLID CUSTOMER SERVICE PRINCIPLE
How Can You Set Yourself Apart from the Competition?
By understanding your competition, you will be able to make yourself stand out by offering what is not being offered by the competition. You have already established which objectives your competition is lacking, and you can then fill the niche. For example, some customers may be willing to pay more for customer service that a business which focused on low prices will lack.
Do you understand what the customer wants?
Success depends on identifying what customers want and how to provide it. Begin by understanding the customer demographics in your area. This will provide you with insights into the spending habits and values of your prospective customers.
How do you discover what the customer/prospects need?
Allow them to tell you. You can hold panels, and conduct surveys to better understand what the customers/prospects expect from you. In panels, customers provide you with their ideas. In surveys, customers answer specific questions. Continued customer feedback allows you to constantly tailor your business to suit your customers' needs.
There are also other ways to stand out:
- Strategy of Preeminence
- Expertise – Take advantage of your expertise to draw in customers.
- Expertise – Take advantage of your expertise to draw in customers.
- Value: Explain how you offer a better value proposition than competitors
- Communication – Use creative and innovative ways to connect and bond with your customers.
BASICS OF STARTING YOUR OWN BUSINESS
Decide on your Business Name
Choosing a name is harder than it seems. You want the name to stand out and reflect your image. Names that are similar to competitors will not help you stand out, and they could result in lawsuits.
Legal Structure of the Business
Determine the legal structure of your business. There are legal structures for any type of company that you want, and each one has its benefits and drawbacks. Choosing the correct structure will require you to understand what you expect from your company. To begin, you are required to register your business type with the Nigeria's Corporate Affairs Commission (CAC).
Types of businesses in Nigeria
Sole proprietorship – The simplest business to create also has the greatest financial risk because it includes limitless personal liability. Sole Proprietorship businesses are registered as Business Names.
General partnership – A business run by two or more individuals where all partners are responsible for the actions of one, if made in the name of the business.
Limited Partnership – The power to make decisions is limited to specific individuals and is outlined in the business plan.
Private Limited Liability Company - A private limited company is a legal entity in it's own right, separate from those who own it, the share holders. The limited liability and simplicity of running the private limited company makes it the most common of registered business in Nigeria.
Public Limited Liability Company - A public limited company differs from the private version in that it is able to sell its shares to the public and may be quoted in the stock exchange. A public company must have at least 500,000 authorised share capital and the subscribers must take up at least twenty five percent of the authorised share capital.
Register Your Business
Once you have a name and chosen a structure, you need to register your business and obtain the Certificate of Incorporation, appropriate licenses, and permits. This will all depend on the type and nature of your business.
Choose the Location
The location of your business needs to be chosen carefully. Begin by determining if you are limited by any zoning regulations such as agriculture or industry. Next, you must weigh safety and cost. Choosing a safe location will help draw customers and employees because they will not feel fearful in your business.
Other Considerations:
Hire an Accountant
You should have a trusted accountant from the beginning. When finding an accountant, you want someone to do more than prepare taxes. You want someone who will advise your business. Keep a few things in mind when choosing candidates:
• Experience with your type of business
• Expertise in the industry
• Services offered
• Will you work directly with the accountant?
CREATE YOUR BUSINESS PLAN
A strong business plan is necessary for long-term growth and success. Planning requires gathering the appropriate information and outlining the plan before creating it with all of the necessary elements. Creating a business plan may seem boring, but you should not neglect it. This is the plan that will guide your company and attract investors.
What Should Be Included in your Business Plan?
The business plan must include some basic elements such as:
• Executive summary – provides an overview of the company and includes information from other elements. This is typically written last because the introduction is so important.
• Market analysis – provides information about the market that includes industry and pricing.
• Company description – provides information about the nature of the business and which factors will make it successful.
• Management and organization – provides a view of the company’s structure, leadership, and team.
• Sales and marketing – provides information about the sales and marketing that will be used.
• Product/service – explains the value, benefits, and uniqueness of the product.
• Funding/financial – outlines the amount of money the company needs in different scenarios and creates a five-year plan.
Tips to writing an effective business plan
• Work on the elements of the plan individually.
• Focus on your niche and what makes your plan stand out.
• Use clear and concise language.
• End with the executive summary.
• Rewrite the draft frequently.
Finally, think big, but start small. "As long as you’re going to be thinking anyway, think big". Donald Trump
FINANCING YOUR BUSINESS
Any viable business startup needs to be financed, and these days there are many different options for financing. There are many resources for entrepreneurs who are starting to look for financing.
Contact Business Organizations for Guidance
The more informed you are, the better equipped you will be to make the right decisions on financing for your business. You can contact organizations such as Small and Medium Scale Business Development of Nigeria (SMEDAN), and/or Nigerian Association of Small Scale Enterprises. They will provide you with a wealth of information on your business financing options. They also provide workshops, seminars, and a wealth of information on different types of businesses, local sourcing of raw materials and access to market.
While some of their services may cost a little money, many of their services are free to use. Here are some websites and associations to go to for help.
Types of Business Financing
Now that you have resources to give you information about your financing, it’s time to decide what type of financing you are looking for. It is imperative that you take the time to consider your options carefully. Choosing the wrong type of financing could sink your company before it even gets a chance to float.
Here are a few of the different types of financing options:
1. Self-financing – Self-financing means that you provide the funds needed to start the business. According to Entrepreneur magazine, it is the number one source of start-up financing for small businesses. You can save up money, or use preexisting savings.
2. Grants - Look for grants where they are available. Examples of grants include YouWin, Empower, Ford Foundation, Bill & Melinda Gates Foundation, USAID and many state government empowerment programs, or constituency projects funds of senators. While there are lots of competition for grants, they are a great option, and you don’t have to pay them back!
3. Financing from friends or family members - Friends or family members who have extra money and want to help see your business vision come to life are a great resource for financing. The downside to using financing from family and friends is you have to be very clear about when their investment can be returned to them.
4. Financing from bank loans - Bank loans are a great option for financing. Bank loans are based on your credit, a solid business plan, experience, assets, and a personal guarantee that the loan will be paid back. If you are taking the bank loan route, be sure to contact different banks, and get the best interest rate.
5. Financing from investors - The three most common types of investors are Private Equity, Venture Capital, and Angel investing. Private equity investors are usually made by individuals or privately owned companies. Venture capital investors are also from private equity but they tend to be more hands-on, they bring managerial or technical knowledge to help grow the business. Lastly, Angel investing is a person who invests in businesses that do not get the attention of venture capitalists. These investors usually gain stock or equity in the company.
What to Do Once Financing Option is Approved
1. Get your place of business: Once you finally have your start up funds, it is time for the hard work to begin. Procure a place of business, and the materials you need to run. This could range anywhere from buying paper clips to buying huge production machines. Stay in constant contact with your accountant to make sure you are on budget.
2. Procure needed inventory: Have a clear list of what is needed, to maintain a budget. Check with different companies to see if they have your materials at lower prices. If you have received financing from investors, you will need to keep them in the loop about the progress of the business.
3. Hire Employees: You can’t have a business without employees. They are the heart and soul of your business, so making sure you pick good employees is important. Every entrepreneur wants their company to be the best, so you should look for the best employees.
4. Develop Job Descriptions: How is an employee supposed to know what their job is if you don’t? Having a job description allows you to tell the employee exactly what is expected of them. A proper job description should outline where one person’s job stops, and another's begins.
5. Advertise Positions: There are a lot of people out there in this big world. As an employer, you want to try to find the best of the best for your business. Advertising about your available positions helps to “cast your net out further”, as they say in fishing.
6. Interview Candidates: Interviewing candidates is a key step in obtaining optimal staff. Conducting an interview without prepared questions is like having a meeting without an agenda, pointless. Having prepared questions will help you stay focused, and get the important information you need to make your decision.
7. Select Candidates: You have finally finished your interviews, now it is time to select your candidates. This is the time when calling job and personal references may help narrow the field. Sometimes people embellish on their resumes, and contacting their former employers could help see if they were being honest in their interview.
8. Provide quality training: "It's all to do with the training - you can do a lot if you're properly trained". Queen Elizabeth II. There is no point in hiring quality people if you do not provide them with quality training. Training is the best way to make sure you staff understands the company and their jobs. Having a team that knows the direction of the company and their working parts in that company is always an asset. The following are what the training of your new employees should entail.
a. Teach Company Culture.What does the term "company culture" mean? Company culture is the behavior of the people in the company.
b. Implement Actual Training for the Position: Training for the position should include written information and visually showing them how to complete their job tasks in line with their Job Description.
c. Provide Feedback: This is the time to talk to your employees and provide them with feedback. Employees react to communication. Most people want to do a good job, and providing them with the feedback they need is imperative. The following are some steps to make sure you are giving effective and constructive feedback:
i. Be Specific- Make sure you are being very specific about what the employee needs to work on.
ii. Explain the effects of the employee’s actions- Tell them why what they are doing is incorrect, and how it affects the company, customer, or other employees.
iii. Allow the employee to reply. Give them a chance to reply to the information you have just given them. Ask questions to make sure they understand the error.
iv. Provide resolution- Tell them how to resolve the issue. Ask questions to make sure they understand.
v. Recap- Review the information you provided them, what the error was, why, and what to do about it.
vi. Remind them that you are in their corner.
MARKETING YOUR BUSINESS
"To be successful in business you don’t just need a great idea — you have to sell it. Don’t be afraid to sell. Don’t think of yourself as anything but a marketer". Susan Sobbott
Marketing is a necessity for any business, because being invisible won’t get you customers! There are different ways to market your business. Your product will affect how your business is marketed. Let’s explore some marketing options together.
Traditional Marketing
The most common marketing environments are television, print, and radio advertising. TV commercials are excellent for getting information about your company and product out to a wide audience. In a commercial, you can demonstrate the product or service for the consumer in a controlled arena. If your service or product is able to be captured in a picture, then print ads may be what you need. A print ad can be in a newspaper, magazine, local publication, fliers, or billboards.
Create a Website
These days almost everyone has a mobile device that is able to connect with the internet, and surf the World Wide Web. With a marketing resource so accessible, not having a website seems like a travesty. Creating a website is an easy way to get your company out to the public.
Social Media
Over half of the working age population in Nigeria has a Facebook page, or Instagram account. People use social media to keep in touch with their friends, and smart businesses have learned how to adopt these sites to keep the customers engaged in their products. You should too.
Networking Groups
Networking is the exchange of information or services among individuals, groups, or institutions; specifically: the cultivation of productive relationships for employment or business. Networking groups can help you in a multitude of ways.
RUNNING YOUR BUSINESS
Running the business is the “fun part”. This is where you take all of the tools acquired to prepare you for operating a successful business, and put them into practice. Before you can sell the products / services your company offers, you must get out there and source the materials. Once you do and the cash starts coming in, responsible money management and budgeting will prove to be your company’s best friends.
Procurement
If your business consists of selling products and even for some services, you must source suppliers to provide the items to you and create a Master Agreement with them.
How do you find suppliers?
There is no hard rule on how your company should locate suppliers, but here are some Tips that can help along the way.
- Have all interested suppliers complete a questionnaire.
- From all interested applicants, select a small group of the most qualified candidates.
- Select the supplier that best meets your needs.
Sell! Sell! Sell!
Most people think, “Selling a product (or service)…that’s easy!” While this may come naturally for some, effectively selling is not so easy for others. It is important to create a method for selling rather than haphazardly doing so. This is a business and one of your main goals is to make money. In order to make money on a consistent basis, carefully consider these steps:
a. When you make initial contact with your prospective customer, greet him / her. You’d be amazed at how much this gets overlooked. Keep in mind, a little acknowledgment goes a long way!
b. Get to know what the prospective customer needs. How can you intelligently discuss the benefits of your products/services if you don’t know how they can meet the customer’s needs?
c. Restate what the customer has shared as their needs. It is important to confirm you have properly understood what the customer wants. This will save a lot of time and headache on the back end.
d. Develop a plan of action to meet the customer’s desires.
e. Simply ask for the sale.
f. Close the deal.
g. Follow-up with the customer. Selling is not just about the sale itself, it is also about relationship-building. A repeat customer is the best customer to have.
How to Manage Cash Flow
Cash flow refers to the funds that come in and go out of a business. If you have positive cash flow, that means you have more money coming in than that going out. That means, negative cash flow is…you guessed it…more money going out than that coming in.
A company that has positive cash flow is not something that happens on its own, the business has to implement strategies that promote such.
What are the ways to improve cash flow?
• Increase your sales
• Don’t extend too much credit to customers
• Give your customers pricing discounts to ramp up bigger sales volume.
Budgeting
Budgeting should be a major component of every business, whether large or small. It serves two purposes. 1. It allows the company to estimate that which is spent on expenditures. 2. Companies can use the figures at the end of a specified period to determine if the company has stayed on budget and how this has affected its bottom line.
Types of Budgeting include:
Zero-Based Budgeting: This type of budgeting starts with a “zero baseline.” All expenses must be justified each period.
Top-Down Budgeting: Cost projections start at the highest level of the company (i.e. executives), then come down.
Bottom-Up Budgeting: Cost projections start at the departmental level with employees, then go up.
GROWING YOUR BUSINESS
Once you figure out what works in starting and running a business, the next step is to grow the business. The following are ways you can grow your business.
Offer More Products / Services
This is a relatively simple way to grow what you already run. For example, if you run a restaurant, you can consider adding more food to the menu. Another way is to ask yourself 'what other service or product do my customer buy before, or after buying my product? You can then consider adding such products or services to your own, or sign an agency or referral relationship with the vendors of such products or services.
Another way is to informally ask customers’ feedback as they frequent the shop or ask them to complete a questionnaire, providing their thoughts on new product lines they will like you to add.
Open Another Location
Even though it is a lot more complex than just adding new products, opening an additional location can produce positive results. In some ways, opening a new location is like starting from scratch.
Franchise Opportunities
With franchising, the franchisee would be responsible for providing the capital to start, run, and grow the business, while it would be your task if you select opening an additional location instead.
Securing Large Contracts
Acquiring contracts to provide your products and/or services to other organizations can be a great benefit to your company. You may be approached by a company, asking you to be their supplier or you may have to seek out these contracts.
CONCLUSION
If you do decide that setting up a business is ideal for you to reach your Financial Independence goals, your journey to entrepreneurship is just beginning. Take a moment to review and update your action plan, we hope that it will be a key tool to guide your progress in the days, weeks, months, and years to come. We wish you the best of luck on the rest of your travels to financial freedom!
ADEWALE FAYINKA is a Sales/Marketing Expert, Career Coach and Business Consultant. He is MD/CEO, F2A Resources Limited. Based in Lagos, he can be reached on 08037126699. Email: dewalemi@icloud.com
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