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Nigeria is arguably among the few African countries with a vibrant economic environment for business startups to thrive. With more than 210 million people, the country offers a large market size for more successful commercialization of new products and service ideas. Reportedly, more than 104 million Nigerians are on the internet. These figures suggest that both online (digital) and offline (physical) businesses in Nigeria can access a viable population and ecosystem to kick-start and scale their operations to success. However, starting and growing a profitable business in Nigeria can only happen successfully if would-be entrepreneurs or business owners follow the steps outlined and explained below:
1. Generate a Viable Business Idea
The success or failure of any business venture almost entirely depends on generating a good business idea that is commercially viable from the onset. There are several methods for developing a business idea. But basically, generating a good business idea is about how you can analyze and then capitalize on market trends and customer demands to establish good business ideas that revolve around your skills and strengths. For instance, with your existing skill sets in mind, you can seek out relatable products or services that are highly needed but relatively missing in your neighborhood, locality, or community. Most likely, this will help you find viable business startup ideas that can engage and leverage your strengths for a commercially profitable outcome.
2. Choose a Form for Your Business
The next logical decision that you will have to make after generating a viable business idea is to choose a legal form or structure of ownership for your business. And, there are four main types of business forms that you can choose from including, sole proprietorship, partnership, corporation, and Limited Liability Company. It’s critically important to select the ownership form or structure that most closely matches your business needs and aspirations because each business form comes with taxes, liabilities, formation policies, and operational costs that may vary depending on the form one chooses. In other words, not only will this decision have an impact on how much you pay in taxes, but it will also affect your liability, the amount of paperwork your startup business is required to do, and your ability to raise money for the operation and subsequent expansion of your business. However, selecting a particular form for your business after carefully reviewing the pros and cons of all the various types of business forms is not a decision that you should make without seeking sound counsel or advice from business development experts and lawyers. Here is more information about the four main types of business forms:
The simplest business form or structure of ownership is the sole proprietorship because it usually involves just one individual who owns and operates the business venture. What this means is that decision-making solely depends on the proprietor or business owner. More interestingly, the owner is entitled to all profits in the business. And taxes are also appealing because both the business expenses and income are included in the owner’s income tax return. However, the owner is also responsible for losses and debts that may arise from the business. As a result, you are placing your assets at risk because they could be seized to satisfy a business debt or a legal claim against you. In any case, the formation of a sole proprietorship is easy due to its simplicity, ease of setup, and relatively low cost. So, if you intended is to own a one-person business, this form of business ownership is the way to go.
A Partnership is a business ownership structure where two or more people contribute capital and resources to share the responsibility of managing the business and the income or losses it generates. So, if your business will be owned and operated by several individuals, you’ll want to take a look at structuring your business as a partnership. However, the two most recognized forms of partnerships are general and limited partnerships. In a general partnership, all the partners contribute to the day-to-day management of the business and assume responsibility for the partnership’s debts and other obligations in general. A limited partnership on the other hand is a relationship where one or more partners are not involved in the day-to-day management of the business but serve as investors only. In short, limited partners have no control or decision-making power over the business operation and are not subject to the same liabilities as the general partners.
A corporation is an independent legal entity, separate from its owners, and as such, it requires complying with more complex regulations and expensive tax requirements. Most corporations assume the roles of people, including hiring employees, paying taxes, and owning assets. The best benefit for a business owner who decides to incorporate is the liability protection he or she receives. A corporation’s debt is not considered that of its owners, so if you organize your business as a corporation, you are not putting your assets at risk. A corporation also can retain some of its profits without the owner paying tax on them. More so, corporations have a right to sue or be sued. Corporations in Nigeria include the Nigerian Television Authority and the Nigerian Ports Authority. Some other corporations in the world include Amazon, Sony, Apple, and Microsoft.
Limited liability companies
Limited liability companies, often referred to as “LLCs,” have been around since 1977, but their popularity among entrepreneurs is a relatively recent phenomenon. An LLC is a hybrid business form or structure that brings together some of the best features of other forms of business ownership. For instance, LLCs provide business owners the limited legal liability of a corporation and the operational flexibility of a partnership or a sole proprietorship. In limited liability companies, the death, transfer, or a member running bankrupt does not affect business operations. To set up an LLC, you must file articles of association with the state branch of CAC where you intend to do business. Limited liability companies are divided into two; Private and public liability companies. Private limited companies are formed by a minimum of 2 members and a maximum of 50. However, the public companies must have a minimum of 7 members to unlimited numbers.
3. Develop a Business Plan
A Business Plan is a carefully written document that provides a detailed description and overview of how you plan to achieve your business goals and aspirations – in a commercially viable manner. At its core, a business plan helps entrepreneurs or business owners identify and portray where their business is at the moment, how far they want it to go, and how they intend to get there. It is a detailed document that clarifies your business model, products or services, target market, marketing & sales strategies, operational plan, human resource needs, organizational structure, funding requirements, financial projections, return on investment, and other necessary details that will help to keep the business on track and attract external investments if need be. Therefore, a good business plan can be used as a roadmap or benchmark to measure your progress towards achieving both short-term and long-term objectives for your business growth. It can help you focus on goals that are crucial for your overall business success and provide you with guidelines for operating your business on a day-to-day basis…Click here for Business Plan Templates you can use.
4. Raise Startup Funds for Your Business
As we all know, no matter how promising and groundbreaking a business idea is, it’s unlikely to ever get off the ground and get to the next level without adequate and consistent funding. So, after successfully creating your business plan, the next step is for you to raise funds or capital to start your business. Funding sources include personal savings, friends & family contributions, crowdfunding, angel investors, and bank loans. With a well-developed business plan, would-be entrepreneurs or business owners can attract bank loans, venture capitalists, or angel investors. Therefore, you should be very analytic and strategic with your business plan development process because it can help you secure the desired funds to start, sustain, and scale your business…Click here for a comprehensive Funding Guidebook for Entrepreneurs.
5. Register the Business with the Government
Businesses in Nigeria are legally registered or incorporated through the Corporate Affairs Commission (CAC), the authority saddled with the responsibility to regulate the formation and management of companies in Nigeria. But before you take this step, it will be wise for you to know the difference between Business Name and Company registrations.
A Business Name registration is best suited for small businesses that are not immediately planning to raise capital through the issuance of shares or do large-scale jobs. It is suitable for forming a Sole Proprietorship or a Partnership…Click here for more details on registration steps for a business name via CAC
Company registration on the other hand is a corporate structure with a separate personality from that of the people or association of persons who came together to form the business entity. It can either be a Private or Public Company. These two types of Companies can be limited by the number of shares, limited by guarantees, or unlimited depending on the company structure. It is usually best suited for LLCs and Corporations… Click here for more details on registration steps for a company via CAC
In any case, the registration steps are as follows;
- Pick and check availability of business or company name
- Complete pre-registration form and upload relevant documents
- Pay filling and stamp duty fees
Note: registration is now end-to-end on the COMPANY REGISTRATION PORTAL (CRP) with electronic Certificate of Registration and Certified Extract of registration information.
Also, it’s important to note that when picking a business or company name, make sure that it is a unique name that creates a clear image of the attributes of your product(s) or service(s).
6. Complete Your Tax Registration
Federal Inland Revenue Service (FIRS) is the body in charge of tax registration in Nigeria. FIRS is where one will be channeling taxes, including company income taxes, withholding, and Value Added Taxes. After successful registration, a Tax Identification Number (TIN) will be given to you. This TIN is also essential for the opening of your business’s bank account.
7. Get Other Relevant Business Permits and License
A business permit in Nigeria is the authorization or approval issued by the Nigerian Government through the Ministry of Interiors to a foreigner or foreign company seeking to start and operate a business in Nigeria. As a standard, the application of a business permit must be accompanied by the application for expatriate quota in Nigeria – which is an approval for foreign individuals or employees of foreign business seeking to work in Nigeria. This application for expatriate quota in Nigeria, otherwise known as Combined Expatriate Residential Permit and Alien Card (CERPAC) is also made through the Ministry of Interiors. Moreover, as a prerequisite for obtaining a business permit, a foreign-owned company that wants to operate in Nigeria must register with the Nigerian Investment Promotion Commission (NIPC), a body set up by the Government to promote and monitor foreign investments in Nigeria.
However, a business permit should not be confused with certain business licenses a company must obtain to partake in certain sectors of the economy. Relatively, some of the Nigerian business sectors have applicable and compulsory licenses that both locally and internationally-owned companies seeking to trade or do business in Nigeria must acquire. For instance: Fintech Companies will need to acquire a special license from CBN before starting their operations; Freight Forwarding companies are required to obtain a freight forwarding license from the Nigerian Ports Authority (NPA) in their respective regions before they start operations; and for you to operate in the Oil and Gas sector, you will need to be licensed by the Department of Petroleum Resources (DPR).
In any case, registering with CAC is still the first and foremost step that a foreign individual or foreign company must take to start and operate a business in Nigeria. And, it’s important to note that minimum share capital of N10, 000,000 is required for any company with foreign performance.
8. Open a Business Bank Account
Opening a business bank account requires the Tax Identification Number (TIN) and National Identification Number (NID). The business account opening process includes;
- Choosing a bank, for instance, Access, Guaranty Trust Bank, UBA, or Zenith
- Fill the application forms
- Submit any recent Utility Bill for proof of business address
- Submit Certificate of Incorporation and other business permit and licenses
- Submit the Tax Identification Number(TIN)
- Submit a valid ID of Business Owner(s)
- Submit Passport photos of the account signatory
- Board Resolution for account opening on your Company’s Letterhead
9. Choose a Business Location
Whether you plan to own a wholesale, retail, manufacturing, restaurant, or service business, getting the right location can make the business thrive quickly. Choosing a business location is not a decision that you should make without proper investigation and analysis. This is so because your choice of business location can either increase or reduce your business’s chances of survival and success. Ensure that the business location you choose is easily accessible in such a way that allows inflow and outflow of materials. Moreover, the customers should not find it hard getting to the premises. Business locations or office spaces are mainly acquired through renting or leasing.
10. Hire Your Initial Team Members
Setting up a business alone is almost impossible. There is nobody who can start and scale a business from the ground up alone. So, hiring a great startup team is a huge step that every entrepreneur or business owner must take to engender success. Therefore, you should look into bringing in qualified and experienced team members that can help you start and take your business to the next level. Moreover, your startup team must be capable of helping you make critical decisions or providing innovative strategies that will propel the company to meet its desired goals and objectives at targeted intervals.
11. Craft Your Brand Identity
In today’s overcrowded startup ecosystem, would-be entrepreneurs or business owners must be able to craft a distinct brand identity that helps them attract potential customers and rise above their competitors. Therefore, branding involves creating a desirable and visible image of your business so that your target audience can identify and differentiate your brand of product(s) and service(s) from that of your competitors. Here, you work on your brand colors, voice, logo, website, and design assets that belong to your business or company. In short, you won’t be able to successfully market and promote your business without a solid brand identity.
12. Start Your Business
After performing all the necessary legwork and due diligence based on the steps stipulated above, the next step is to go ahead and start your business. At this juncture, you have to use your business plan as a roadmap to navigate your business journey effectively. So, it is time for you to believe in yourself and in the ability of your startup team members to deliver a successful and sustainable business. In short, you have to be confident that your business plan will succeed and then follow it up to ensure this outcome.
Nigeria has a ready market for both offline (physical) and online (digital) businesses. And starting a business in Nigeria can be easy if one follows the proper procedures and step-by-step approach. So, having gone through the above steps, you have gained the knowledge needed for starting and operating a business in Nigeria.
I wish you nothing but success in your business startup! And remember, we at truebiz are available for consultation and assistance if you need help.