By Magnus Nmonwu, Regional Director for Sage in West Africa
During Global Entrepreneurship Week (13-19 November 2017), it’s worth reflecting on the role of small businesses in government initiatives such as Made-in-Nigeria Dress Days and procurement policies. The government push to support local business could help spur diversification of the economy and create profitable businesses in several sectors and industries, thus reducing unemployment.
However, for this to pay off we need to boost the survival rate of small businesses—only 20% of new startups and businesses in Nigeria survive their first three years. The first year of a new business’s life is especially critical to its future success.
Here are a few tips to help you survive it, and come out stronger for your second year in business:
1. Don’t ‘wing’ your business plan
If you’re not looking for external investment or a bank loan, you might be tempted to wing it rather than write a formal business plan. But the process of writing a strategy and planning document can help you sharpen your vision and identify potential pitfalls for your new company.
Such a document needn’t be long - you just need a few pages detailing issues such as:
- The problem you are trying to solve in your market
- The customers you are targeting
- Milestones such as launch dates, customer targets, and revenue and profit forecasts
- Funding plans
There are some great templates available online, and some of them encourage you to get your high-level plan to fit onto a single page.
2. Spend as little as possible
The reason new businesses usually fail is that they run out of funding. It’s important to keep your cost base as low as possible while you wait for revenues to start flowing - especially if you have a long sales cycle in your industry or need to spend time developing your product before you can start selling it.
Some ways to save money include:
- Use contractors and freelancers rather than hiring full-time employees so you can access skills on demand
- Do without an office if you can work from your garage or study
- Use low-cost digital channels (such as Facebook) for marketing rather than spending money on print and radio ads
- Hire smart, inexperienced interns and train them up rather than looking for expensive people with industry experience
- Review expenses each month and question which ones are unnecessary
- Use cloud software rather than buying expensive software licences
3. Get professional advice where you need it
Professional HR, tax and financial advice is worth paying for. A good accountant can help you achieve significant tax efficiencies, highlight ways to save money and give insight into the financial trends in your business. Good HR advice can also help you avoid expensive disputes with employees or making poor hiring decisions, and more importantly, save you time.
4. Do one thing right before expanding
You may have the ambition to build a global empire straddling multiple lines of business, but it makes sense to start by focusing on a single region or product line. Start off in a territory you know well, then you can learn, develop a revenue stream, and scale out to more national or even international markets. If you try to cover too many regions or offer too many services and products in the early months, you could spread your financial and human resources too thinly.
5. Automate as much as possible
Rather than spending your time fiddling with Excel spreadsheets, automate as much of your business as you can, from payroll, invoicing and accounting to marketing and customer relationship management.
This will not only save you time, but it will also help you to avoid human errors, such as miscalculating your PAYE for the month or omitting a zero on a client’s monthly invoice. And you’ll also benefit from easier compliance with tax laws and have access to data you can use to make good business decisions, especially as the Nigerian government looks to drive more revenue from taxes in the near future.