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Monday, November 16, 2009

Starting a business with little or no capital in Lagos Nigeria

By Onwueme Paul

One of the very much talked about topics on the business section of nairaland (Nigeria’s largest internet community) is starting a business with little or no money. Most of the people who post these topics or make comments are people with little capital but who wish to have a commercial venture they can call theirs.
From titles such as “what business can I start with N 10,000” to others such as “I have N 200,000 what can I invest it in” people are searching for micro businesses
(sme businesses) they can start but with great potential for profit.

While it is good to start a business small and grow it so that it becomes profitable eventually, setting unrealistic goals or having grandiose expectations of small businesses will certainly defeat the purpose of setting one up in the first place. A business that costs say N 100,000 to set up would have limited working capital which in turn means limited potential for profit and growth hence eventually external funds would be needed to grow the business. Expecting to make N 50,000 a month as profit starting with the first month is a bit unrealistic although it is possible. If however you choose to set up a micro business with little or no funds here are a few things to note;

1. Businesses take time to mature

When going into business, consider that a time frame is required for the business to build a customer base. Also profit comes only after customers are satisfied and desire to get more in other words your business will mature only after customers are happy patronizing you and recommend you in turn to other people. Typically many businesses take 2 or more years before they can be called mature.

2. Businesses need capable hands to run them

Never make the mistake of employing the wrong hands to manage your business. If you intend to run your micro enterprise as a part time venture, get a trusted hand to man it while you retain your job or continue with your studies as the case may be. The major cause of business failure is employing the wrong hands to man your business.

3. Business capital must be different from personal funds

Agreed that your funds were initially used to setup the business but the moment the business takes off consider the funds you used in setting it up as business capital and not your personal funds. That means if you are broke and urgently need money for personal use, you cannot sell off part of your inventory or use your working capital to meet those needs. Your decision to go into business is strictly for business unless if you have already decided to use part of the business profit as an additional source of income, you do not have any personal funds in that micro business you call yours.

4. It is possible to setup a business without funds but appreciable human capital is necessary

If you have skills, work experience, integrity, connections and knowledge of how to setup and run a micro business then you do not necessarily need money to own one. The aforementioned are capital in lieu of money because you could partner with someone who has the funds but lacks human capital for your desired business or simply approach a bank for a loan but with a sortie to guarantee you against default. Some business such as service based can run without capital (estate agency, commercial typing etc)

5. Have goals for your business

Every business without a goal is simply waiting for doomsday. All businesses including micro businesses need goals to run smoothly. Goals like servicing a minimum number of clients within a stated period or surpassing a previous target performance or industry average are goals. Some companies embody their corporate goals into vision and mission statements. You should do the same.