Most of the time when people asks me how to generate capital to start a business in Nigeria, they always expect me to give them a magical answer:
A solution to get money from anywhere, quickly, and without any effort to fulfill their dreams.
But the truth is this:
There are no magic formulas to getting money, nor is there anything worthwhile in life that is achieved without effort and without working a little for yourself.
There are several ways to generate capital to start a business in Nigeria? But before you worry about which one to choose, you should take a deep breath, temporarily hold your enthusiasm at bay, and make sure that your idea is really concrete and monetizable.
Here are 5 steps to get you on the right track to interest and convince someone to believe in your idea, invest in your business, finance your start up.
Find a mentor who can evaluate your idea
To convince someone to invest in your idea, you will have to make them see how good it is. But is it really that simple? First of all you must be convinced of it, but on objective grounds and not just because “it’s your idea”. You should therefore identify someone who has already traveled the path you are about to take, someone who has had an idea before you, developed it, found the necessary funding to start it and achieved the desired success. Someone who knows how to put himself in your shoes, but who can give you an objective, neutral and disinterested opinion.
If you don’t know anyone with these characteristics, search your network of contacts and knowledge, or attend fairs, meetings and workshops related to your sector. Use the internet and social networks to find bloggers, influencers or experts you can contact.
Don’t be afraid to ask for an opinion, and above all don’t be so presumptuous as to fear that someone might steal your idea. The idea of a business is worth very little on its own, it is its execution that makes the difference.
Most of the experienced entrepreneurs are willing to share their experiences, and who knows, you might even get lucky and find someone directly willing to invest in you.
And if the response is negative, accept it. Maybe it’s just a matter of adjusting some details or correcting the shot. Or you could just have had the wrong idea, fantastic on paper but not in the real world. Patience, take advantage of this experience and, without being discouraged, think about the next opportunity to seize. You will still have gained something in terms of relationships, knowledge and experience.
Analyze the market thoroughly
To be able to transform your idea into a business, it is essential to identify your target market . Once you have identified your target, you will have to “do your homework”, analyzing the scenarios and market trends, the habits and needs of the public, the existing competition.
You can start by asking yourself these two questions:
- Who is my product or service for?
- Will customers really be interested in my product or service?
The first question is the profiling of your target audience, identifying age, gender, level of education, geographical positioning and other data. The more specific you are, the better.
The second question will help you avoid wasting time and resources (= money) to develop and market a product that nobody will buy.
There are many sources that can help you understand the opportunities and pitfalls of the market, and you will also need to collect data directly from your audience, through a market analysis that may involve the use of questionnaires, interviews, ratings, groups of discussion, but also social media and measurement tools such as Google Analytics.
Often these data have already been collected by others and you only have to request for it. Examples of those you should contact include but not limited to;
- Trade associations
- Official statistics (eg NBS)
- Chambers of Commerce
- Entities and foundation for business development
- Online resources
Today a great way to conduct market research is through crowdfunding . In fact, many startups use Kickstarter or similar platforms to test the market and test the interest of the target.
Determine how much capital you need and make a business plan
The advice of a mentor and your market analysis should have helped you to get an idea that is still approximate but realistic enough of how much money you need to not only start up your business, but also to be able to keep it until it starts generating profit.
In a business plan you not only explain what your business is and what it is about: you also analyze what your costs will be, what benefits you will have, your competitors, market environment, and the exact amount of money you will require to start it.
The important thing is that it be clear, concise and fluently written. Sometimes a good idea is discarded simply because those who had to evaluate the business plan trashed it without even finishing reading it. If you wish to generate capital to start a business in Nigeria, then you must avoid it from happening to you too.
Participate in tenders and competitions
Many large companies and multinational groups, but also public administrations, banks and financial groups indicate tenders or competitions to finance and develop ideas and companies . Obviously, they demand the best of the best, so they are generally very tough and fierce competitions.
To participate, you must of course comply with the requirements, so take the time to read and understand the rules and conditions. The calls can be addressed to specific sectors, to subjects determined on the basis of age or gender, to startups or to companies already started.
The opportunities offered by the calls may be different. From the grant (cash prize) to the co-investment by the promoter organization, from specialized training opportunities to contracts and collaboration or distribution agreements.
Furthermore, participation in a competition or tenders can also be used as a reference and add value to your idea.
Generate capital to start a business in Nigeria
At this point you should have done the necessary market research, obtained feedback from your mentor and defined your business plan. The time has come to resolve the fundamental point of the question: how to generate capital to start a business in Nigeria?
The most common options are:
- Financial loan
- Venture Capital
- Business Angel
The Financial Loan , provided by a credit institution, guarantees you greater control over your business, but conditions and methods of extinction must be carefully evaluated and the consequences in the event of delayed or non-payment of installments.
Crowfunding : This is yet another way to generate capital to start a business in Nigeria. It allows you to attract the interest of different investors to your project, whether on a small or large scale. As we have already said, it can also be an excellent form of market research. In order to have some hope that your idea not only collects interest but is actually financed you should already be able to count on a network of contacts and supporters. Otherwise, you will have to work hard to catch the attention of those who still don’t know anything about you and your business idea.
The Venture Capital implies an investor ready to finance the development of a company even with high risk potential, but operating in sectors with high potential returns. Generally the Venture Capitalist allocates the funds destined to startups that it considers promising, assuming risks that other financial operators (eg credit institutions) would not accept. The difficult part, in this case, is not so much to identify a potential Venture Capitalist,as to convince him to believe in your project.
The Business Angel or Angel Investor : this is a sort of “informal investor”, usually an entrepreneur or a professional with personal assets, contacts and an adventurous spirit, willing to invest in small-medium enterprises by participating in the capital. A sort of patron therefore, which sees the startup as a possible source of economic return in the medium and long term. It therefore involves a more personal relationship than a Venture Capitalist, and most likely you will have to accept some interference in the management of your business. This is a great way to generate capital to start a business in Nigeria.
Do not look for shortcuts, thinking of jumping directly from point 1 to point 5 , because you would not only burn the stages, but would burn your idea.
Carrying out an in-depth market research to test the validity of your product and being able to count on a detailed business plan are necessary steps for the development of any project, while participation in tenders and competitions is an option that many do not consider but it can also represent a valid opportunity only in terms of experience.
Don’t be hasty, and once you are really sure of the validity of your idea you can finally have not only the curiosity of your potential investors, but also their attention, thus be able to generate capital to start a business in Nigeria.