How to Start a Business in Nigeria [2020]
This article will help you with all the actionable steps you need to start a business in Nigeria.
The cool part?
You get a complete breakdown of these steps so you can begin your business right away!
Let’s jump right in…
We will be going through the following 9 steps:
- Do Market Research
- Write a Business Plan
- Fund Your Business
- Pick A Business Location
- Choose Your Business Structure
- Register Your Business
- Obtain Tax Identification
- Apply for relevant Licenses and Permits
- Open a Business Account
1.) Do Market Research
Market research involves the process of collecting relevant information as a means to determine how viable a business would be after it is launched.
As a result, you need market research to start on the right foot as well as to retrace your steps if your business begins to lag.
So how do you conduct one?
Discover Your Target Audience:
So you may already have an idea of who you want your product or service for.
But how much do you know them?
You need to drill down to discover what motivates your prospective buyer to purchase your offering.
To do this,
Find out the basic information of your prospect(s) like;
- Gender
- Age
- Location
- Education
- Income
- Interests
- Hobbies
- Challenges
- And Pain Points
What you are doing is, in fact, creating a Buyer Persona and the more specific you are with your personas…
…the greater chance, you will predict their behaviours, and hence, be there for them, when they need you the most.
Conduct Competitor Research
Your biggest competitors provide some of the best clues for what is already working for your target audience.
Information such as;
- The price range of their products or services
- Offers they run
- and the Marketing strategies they adopt
Provide insights into what your audience is actively responding to.
You can also develop a USP or product feature around some of the most common buyer complaints about your biggest competitors.
Relate With Prospects
Engaging with your prospects can also reveal information that may not have been uncovered by other strategies.
Here, you are concerned with what your prospects feel about your product, what value they derive and suggestions on how the product could be modified.
This could be as simple as,
- Asking one on one questions
- Developing e-forms sent to closed groups [like Facebook groups] or setting up Telegram Polls in groups with the ideal demography.
And so on.
After all, is said and done,
You will need to pool all of this data to form comprehensive ‘Buyer Personas’.
So that you know who exactly your business is addressing.
2.) Write a Business Plan
A business plan describes what you plan to do and how you plan to do it.
Easy-Peasy!
It is important because not having one will increase your chances of getting lost during your business journey.
Similarly, the document helps to map out your idea from concept to reality,
– which is a good way to see if your big idea makes business sense and is worth investing in.
If your business fails on paper, why bother going on with it?
So how do you go about writing a business plan?
There are two approaches to writing a Business Plan.
A traditional format and a Fast-tracked format.
Traditional Format
Use this format when you want to request financing from Investors…
…or traditional lenders like banks who are even more risk-averse [and will need more detail to knock down their inhibitions]
According to the US Small Business Administration,
The traditional format consists of about 9 sections. Apply the sections that are relevant to your business.
Executive Summary
Here you provide information that gives a holistic view of what your company is all about.
Common things to highlight include;
- Products offered and/or services rendered
- Leadership Team and other Staff
- Justification of Business Viability
- Growth Potential of the Business
- Funding Requirements
Company Description
Go into detail to explain the problem that your business solves and the exact market it caters for.
Also, try to stress all factors that give you the edge over other businesses.
Market Analysis
In Market Analysis
You present an outlook of what the drivers of your industry are doing…
…and why they are successful at it [or not] and more importantly, how you can do better.
The research you conducted during the Competitive Research phase of determining your audience will come in handy here.
Organization and Management
Would your business be a Sole Proprietorship or a Limited Liability Company?
Here, you provide answers as regards the legal structure of the business and the flow of authority.
The idea is to understand how business decisions are carried out and the people critical to making your business work.
Service or Product Line
In this section, you describe;
Your product, how it benefits your potential customers, and what the product lifecycle is all about.
You also mention if necessary, plans to protect Intellectual Property.
Marketing and Sales
How would you attract and retain customers?
This is what you plan to answer in this section.
You would take a deep dive into your Marketing Strategy and how a sale happens with your product or service.
Funding Request
This is optional and necessary only if your business is requesting funding.
Your job is to say how much funding you need and what you will be using it for,
Usually for a five-year period.
Financial Projections
You will use this section to make projections of your expenses throughout the period you are requesting funding for.
Projections need to be well explained and justified, in a way that they complement the funding requested.
Appendix
Here, you provide supporting documents for the business plan and other materials that have been requested.
Fast-Tracked Format
If you need a business plan within a short period to explain key information or your business is simple, then you may opt for this style.
This format may only take a page and can be completed in a few hours.
Examples of this format include;
- The Business Model Canvas by Alex Osterwalder
- The Lean Canvas by Ash Maurya.
3.) Fund Your Business
It is obvious your business requires money to run operations and iterate in order to stay relevant and remain viable.
Your options for funding may include; Self-funding, Loans, Grants and Capital from Investors.
Here’s how to go about each one of them;
Self-Funding [Bootstrapping]
This is an attractive option if you want to curtail the interest of Investors and save time.
It allows you to focus on building value — fast!
…And the value you develop may later attract funding from other sources easily.
Self-funding also gives you ownership over every aspect of your business.
But to pull it off, you will have to make judicious use of your personal finances and be very flexible to manage different projects simultaneously.
Loans
You could secure loans from Banks and Financial Institutions, Government Loan Schemes and Loan Service Providers.
Banks & Financial Institutions
Short and long term loans can be received from banks and other microfinance institutions.
Consider interest rates, speed of processing loans and duration of payment before approaching any of these institutions.
Generally, these institutions lend at relatively high rates, with microfinance banks even higher.
Government Loan Schemes
These loans are funded with little to zero interest rates by the government to promote Nigerian businesses, especially Small and Medium enterprises.
Apply for these loans through funding programs like;
and many more on their respective websites.
Loan Service Providers
Fintech companies now provide quick loans that can be processed within a few days after application.
They however only provide these loans for a short period — usually a few months, but can lend millions of naira to businesses without collateral.
Examples include Carbon For Business, KwikMoney and RenMoney.
You can access these loans by applying on their websites.
Grants
Grants are one of the best ways to secure funding for your business.
The prize can be hefty, always non-refundable and often come with some level of professional guidance.
In addition, you still get to retain your desired business structure?!
Awesomeness!
All you have to do is;
- Meet Grant requirements
- Submit your Grant Writing application.
- Wait
Most grants are awarded on a yearly cycle
So you may only have to wait a few months after your application before getting a grant…
…if your application is successful.
Some of the most popular grant awards accessible to Nigerians include:
- Tony Elumelu Foundation Entrepreneurship Program
- Africa’s Young Entrepreneur Empowerment Nigeria (AYEEN)
- Unilever Young Entrepreneurs Award
And so many more.
You can get information on available grants
By following Afrocentric opportunities websites such as;
Opportunities For Africa, After School Africa and more.
4) Pick a Business Location
Choosing the perfect business location to start a business in Nigeria is crucial.
This is especially for location-dependent businesses.
Factors such as your budget, the type of space you need and the relative safety of the location are easy calls that impact your final choices.
In addition, here are 3 more factors that are crucial to your final decision.
Businesses Nearby
A perfect location will have;
- A high volume of people who are already willing to buy your product.
- Low competition with other businesses.
But we do not live in a perfect world.
It is likely that your perfect spot is crowded with competitors.
And that may be where other aspects of your business, like your USP, will come in handy.
So, let’s focus on how to get a location with a sizable volume of people willing to buy from you.
Check Business Listings
Business listing spaces like Google My Business, VConnect, SME Arena and others can serve as a goldmine of information.
On these platforms, type in keywords related to your business in the available search bar and hit ‘search’.
The results will show businesses providing similar services or products like your business.
Scan the location of these businesses.
Places that keep popping up must have people who are receptive to what your product or service is offering
Ease of Access
Your business has to be easily accessible to those interested in your business.
This includes offline and online access.
Offline Access
Your customers and suppliers need an easy way to locate your business.
Depending on the product or service,
You will have to confirm the route to your shop or office is freely accessible…
…and not under a major reconstruction or blockade.
Follow updates from the Ministry of Works and the relevant State and Local Governments for information on road accessibility.
Online Access
There are many opportunities to maintain a presence online and establish a connection with your clients.
They include;
- Owning a website
- Getting listed on popular Business listings,
- Making regular updates on major Social Media platforms
and others.
5.) Choose Your Business Structure:
The legal structure you choose for your business should give you the least liability and biggest freedom from taxes.
Some of the more common legal structures that your business can assume include;
Sole Proprietorship: For Single Owners, gives complete managerial control to the owner.
Partnership: For two or more people who agree to share in the profits and losses of the business.
Corporation: An entity you create with other people, made to run the business and is treated as being separate from the founders.
Limited Liability Company: Here, you and other owners are shielded from personal liability, while profits and losses can be passed to the owners.
If you are starting out as a Small Business, then a Sole Proprietorship or Partnership should suffice for you.
Get advice from Lawyers and Business Consultants on what Legal Structure will fit your business.
You can seek Thought Leaders on LinkedIn in the Legal and Business Consultancy space in Nigeria for advice.
They offer free advice and are usually willing to help when you reach out to them directly.
6.) Register Your Business
The Corporate Affairs Commission (CAC) conducts the registration of Companies, Business Names and Incorporated Trustees in Nigeria.
Before submitting a Business Name for verification,
Ensure you follow these Business Name best practices;
Avoid Restrictive Names
Names that limit the scope of your business should be avoided.
If you print custom messages on Tee-Shirts in Lagos for example, naming your business ‘Lagos Prints’ communicates that you operate only for the Lagos Markets.
Should your capacity to expand beyond Lagos set in, you may have to change your business name.
This will confuse customers and result in the loss of clients.
Therefore, always give room for potential expansion of your business.
Choose Unique Names
Your business can easily be mistaken for another should your name be similar to another product or service.
You also run the risk of getting into legal battles for businesses who see yours as a threat to their success due to business name similarities.
Hence, to avoid heartache, strive to choose a name that is unique and aligns with your business goals and branding.
Search your suggested names in Search Engines and Social Media platforms and see if they bring any results.
Furthermore, conduct a business name search on the Cooperate Affairs Commission website.
If no similar name pops up, then you can be largely sure that your name is unique.
You can then proceed to register your business.
Begin Registration
When you have your name ready, proceed again to the CAC website.
Recent improvements to the registration process mean you can now complete your business registration online.
Your first task is to register your business name.
On the homepage select ‘Business Names’
From here on, just follow the prompts.
The website has been structured to be direct enough to help you throughout the business registration cycle.
Once your business name has been verified, you can proceed to become fully operational since your business is now recognized.
Note: You must have seen two other options under ‘Step by Step’ registration on the CAC homepage.
They are ‘Companies’ and ‘Incorporated Trustees’
You do not need to register as a company if you are a Small or Medium Enterprise.
‘Companies’ is for the registration of Incorporations where the business entity is separate from the owners.
‘Incorporated Trustees’ is meant for Non-Governmental Organizations (NGOs), Foundations, Charities, Religious Organizations etc.
7.) Obtain Tax Identification to Start a Business in Nigeria
Once you start a new business, you automatically have tax liabilities.
All tax returns are collected and managed by the Federal Inland Revenue Service (FIRS)
You should receive your Tax ID via email or text, two weeks after your business is registered with the Corporate Affairs Commission.
If you do not receive yours after two weeks, then send a mail to FIRS HelpDesk.
After obtaining your Tax ID, you will then be required to pay tax.
Taxes you pay and how you pay them is based on a number of factors.
Some of them include; the type of business you are running, the business sector, your location and so on.
I advise you to reach out to a lawyer for further guidance on how to navigate your tax payment obligations.
8) Apply for Relevant Licenses and Permits
This is another subjective step which is determined by the type of business you run.
For instance, if you deal in the Food and Drug sector,
You will need licenses and approvals from the National Agency for Food and Drug Administration and Control (NAFDAC).
Failure to do this would result in lockdown and Fines to your business.
Therefore, protect your future business interests
By ensuring you apply to all the relevant bodies issuing licenses and permits for your type of business.
As a rough guide, you can check this Wikiprocedure page.
It lists a good number of what licenses and permits your business will require by, Type of business and Location, in Nigeria.
9) Open a Business Account to Start a Business in Nigeria
You will need a business account for a number of reasons.
Some of these include;
- To further your branding efforts.
- Be seen as actively being in Business [not running a Charity organization]
- Increase trust [especially with people who are not familiar with you or your business]
To open an account,
You will need documents showing your Tax Identification, Business Licenses, and a host of other documents as requested by your bank of choice.
Open your account preferably with Nigeria’s Tier 1 banks like UBA, Guaranty Trust Bank, Access Bank and Zenith Bank.
This is because they often boast a better level of service delivery, and may have access to perks that benefit you which will not be available elsewhere.
However, some services by other Non-Tier 1 banks may be timely and potentially very beneficial for your type of business.
Therefore, request perks which may be exclusive to certain banks from their personnel
Thereafter, compare and pick the bank that best suits your business needs.
Approach your bank of choice to specify what documents you are to provide and proceed to present them.
If you followed through with all the steps previously mentioned, getting some of the important documents requested will be relatively easy to present.
Well done!
You are ready to soar. You can now to start a business in Nigeria.
Now, I would like to hear from you.
Do you have any clarifications on any of the steps I mentioned?
Any additions?
Let me know by leaving a comment right below.
