Business Plan Competitions in Nigeria: Are they always worth the stress?

Many Nigerian entrepreneurs and business owners looking to raise either startup capital additional capital to fund their growth may have had cause to participate at a business plan competition in the past. Are business plan competitions really worth the trouble of submitting and participating fully in? We shall find out at the end of this article whether or not they are worth the stress.

What are Business Plan Competitions?

Let us begin first by asking what are business plan competitions? They are competitions designed usually by governments, international development agencies or consortium of investors to identify, mentor, and fund small and medium scale businesses which are viable and have great potentials for growth, employment creation and wealth creation. Usually they are part of a larger project by governments and major international organisations to achieve sustainable development goals or enable various countries achieve major economic and developmental aims. Therefore a business plan competition is both an economic and social development project.

•  Business Plan Options for Nigerian Entrepreneurs
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• How Much Does it Cost to hire a Professional Business Plan Writer?
• Top 5 Misconceptions Nigerians have about Business Plans

Why Should Business Plan Competitions Matter to Entrepreneurs

There are a few reasons why you should participate in Business Plan Competitions. The main reason is that you could attract funding for your business if you win at the competition - that is not including the prize money by the way. Some business plan competitions like the Abuja Business Plan Competition offers prize money for the best 10 entries in addition to access for funding from high net worth individuals who may be interested in investing in SMEs with huge growth potentials.

Another benefit is the chance to network and meet potential business partners and customers. Like a trade fair which is principally a networking and marketing event, you could say a business plan competition also offers entrepreneurs new business opportunities that they may not have heard of but for the business plan competition.

Entrepreneurs can also be mentored through trainings, courses, conferences, case studies, lectures, affiliations with established business schools and institutions to mention a few entrepreneurs can actually be empowered with new skills, knowledge, information and strategies that could take their businesses to the next level.

Why Business Plan Competitions may be a waste of time

The other end of the divide presents the failure of the human factor in most noble projects. On one hand, business plan competitions are designed for entrepreneurs but they may not function that way. The organisers usually have interests and goals to achieve which may not correspond with the expectations and interests of the applicants at the competitions. Some entrepreneurs understand their businesses thoroughly but the competition organisers may hire ‘experts’ to review their applications and many of these so called ‘experts’ are questionably qualified to assess the viability and potentials or otherwise of emerging new businesses.

Most startup businesses which attracted huge funding for their businesses never applied to a business plan competition, because there are other alternatives which show greater promise. So someone like Mark Zukerburg who didn’t get the funding he required for facebook from a business plan competition may be right to ask “why bother then?”

Stiff competition and limited funding also reduce the chances of serious entrepreneurs with bankable business plans and viable businesses as well who may have to struggle to convince a panel of judges that they and not others should be considered.

There is also the issue of the integrity and competence of the competitions’ managers. YOUWIN for instance has faced allegations of favoritism, nepotism, lack of due diligence and lack of due process in the award of grants. Many grant winners have folded up their businesses due to inexperience, poor management, an unviable business model or other risks that were not factored in when these businesses were being assessed for viability and suitability for grant.

Business Plan Competitions in Nigeria: past, present and the Future

There will always be business plan competitions available to Nigeians whether they are perennial – once every 3 years – like the Abuja Business Plan Competition or annual like the YOUWIN, African Young Entrepreneurs Empowerment Nigeria, Tony Elumelu Entrepreneurship Programme or one off like the Pat Utomi @ 60 Business Plan competition, they have come to stay albeit for an uncertain period. Some other global and regional international business plan competitions hold in various parts of the world and Nigerian entrepreneurs can seize advantage to be part of it.

My Take on Business Plan Competitions

If you are new, young, inexperienced but have a business you believe so much in, then go ahead and participate in a business plan competition. This is because even if you don’t get funded, there are other benefits you can gain from them. If on the other hand you have lots of experience, you have an existing SME with strong growth and profit potentials and you have made concrete progress in growing your business with the little resources you have, then look for alternative sources as they are usually more promising, that is not to say business plan competitions are only for novices, but serious investors with interests in SME ventures are often nowhere near business plan competitions and they are not likely to fund startups run by inexperienced entrepreneurs.

Are you looking to submit a bankable business plan to an investor, bank or business plan competition and need very sound and reliable write up? Give me a call: 0803 206 4106 or email me: paulonwueme@gmail.com

How to Setup a Microfinance Bank in Nigeria

Microfinance banks as we have them today evolved from pre-2005 community banks and cooperative societies which carried out informal financial services to the benefit of low income, rural dwellers who were too far from accessing retail banking services from commercial banks or earned too little to even be worth saving or approaching them for loans.

The Central Bank of Nigeria saw this situation and noticed that despite the huge acceptance of the Esusu System (local/informal revolving, interest free loan scheme) was very well received in Nigeria only a few corporate organisations were tapping into this.

Nigeria’s rural poor cumulatively could generate over N280 billion in savings annually (as at 2005) and cheap access to loans and other business funding meant a lot of people could move out of poverty as they fund their micro businesses – especially rural subsistence farmer, petty traders, artisans, low income salary earners and other unskilled labour. 

Business Opportunity for Setting up Microfinance Banks in Nigeria
There are plenty of reasons microfinance banks in Nigeria are needed. But we shall look at only 4 today.

Huge demand for affordable Loans to Micro, Small and Medium sized Businesses 
The number of small and medium sized businesses in the economy that need finance to fund their operations but are unable to do so is really huge. Less than 54% of Nigerians have bank accounts and interestingly many of these people not captured own farms, run small sized commercial ventures and have their eyes set on doing bigger business which without additional funding they will be unable to do. At least N600 billion is requested for by SMEs annually but less than N300 billion is granted.



Increase in Population of SME Businesses Captured in the Formal Sector
More hitherto informal businesses are migrating into the formal sector. For instance, small food retailers like 5 years ago would have grown into medium sized businesses employing from a few to dozens of employees. These employees would somehow need to be captured in a payroll system which would require documentation. The business would need to start paying taxes, pensions etc. But this same business may be better served by a microfinance bank which is closer and more compatible than a commercial bank.

Microfinance Banks are strong drivers of savings among low income earners
Many low income earners may be know the benefits of savings but microfinance banks offer greater services in mobilizing them to save than commercial banks. Low income earners who prefer Esusu scheme for target savings are more likely to patronize an MFB than a commercial bank to open and operate a savings account - the reason being that savings can be a major source of credit and financing to them, which commercial banks are less likely to deliver on.

Challenges of Running Microfinance Banks in Nigeria
In the Nigerian business environment running an MFB is a huge challenge. There are many obstacles and threats which could both slow down or even stifle your success in the business. For instance;

Internal Bank Fraud
While the CBN, EFCC, NDIC, NDLEA and the police have played crucial roles in limiting internal fraud in many MFBs, there are still instances of where bank staff make away with depositors funds. Some MFBs have even folded up because a director made away with huge sums of money under various pretext. This is a reality which they still face till date.

Loan Defaults from some Customers
In comparison to commercial banks MFBs tend to record less loan defaults. In fact petty traders and artisans who are less educated seem more likely to repay a loan than a formal business run by educated people. But there are indications that loan defaults among Nigerian 
MFBs have been on the increase year on year by very small margins.  Loan defaulting has a way of frustrating revolving loan schemes which in turn can discourage further savings.

Misapplication of Loans
Some people will approach a bank to raise a loan for their business but divert it to pay house rent, splash on wedding or cater to another non-business need which could lead to them either not repaying the loan or taking longer than they should.

Mini Commercial Bank Syndrome
A newspaper report quoting the CEO of an MFB noted how most MFBs in Nigeria are struggling to stay afloat. In fact most of them are close to closing down as over 40% of the entire market is captured by just 10 out of 991 existing MFBs. This was attributed to ‘mini commercial bank syndrome’ where the MFBs function like commercial banks and target more of middle level customers than low income earners and micro businesses. According to the CEO when you neglect the core microfinance practice you are heading for insolvency which most MFBs in Nigeria are currently doing.

Setting up a Microfinance Bank in Nigeria is not too hard and offers great Returns
You can actually start a microfinance bank in Nigeria with as little as N20 million operating from just one unit location within a state. Alternatively, you can startup as a state MFB with N100 million startup capital or N1 billion for national MFB. The return on investment (if you manage the business well) can be as high as 35% and this can be realized by your 3^rd year. Your first year is capable of generating over 20% ROI.

Conclusion
Setting up an MFB in Nigeria has stringent requirements but they are not too difficult for serious minded individuals who want to invest in it. Secondly while the market is growing, there are challenges to deal with and but sound management practices can handle most of them. The future of MFBs in Nigeria will likely improve as more people in the informal sector have increased access to financial services.

Want to setup a microfinance bank in Nigeria and need a bankable business plan with detailed industry analysis, market information, financial projections and management setup plan. Give me a call: 0803 206 4106 or email me: paulonwueme@gmail.com to have one prepared for you.

Sample Business Plan Online Fashion Store in Nigeria

An online fashion store in Nigeria is a viable business venture but there are challenges which could potentially stifle its potential to be profitable, sustainable and ensure growth. Nigeria is one of Africa’s fastest growing and largest e-commerce markets and is expected to be worth at least N152 billion ($400 million) in annual sales by 2020. There are at least 150 existing fashion stores with online presence competing for a share of the ever expanding (16.1% annual growth) Nigeria target market. More of this breakdown will be explored in this article. 
 
An online fashion store is an online shop which stocks and sells a range of fashion items such as; hair products, clothing, bags, shoes, wrist watches, belts, cosmetic products, perfumes and designer fabrics among a host of other products. The online fashion store business hasn’t been around for very long with the major players in the market coming on board in 2011 with dealfish (now Olx.com.ng) setting the pace and the entry of other players such as; kasuwa now jumia.com.ng, konga, kaymu among others coming up at various times between then and 2015.

The Opportunity in Nigeria’ Online Fashion Market
In 2014, the Nigerian online retail market was worth at least N800 million per week in gross sales with fashion items capturing a sizeable 25 to 30% of that amount especially clothing and shoes. By 2016, the market has grown to over N1.5 billion a week with at least 105,000 transactions conducted on the two largest online retail stores namely; Jumia and Konga – despite an economic recession.

By 2020 when more Nigerians would have improved online shopping options with the expected development of online payments, the market would experience weekly sales of over N3 billion going by current market growth rates and expected market impact of technology and increased purchasing power of Nigerian shoppers.

The current demand level for online shopping is driven by several social and economic factors among which are; increasing urbanization, improved payment systems, increased brand awareness, cheaper internet access, stronger customer retention strategies and 12 other factors which will progressively increase annual demand by online shoppers for fashion items.

There are strong indications that less than 12% of Nigeria’s potential online market has been captured as at 2017 and this has implications for new entrants into the market as well as the top two market players – Konga and Jumia who currently control over 85% 
of all localized e-commerce transactions in Nigeria.

Challenges with setting up and running an online Fashion Store in Nigeria
There are at least 22 identified challenges that will adversely or moderately affect the success of running an online fashion store in Nigeria but here are a few to take note of;

• There is very stiff competition in the market that new entrants must deal with if the hope to reach their target market.
• Online scams in Nigeria is a major deterrent to online shopping among the potential target market
• Cybercrimes like hacking, identity theft, phising and many others present serious logistical and financial challenges to online stores
• How will customers in rural parts of Nigeria be served with their deliveries
• The high incidences customer complaints which are left unattended to usually create negative backlash for online retail stores
• Creating a trusted and respected brand is very expensive and many new startups must find less expensive ways of doing this which is painfully slow and inefficient

Financial Summary
The financial projections for this financial analysis is based on 5% sales conversion rate and average of N6,000 per transaction and 8 transactions per day for 300 days in a year, cost of sales 79.2% of gross sales.

Startup Summary

• Premium e-commerce website: N250,000
• Inventory: N500,000
• Advertising Budget (6 months): N300,000
• Operating costs (6 months): N630,000
• Contingency: N300,000
• Rent: N300,000
• Other expenses: N600,000
• Total: N2,880,000

Profit and Loss Summary  

• Gross Sales:                 14,400,000   
• Cost of Sales:               11,400,000
• Gross Profit:                  3,000,000   
• Operating Expenses:       1,260,000
• Profit before Tax:           1,740,000
• Taxation:                           522,000
• Profit after Tax:              1,218,000
• Return on Investment:       42.3%
• Breakeven Period:           8^th or 9^th month
• Payback period:              24^th to 30^th month

Conclusion
This is a challenging business to do but there are also plenty of untapped opportunities as the market is not properly served even by the big players. The success or otherwise of this opportunity depends on your ability to meet your sales target which in turn depends on having an effective marketing strategy and a thorough knowledge of market trends and consumer needs. Achieving these requires a detailed marketing plan and the right team to work with to make them happen.

Looking to setup an online fashion store in Nigeria and wish to have a professionally written business plan to help you accomplish setting one up? Give me a call: 0803 206 4106 or email me: paulonwueme@gmail.com

How to Setup a Profitable Beauty, Hair Salon in Nigeria

A beauty salon is a place where mostly women visit to receive beauty treatment/services for their hair, skin, nail or facial needs. There are different forms of beauty salons such as nail salons, hair salons, beauty parlours, cosmetic shops or even spas. Each of these type appeals to different target market needs. Today’s article is merely dealing with the hair aspect of the beauty salon business in Nigeria.

Market Opportunity for Beauty Salons in Nigeria
There is a huge market for haircare products and hair treatment service in Nigeria. Nigeria is Africa’s second largest market for hair products with consumers spending over $210 million (N798 billion) in 2016 on hair extension products alone (both natural and artificial). The average middle class Nigerian woman (21 to 45 years) spends between N9,000 to N30,000 monthly on her hair mostly on extensions.

This is because for most women in Nigeria, their hair is a source of confidence and scruffy looking hair even for a not so classy lady is a nightmare they wish to avoid. As a result they go through a lot of inconvenience to have a really nice hairdo – spending hours at a salon ‘fixing their hair’, saving to raise the required amount to make the next hair style in say 2 or 3 weeks times – even sometimes the buck falls on the men in their lives to foot the bill of styling their hair.

A conservative estimate of this market reveals that at least 5.1 million Nigeria women qualify as target market who can spend within the N9,000 to N30,000 monthly range which means a beauty salon that in a big town or city such as; Lagos, Abuja, Port Harcourt or Benin should be able to attract sizeable patronage if they have an effective marketing strategy in place.

Target Market Summary Hair Extension yearly gross sales in Nigeria

                          

·         Total population: 24.45 million (2010 est.) ·         Urban Population: 13.45 million ·         Middle class Population: 5.1 million ·         Estimated spending for Nigerian middle class women on hair extensions:  N797.6 billion

Challenges of Beauty Hair Salons in Nigeria

• Irregular Power Supply: the main challenge is having adequate power supply to power the different machines required. This doesn’t come cheap because fueling costs and maintenance cost fluctuate very unpredictably and this can affect the bottom line by as much as 30% of gross profit.
• High cost of Rent: as if that is not enough, finding an ideal location for a premium hair dressing/treatment service is both expensive and difficult. If you want to target the middleclass and you can’t afford to find a place within their reach that you can afford, how can you possibly achieve your sales target?
• Difficulty in finding competent hair stylists: professional hairstylists mostly prefer to be self-employed but when they are not, usually don’t come cheap. But that is if you can even find them because they are hard to come by. Which means you’ll have to make do with apprentices and inexperienced hairstylists which may delay your business growth for a while
• Difficult customers: some customers don’t know what they want and even when they know may make ridiculous and frustrating demands. Others may be very rude and aggressive to your staff and may bad mouth you and your business. Dealing with such customers can be difficult especially if they have been patronizing you for long and have even referred others to you.
• High amount of fake/counterfeit hair products: the market has been infiltrated with low quality, cheap imitation hair extension and hair creams/shampoos which makes delivery quality hairstyling difficult and frustrating if your customer insists on buying her own hair style products. 

How much is required to setup a Beauty/Hair Salon in Nigeria
For a small sized operation with 1 main professional stylist and 3 assistants/apprentices, a good breakdown should look like this;

• 2 wall hair driers – N80,000 (N40,000 each)
• 2 hand hair driers – N10,000 (N5,000 each)
• 4 hair straighteners – N16,000 (N4,000 each)
• Stock on hair creams/shampoos – N100,000
• Stock on other hair accessories – N40,000
• 1 year shop rent – N300,000
• 3 months operating costs – N300,000
• Signage and print advert – N90,000
• Furniture – N300,000
• Contingency – N300,000
• Total – N1,536,000

Financial Summary and Projections
Assuming you can on a daily basis attract 6 customers and the salon is open for 300 days in a year with each customer paying on average N4,000 for your service then the projections should look like this;

• First Year Sales – N7,200,000
• Cost of sales – N2,880,000
• Gross profit – N4,320,000
• Total Expenses – N1,800,000
• Profit before tax – N2,520,000
• Taxation – N756,000
• Profit after tax – N1,764,000
• Payback period – 10^th or 11^th
• Return on Investment – 115% within 12 months

Conclusion
You can recover your initial investment within your first year if you can achieve your sales target and minimize your operating costs. There is stiff competition in this business but there is also plenty of room to succeed - as this business favours innovative service and marketing approach.

Are you looking to start a hair/beauty inclined business in Nigeria and need a well-researched, well written business plan? Give me a call: 0803 206 4106 or email me: paulonwueme@gmail.com for details