Two Things You Must Know Before Setting Up Your Business


ISSUE ONE:  MANAGEMENT
I have met so many upcoming/ start-ups and intending entrepreneurs at many occasions and lots of emails for advice and one thing I have shared from my experiences is that business is more about MANAGEMENT than FINANCE.

If you  spent 50,000 to set up akara business, until you make that 50,000 back, you have not started. When you finally do make the 50,000 back, (this is called capital ), anything else you spent to make the 50,000 is the cost of operations. Take that out and whatever is left is the profit. The problem in business is MANAGING all the challenges, decisions and headaches that comes with making that PROFIT and not the money to start it.

A CHECKLIST would be- How do you apply the money made; how  have you handled those customers, how DO you manage the business money away from personal desires, and where you have employees, how you manage them and comply with basic legal, economic and social challenges HAS been the problem of business.

This explains why many businesses fail despite thousands, millions and billions invested into it.

ISSUE 2. ANALYSIS
Take time to do your findings, business analysis or business plan. Do not invest because you see someone doing well. Let me give you some sad examples;

SCENARIO 1. You were driving past a street and sees cars lined up at a filling station and you conclude it’s profitable and hurriedly to set up yours with say 40 million.

PROBLEM:

- some people open businesses as a front for illegal deals such as illegally refined petroleum products, money laundering and so on and not to do real business. It’s just a facade!! So while you may think there is so much money and you go ahead to build filling station of say 20 million, the guy sells half truck of good product, mixes the rest with his bad product, adjust dispenser fraudulently and sells the same price with you who buys real product at approved price. You can’t compete with him.

To add to this, that filling station may be one out of many the owner has and by so doing, provides financial cushions for the business even when things go bad or the owner could be leaning on other businesses to keep the station going.

So when you hurriedly build yours on wrong assumptions, even without getting your capital back, after years, the business dies. Your money GONE!

- after building your station and you realize that you are struggling to dispense only one truck in a whole week. You are not NNPC that exhaust 4 Trucks a week. You still have to pay salaries, burn deisel, pay for security and maintenance. You then realize that even in 10 years, you cannot realize your CAPITAL the business dies. Your money GONE! You will be shocked that in 10 years, you still may not get your capital, let alone profit!

This is why you have many locked up stations.

- LESSON: do proper business analysis before making the final investment decision.

SCENARIO 2. You see someone importing tyres say  for Caterpillar and the guy is making it and you hurriedly set up yours.

PROBLEM: That man possibly has been in the business of importation for years, learnt the trade and taking advantage of the weaknesses. A Caterpillar tyre is so big one can hide many goods inside one. He pays the custom duties for tyre and sneaks in many other goods. In fact, the business of Caterpillar tyre is the mask behind his real business and all you see is the tyres and his success.

LESSON: don’t invest your money in a business you know nothing about. Spend the money rather on feasibility/analysis and business plan to save you the loss. So a business of say 20 million investment, with 2 million, your feasibility studies and business plans will let you know if you should go ahead or not and save you the losses, pains and frustrations. This is why you have business development consultants whose job it is to guide your investment decision. It’s cheaper to take a well informed decision than make an avoidable loss. Not all that glitters is gold.

CONCLUSION
In Nigeria, Institutions of Government are dead, no regulatory agency is alive so you cannot compete and survive favorably.

Agencies of government are only out there to take registration fees and charges and not to check standards so don’t be fooled. Invest in what you can manage well and survive based on proper business analysis.

PLEASE what other one thing you think should be added to the list for someone out there about to start a business ?

Please share your experiences and thoughts in the comments section.

- Barr. Moses Oruaze Dickson
#BusinessLesson

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