STARTING MY OWN BUSINESS (1)

Understanding Business Fundamentals

Monday's here again and so is a new series. Last month, we talked about Dealing with Negative Emotions and it was a big help to a lot of people. This month, we'd be talking about businesses and how to start a business. 

If you're thinking of starting a business and you're unsure about how to go about it, or you've already started a business that isn't really growing as you'd like, then this series is for you. 

If you're already in business, and it's doing pretty well, you could share your opinion with us in the comments section and let us know what we might have missed out on, from your personal experience as a business person. 

What You Would Find in This Series

1. The Fundamentals: You would find out what a business is, the difference between a business person and an entrepreneur, why you should go into business, and typical challenges Nigerian businesses face

2. Who and What Do I Need to Start a Business 

3. When and Why Do I Start My Business

4. What Business Can I Start With Little Capital

5. What Business Can I Start With Decent Capital

So, let's start with our first post in the series. 

What is a Business? 

According to Investopedia, a business is defined as an organization or enterprising entity engaged in commercial, industrial, or professional activities. Businesses can be for-profit entities or non-profit organizations. Business types range from limited liability companies to sole proprietorships, corporations, and partnerships.

Wikipedia defines business as the activity of making one's living or making money by producing or buying and selling products (such as goods and services).

Whichever definition you choose to go with, you must acknowledge that every business must involve activity that is carried out with a goal in mind. This goal is often with the aim of making money to support or sponsor a livelihood, but that is not always the case. 

Note that in this post, you would see the word business used a lot, even though it might border on the idea you have of entrepreneurship, so let's clarify the similarity and differences between them. 

An entrepreneur runs an enterprise, while a business person runs a business. 

A business person is a person who runs a business, undertaking an unoriginal business idea. On the contrary, an entrepreneur is someone who first initiates a product or business idea and thus the leader of that in the market. In the long run, an entrepreneur becomes a businessman, but there is a difference.

For example, a person who starts out a new fashion line is an entrepreneur, basically creating a market that didn't exist before and in doing so, takes on a high degree of risk. A business person sees that the entrepreneur is doing well in the business and takes on the idea when the market is already created, see the difference? 

The entrepreneur will, however, have to do business and commercialise the fashion line to stay afloat. 

This means that for the sake of this series, we're talking about two sets of people. The first set is people who are adopting existing business ideas, while the second set is people who are creating new ideas that eventually want to grow that idea and make a financial profit out of it.

Business Facts

1. Nigeria has a population of over 200 million people, with an over 36% unemployment rate
2. 43% of the youths who make up about 70% of the total population are unemployed
3. Compared to 2009, Nigeria's economy is at a 20.5% inflation rate right now
4. Food inflation is at over 550% compared to 2009 (NBS)
5. Nigeria's economic freedom score is 54.4 - the 124th on the global rank (Index of Economic Freedom)
6. Government spending has amounted to about 12.5% of Nigeria's GDP
7. 46.4 million Nigerians own a business (Business Day)

Why Should I Go Into Business? 

1. To Meet a Need 

Much more than any other reason, you should go into business if you are seeking to meet a need you have identified. People are always looking for a way to make their lives easier and better, and are willing to pay for that, even without compulsion. 

Your desire to go into business should be fuelled by the discovery of a need and your ability to create a solution. 

Fun fact, the market is never over-saturated for the right product. 

In seemingly established areas of the economy, such as transport, fashion, energy, housing etc, there are still needs that are yet to be met, and people are waiting for you or whoever would step in to identify and meet those needs. 

2. To Provide Value

In addition to having their needs met, people want to be satisfied with the value you provide. The market will always find a way to provide competition for you, so you have to be driven to provide top value to people in a manner that impresses them and builds your reputation as a credible and valuable brand in your industry. 

3. To Make Profit

Some form of profit is always the major reason most people go into business. If people would devote their time and energy to a venture, that venture should be able to take care of them, either in the short or long run. 

If you're starting a business, while profit shouldn't be your major focus, it has to be a part of your subconscious thought process, minimising loss and maximising profit without compromising the quality of your product. 

Other reasons might be:

4. To Create Jobs

5. To Find Freedom

6. To Grow the Local Economy

Challenges Facing Nigerian Businesses 

1. Funding 

This is the biggest challenge businesses would claim to face, and while this might not always be true, it cannot be disputed that any business without financial muscle will eventually die off. 

Getting the necessary money to start a business can be a difficult and frustrating process, especially with the terrible times the Nigerian economy is going through. 

Inflation is at a record high, with prices of goods highly volatile and subject to continuous increase while income is the same for most salary earners. 

Even financial institutions that offer some form of support are now more strict in their policies and only provide the funding at ridiculously high-interest rates, which is dwarfed by the economic crash. 

2. International Competition

There exists a certain lack of trust in local goods when foreign counterparts are available. This occurs even among the elites in the country. Nigerian products are perceived as somewhat inferior, and on the other hand, most people believe that whatever is made and sent here from abroad is of a superior standard. 

This couldn't be further from the truth, but it is a struggle trying to change that mentality. Even when local goods are produced here, there is a desire for the goods to still be made with imported materials, as they last longer. 

As you read this, you could review how many locally made products you use daily, compared to the foreign stock. 

3. Government Policies

Over the years, the policies of the government have been largely and increasingly unfavourable to businesses, ranging from small-scale to large businesses. 

Issues such as lack of infrastructure, security, power supply etc have only served to further increase the cost of doing business, coupled with the fall of the naira in recent times. The failure of the government to reduce the rate of corruption has also served as a bottleneck to the growth of businesses, as a lot of businesses are unable to undergo relevant documentation without going through the back door. For example, registering a business name could take months, but this could be reduced to weeks or probably days if you know who to talk to. 

The scarcity of the dollar has also had a far-reaching effect on businesses in recent times, in addition to the limitation on the monthly dollar spend for accounts in the country. 

4. Training

A lot of people in business are not adequately trained or oriented before they set out for business. They just see a thing or two left and right and believe they are ready, thinking that all that is involved in a business is to provide a good or a service and get paid for it.

This is especially true for young people, who mostly haven’t had the time to learn business properly, usually because they are more focused on the formal schooling system and do not really consider learning the fundamentals of business as even some business students are excellent at mastering the theories just to pass exams but are poor at putting the theories into practice.

Summary

Businesses are a must for human survival and societal growth in today's world. As a result, it is necessary that people who desire to go into business are properly schooled and understand the basics of business, including the motives and challenges they might face. The topics we would cover in this series would provide valuable answers to these topics and empower aspiring entrepreneurs for success in business.

Till I write again next week, stay smart!