One of the hardest places to start and run a business in Africa is Nigeria, and the truth is, about 96% of people that attempted that, fail after 10 years.
Perhaps, no one has ever told you this, but that is just the truth.
A study shows that only 1 out of 25 businesses that started together in Nigeria survive after 10 years, while about 80% fail within the first 5 years.
Of course, this is scary.
Thankfully, our recent article compiled the top factors that are responsible for this huge failure rate and you might want to check them out here.
And in this post today, I’ll walk you through how to avoid them.
But before we dive into this, I would love to show you why investing in Nigeria is never a bad option despite the disappointing news.
So, let’s get started.
Why investing in Nigeria is the right call
Nigerian startup eco-system received its spark at the stroke of the new millennium, probably as a result of the mobile phone revolution.
Of course, the spark led to the springing up of a lot of startups that over the years grew to become major industry players.
Though Nigeria could be said to have entered the scene fairly late, behind South Africa, Kenya, and Egypt, Nigerian startups led the bulk of investment on the continent and it has grown to become arguably the most important startup ecosystems in Africa.
It commands a staggering one-third of all startup capitals available in the continent and currently dominates the Y-Combinator’s Africa shortlist with about 60% representation.
These YC-backed African startups have raised about $65.5 million in funding and 5 of Nigerian startups; Flutterwave, Paystack, Kobo360, Tizeti and Kudi top the chart.
About last year, Disrupta Africa reported that Nigeria leads with 58 startups and raised a total of $94.9 million, displacing South Africa to the second position whose startups were only able to pull $60 million.
The same year, Facebook and Google opened their hubs in Lagos and launched an acceleration program in the country.
Of course, the choice of Lagos is not surprising.
The state is the leading hub in the Nigerian startup ecosystem and boasts local entrepreneurship worth about $2, beating Johannesburg (1.36 billion) and cape Town ($172 million) as the most valuable ecosystem in Africa.
These data show that Nigeria is viable and investing in it is never a bad option.
But before you throw your money in, there are a few things you need to take care of first and luckily, this post has compiled the 6 of them.
Of course, continue reading.
6 temptations you should overcome before starting a business in Nigeria.
Despite the huge failure rate in the startup eco-system, of course, it is still possible to start and grow a business that will thrive.
Thankfully, this article compiled 6 temptations you should strive to overcome before launching your business.
If you find it useful, kindly use the social media buttons to share with your friends and I will be super grateful.
So, let’s get started immediately.
Getting started without a business mentor
A lot of people rush into entrepreneurship without a mentor to lead the way, and of course, this is a huge mistake.
If you don’t believe this, then take a look at these statistics.
96% of new businesses fail in Nigeria after 10 years, but there is an exception.
A recent study found that 70% of mentored businesses survive more than 5 years. Of course, when you compare this with the 35% survival rate of non-mentored businesses over the same period, it is truly stunning.
Another study found that 89% of business owners who don’t have mentors regret not having one while a different study shows that 84% of business owners with mentors have avoided costly mistakes.
And, also increased revenue by 83%, unlike non-mentored businesses that do so by 16%.
The truth is a good mentor will help set the right direction for your business, define critical tasks and then guide you towards meeting those goals.
And the good news is you don’t have to pay to get one.
At Mentor Nigeria, we connect young business owners or aspiring entrepreneurs to business growth mentors that will work with them to help them to start their business, grow it and secure funds to transform themselves into successful entrepreneurs.
Failing to run a feasibility study
One amazing thing with a feasibility study is that it provides crucial and insightful data that could prevent a company from rushing into risky terrains.
And of course, running one before starting your business could help you to prevent such mistakes.
The truth is when planning a business, we intend to be emotional sometimes and what we thought to be profitable could, in reality, turn out to be a suicidal move.
A study shows that only 40% of small businesses are profitable, 30% only break-even while the other 30% are losing money.
The feasibility study will help you to avoid this. It takes emotions, personal impressions, and feelings out of the business planning process.
Luckily, this article compiled how to get started with a feasibility study in 7 simple steps.
Not knowing your customers beforehand
Who are your customers? What are their pain points? Where can they be found? What is there average disposable income? How long will it take an average consumer to convert? Are they the real users or are they buying for other users? If yes, who?
And how can these people be reached? Are they old enough to be targeted with marketing messages? Can they influence the buying decision?
If yes, how?
What other products or services resonate among them? And why?
Of course, these are important questions you need to seek answers to; believe me, having answers to them will get almost half of your work done.
And a feasibility study can get you started.
The temptation to start without enough capital
A post-mortem analysis of 101 failed startups by CBInsight reveals that about 29% of failed businesses is as a result of the owner running out of money while 18% failed as a result of pricing and cost-related issues.
So, it is important that you procure the necessary capital before starting your business, at least enough to get you started for a year and the bad news is that this might not even be enough.
One study shows that 84% of small businesses reach profitability in their first four years.
This means that those without enough startup capital to last them till they reach profitability might be in danger of failure and sadly, raising this startup capital is not funny.
For instance, out of the multitude of active startups in Lagos, only 58 were able to secure funding in 2018 and less than 20 of these firms dominated funding within the past years.
According to a poll by Gallup, 77% of small businesses rely on the personal savings of their founders for initial capital needs.
If you don’t have enough savings or part of the other 23%, kindly hold on to your business idea until you acquire startup capital.
Or, you can apply to access our Nova New Venture Grant, of course, free of charge.
Of course, continue reading…
Failing to work out your team
Lack of capital and a good team are responsible for 52% of some businesses that failed and this makes them a priority when starting out your small business.
Avoid the temptation of a hurriedly assembled team.
A study by CBInsight shows that 23% of businesses failed because they lack the right team, yet this is one of the most underrated tasks when starting a business.
Assembling is a good team is an important task you should take care of before starting your business.
The good news is startups with two co-founders rather than one raise 30% more capital and in a different study by Gusto, 37% of employees say “working with a great team” is their primary reason for staying.
Before assembling a team, check out these 10 surprising statistics first.
Inability to sell
But sadly, a lot of young entrepreneurs focus efforts on developing great products than actually finding ways to sell them.
And one huge mistake you would be making is to depend solely on the sales team without making an effort to learn the skills yourself.
A study by InsideSales shows that hiring a good sales rep is the top challenge for 41% of sales managers while Mentor Nigeria’s study revealed that 90% of graduates aged 21-35 would not consider a career in selling.
Of those who may consider a career in sales, 65% don’t have what is needed to succeed in sales.
Though a whopping 63% of graduates surveyed were aware of the huge potential in selling, however, 70% are not ready to give themselves any chance to explore the opportunities in this sector.
Getting started with your first business in Nigeria
Of course, starting a business in Nigeria is exciting, however, it could be quite challenging especially, the first 5 years.
Thankfully, this post has compiled 6 fool-proof tips to help you get started without going else and in addition to this, you can leverage our free business mentorship program to gain better standing.
At Mentor Nigeria, we help people to transform their life experiences, talents, skills, education and their passion into a highly successful story as an entrepreneur millionaire.
We work with young Nigerians to help them to create businesses that are scalable, repeatable and profitable, work with them to scale them until they secure the right funding to transform into successful entrepreneurs.
You can get started by registering here.