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Monday, November 28, 2016

Is it advisable to invest in manufacturing in Nigeria for 2017 or to venture into trade?

The year 2016 has been one of the worst economically in the history of Nigeria, first came devaluation of the Naira due to scarcity of dollars for importers, there has been spiraling inflation of over 18% and a liquidity squeeze (partly due to non-performing loans and the Treasury Single Account) which is affecting the ability of banks to fund businesses.
The question of whether or not one should invest in manufacturing or trading in 2017 is necessary to answer because of the implication it could have on investors and the economy at large. Another way to look at it is would I make more money in 2017 and perhaps risk having losses if I put in money to fund a manufacturing Startup or trading venture.  

What this means is that an ordinary businesses is that there will be little money to fund working capital and/or expand their operations. In addition to this is the cost of importing raw materials has gone up by over 100% in less than 18 months and worse still the Finance Minister Mrs Kemi Adeosun has projected the recession to continue into first quarter of 2018.

Key Economic Factors in Nigerian Economy for 2017

  •   Recession
  •     Government Policies
  •   Import tariffs
  •   Weak Naira
  •     Declining Purchasing power

 What will the economy in 2017 be like for manufacturing and trade?
If you decide to go into either trading (retail shops such as supermarkets, boutiques, pharmacies, auto parts stores etc) or manufacturing such as cottage industries or agro processing factories it is important to mention that these issues will not be avoidable.

Decreased patronage
As the purchasing power of the middleclass is gradually declining so too is the tendency and ability of businesses to and individuals to buy products and services, so people will place premium on price or would prefer cheaper substitute products if available, this can only mean decreased sales.

Capital Flight
More foreign companies based in Nigeria are less likely to invest more, rather they would take away their profits to their home countries

Decreased Capacity Utilization
In order to compete and maximize profit, companies may have to reduce their capacity utilization and instead focus on reducing costs to stay afloat.

Decreased Profit Margins
As production costs go up fast but sales increase at snail speed this should lead to decreased profit margins especially for manufacturers. Retailers would suffer this less

It may be more profitable to engage in trading as retail businesses have more options in terms of product selection and diversification than manufacturers do. Therefore in my opinion engaging in trading will be a more profitable investment in 2017 for Nigerian entrepreneurs 

Hi, my name is Paul Onwueme and I write bankable and professional business plans. Give me a call on: 0803 206 4106 or email me: paulonwueme@gmail.com for details

Monday, November 14, 2016

5 Services a Business Plan Consultant can render to a Nigerian business owner

A business plan consultant in the strictest definition is anyone who can help you write a professionally sound business plan or help you improve on one you are currently writing or have already written or even advise you on how to best approach your targeted audience with the business plan you intend writing. For most Nigerian business owners or entrepreneurs they only need a business plan when trying to secure a bank loan or approach investors but rarely as a business guide and so it natural for many of them to ask besides what the fancy title suggests what can a business plan consultant really do for you? Another way to put this question is why bother approaching a so called business plan consultant in the first place?

A Business Plan Consultant can help improve your existing business plan
You are writing one business plan already and it isn’t as sound or as professional as you intend it to become, what’s the way forward? A business plan consultant is what a technical adviser is to a football team constantly losing matches or what a dietician is to a person in need of good diet. They diagnose your existing problem and show you how to go about solving it or improve your existing performance through actionable plans. So a business plan consultant can help you improve on your existing business plan to make it more professional and appealing

Business Plan Consultants give workable advice on business loan application
Sometimes you may not realize that banks reason differently from investors, while the investor is primarily after profit and the viability of your business, the banks are more interested in the risks involved, your market position against the existing competition, the accuracy of your financial projections and your repayment plan. A business plan consultant will know just how to tailor your business plan to work well for a loan application and also advise you on what to avoid in the application process.

They also write professional and bankable business plans
This is similar to advising you on writing your business plan except that the burden of writing the business plan now falls on the business plan consultant. You state your terms and explain the business venture to the consultant, he reviews the opportunity then writes one based on realistic assumptions.   

Business Plan Consultants also give sectoral and industrial analysis
If you want to set up a business but decide to do a little feasibility analysis of a business opportunity or you want to identify new business opportunities on the basis of relevant industry and economic sector who should you meet? A business plan consultant can mention past and present trends and relate both with possibility of future growth or not and hence with this analysis you could make informed decisions on your next step to take.

Carry out market research and feasibility studies
When you discover that your business has stiff competition and you are losing your market share, you need a marketing plan to help position your brand, you wish to exploit business opportunities in a new market region etc what kind of information will ensure that you don’t make costly marketing mistakes or fail to identify risk factors that could kill your business? The answer is a thorough market research or a feasibility study to the rescue but only one that is professionally carried out.

Are you in need of the services of a business plan consultant? Give me a call and I’ll work you through the process: 0803 206 4106 or email paulonwueme@gmail.com

Tuesday, November 1, 2016

Nigerian Business Opportunities: Review of Car Wash versus Barbing Salon Businesses in Nigerian Cities

Is a car wash business more profitable than a barbing salon or vice versa and if so how can I go about setting one up in Nigeria? That is what this article seeks to solve and I’ll get to it shortly but for my blog readers I’ll need you to pay attention to this piece of information.

This is the first in a series of articles I will be doing in the coming weeks at least one of this type of article will be written every month where I’ll compare two businesses side by side and write about their similarities, differences, opportunities and threats. 

Now to the article of the week, is a car wash business more profitable than a barbing salon business? My answer is yes and no because the factors which determine success or failure for both are dynamic, sometimes unpredictable and other times unmeasurable. For instance if you read my article on how to start a profitable barbing salon you will recall I mentioned power supply as a key success factor but you can easily overcome this if you have a solid business model and marketing strategy as your sales should override the hefty sums you spend on powering your salon but you can’t say the same for a car wash except those that work with high capacity automated machines. As far as power supply is concerned for most car wash business in Nigeria this is not a big issue. 

Then what about sales margin? In car wash the sales margin depends on how much sales you generate i.e the more you sell, the lower your sales margin whereas with barbing salon the sales margin may vary both ways, the more you sell the more/less your sales margin so eventually it boils down to who can generate more sales relative to expenses to determine the winner. Let’s however check out a detailed breakdown on each business opportunity.

5 Success Factors that make a Profitable Car Wash Business in Nigeria
If you setup a car wash business in Nigeria then you must take note of certain factors which will ensure that you remain in business at least sustainably for a reasonable period of time before the competition show up – even when there is competition you can still make huge profits.

  • High Population density of vehicle owners – in cities and towns with large number of vehicle owners like Lagos (over 1,200,000 cars), Abuja (over 500,000 cars), Port Harcourt (over 900,000 cars) and kano (over 600,000 cars) there are many car wash centers and this is expected because 1 out of every 6 car owners visit a car wash at least twice a week. Hint here is to settle down in busy parts of the city with large number of cars plying daily to enjoy steady patronage.
  • Commercial Parts of Towns – places with a lot of very busy markets, shopping malls, offices and large companies tend to have a huge need for car wash services
  • Sizeable population of corporate middle class – Most people who patronize car wash centers are people engaged by corporate organisations rather than commercial vehicle owners, but in certain cases taxi drivers especially in Abuja are good customers to many car wash providers.
  • State of Roads – Places which have many bad, dusty roads tend to also have greater need for car wash services. People who can smell this opportunity know that although bad roads are good for business, where you do your business should be in an easy to locate area with good roads.
  • Widespread Consumer lifestyle – the idea of waking up early, having a light breakfast and rushing to work, eating lunch out, driving back home late in the evening from work can only mean one thing to this person, there is little time to wash his/her car knowing that it takes at least 45 minutes to wash a car well. Better to hire someone who can wash it really well and in even less time. These are not all the factors but let’s move on to Barbing Salon and see what our analysis of this business can make of it.

3 Success Factors that make a Profitable Barbing Salon Business in Nigeria
The barbing salon business is a lifestyle business and a profitable barbing salon is one which targets fashion conscious men with good tastes. So what factors can attract customers to your salon?

  • Sizeable population of male folks – A barbing salon located in a place with scant male population like in open air markets or rural communities will suffer from low patronage, most men move to the cities to hustle and often frequent bars, banks, offices, shops, visit friends etc This factor is suitable for first time customers
  • Excellent Personal Service – this is a factor that keeps your customers coming again and again. If they enjoy your personal service, your friendly and courteous approach, your unique but professional touch, they’ll visit you again
  • Relaxing Ambiance – Barbing Salon for some men is a second lounge, a place where they can hang out and have a nice conversation while being entertained with good music or sports. If your salon is neat, well decorated and has entertainment services to go with it, trust men, they’ll always be men.

6 Things Car wash businesses and barbing salons have in common?
Both of these businesses have the following in common;

  • Service based – they don’t involve manufacture of any goods just service that requires skill
  • High profit margin – they both enjoy high profit margin of over 60% on gross sales although in some locations where rent is low and sales is high, car wash has a slight edge.
  • They’re both hard to monitor – if you employ people to run the place for you, there is no way to know how much they are making while you are away except if you give your workers daily sales target
  • Easy entry into the business – Anyone, anywhere can wake up tomorrow and start both businesses with little capital
  • Location may not be a decisive factor – most times almost any spot in a well populated area will do, it is your personal touch that often makes the difference in terms of patronage
  • They can both be run on part time basis – the owners of this business can move on to do other things full time while running these businesses part time
What are the Start up Financial and Technical Requirements for starting a Car wash and Barbing Salon in Nigeria and their Financial Projections

Car wash needs buckets, cleaning tools and reagents, water source and a motor for pumping out water plus rent for open/vacant space everything coming to just over N300,000 depending on location, a barbing salon on the other hand needs clippers, sterilizing machine, towel warmer, large mirrors, entertainment gadgets, a shop location among others coming to at least N800,000 depending on location. Please note I am assuming both of these businesses will operate in the same vicinity. The financial projections reveals that breakeven for car wash can happen within 3 months whereas barbing salon can happen between 4th and 7th month. However in terms of sales Barbing salons have the upper hand as there are more people needing haircuts that cars needing cleaning and the standard fees tend to be the same for both businesses but with car wash be slightly more expensive (N400 for haircut, N500 for full body car wash).

If you are intending on going into any business and need well written business plans or proposals to help drive home your point to investors or financiers, give me a call: 0803 206 4106