Seven Ways to Start a New Business in 2018

Seven Ways to Start a New Business in 2018

The year 2017 is about gone, and I know that someone is thinking how he/she could start a new business in 2018. Sure, running a business is not for everyone. It is tough because the attributes that make good entrepreneurs in Nigeria (and Africa) are not in typical business school playbooks. By the time you wait for a bank CEO for six hours, and when he emerges, you smile and thank him for the opportunity to be waiting. Repeat similar episodes in government offices and you will know that nothing could have prepared you for that patience.

You crossed the gate at 9am for a meeting scheduled at 9.30am and by 4pm you are still waiting. But you are lucky as you have not been informed to go, and that is huge as “hope dey”. It is irrelevant what degrees you have, and what you think you are.  That element of humility with high morals opens opportunities.

Yes, being an entrepreneur is not a vacation job: get into it; you lose the construct of time because it is a constant contact sports that demands 24/7 attention. But where you think you are open for business, I have some ideas for you on how to start in the new year. You can make it happen through any of the following new business/market entering models:

Representative: You can become a manufacturer representative in Nigeria for a foreign brand. You use your local knowledge and contacts to find business opportunities for that foreign company. They pay you commission. It could be lucrative if you have great contacts locally. Companies like Dell, HP and IBM have representatives in Nigeria who help to deliver sales and support to clients that want their solutions. Chinese firms are also opening opportunities looking for local representatives. There are many of them on LinkedIn looking for people to anchor their businesses locally in Nigeria. One of the best examples of a representative in Nigeria is MBM (Modern Business Machine), a technology integrator, which worked as an IBM representative for years.

Licensing:  Licensing requires a heavy dose of technological capability from you to make it work. It means you are able to license a technology from another entity and then use it locally to address a market need. Licensing is not very common in the Nigerian digital tech space but it happens in other sectors. Some of the pharmaceutical companies in Nigeria are on licensing agreements with foreign partners. They are allowed the rights to use the core technology to make products in their own brands or labels. In the technology space, white labeling is also possible. There are many American companies that license payment infrastructure to help startups run payment fintech as though those startups developed the technologies.  Customers see your brand and identity. But behind that your product is a full technology core provided by another company. No other person will know but you and the supplier. For the privileges to use these technologies, you pay fees. Coca Cola (yes Nigeria Bottling Co) is on license with the global Coca Cola brand to use the secret sauce of coke.

A section of my book, Africa’s Sankofa Innovation, with ideas for new businesses

 

Franchising: There is a big franchising opportunity which is available right now in Nigeria: we do not have McDonald’s, the iconic American fast food burger chain. KFC is here already in Lagos; KFC Nigeria is a franchise. Companies allow you to buy rights to run a business using their business processes and intellectual properties to create products in your local market. Most times, you are tapping into the brand equity of the franchisor which controls the trademark and all copyrights associated with the brand. As noted, KFC Nigeria is a franchise of the Yum! Brands which owns KFC in U.S.

Partnership: In partnership, you find someone you can work with. You bring something and that company brings something also. That fusion makes both better. It is the typical business maths that 1 + 1 must be greater than 2 to make sense. In the renewal energy, security, education, and across industrial sectors, there are opportunities for partnerships not with international brands but also local players. For example, in my company, we partner with local companies in Northern Nigeria with staff that speak Hausa on Zenvus. We provide the technology; they work with farmers because they understand the culture and the language. That improves our speed and allows us to focus on things we know best: technology. Partnership can be loosely connected with representative when done across national or regional boundaries.

Joint Ventures: Partnerships can morph into joint ventures where two or more entities decide to bring resources together to create a new entity. And everyone works through that new entity. This is very common in Nigeria during major contracting tenders where consortiums emerge to meet stringent tender requirements. For example, in a major construction project, you may need financiers, construction companies, etc as a team. No single company may meet all the requirements and one has to be created to meet whatever the tender requires. That is where you need a Joint Venture: the JV relying on the individual firms will magically meet the requirements. You can also use JV for research & development where companies co-invest money to develop new technologies and innovations. Julius Berger uses JV in some projects; it works with foreign financing partners as it did on Second Niger Bridge where a South African financier was in the fray.

Acquisition: If you have the money, you can buy another company and then become the owner of that company. It comes via different forms like buy-out and acqui-hire. The latter is a method where you buy a new company purely for the talent and not the company itself. I have used acqui-hire in Nigeria where I buy local companies mainly for the team and not necessarily for their products and companies. The advantage here is that you have seen what the team did and you can channel them to use the experiences to build your business. Buy-out happens all the time in Nigeria: MTN bought Visafone and Visafone itself bought Bourdex Telecoms Aba.

Greenfield Investments/Startup: This is starting from scratch and the typical model for startups to enter new markets. You start from $0 revenue and climb up. You add customers one by one. Unless you have change from daddy, mommy or uncle, this is the typical way it happens: you need to cut your teeth and build things from ground to up with savings, selling of equity or taking debts. I have shared many ideas on how you can make this happen in my new book. This chapter is a most-read if you have to play in the digital space. You can also see greenfield investments as moving into a new location to start something, even if you are operating somewhere else. Yet, even with that, you have to start from scratch in that new location. Of course, you enjoy some advantages over real startup that will have to build teams, technologies, business models, etc from real scratch.


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4 thoughts on “Seven Ways to Start a New Business in 2018

  1. It’s no wonder all seven ways to start a new business require one critical thing: knowledge–whether local knowledge or business know-how; expertise or uncommon insight. In today’s economy, knowledge is everything. And IP has a major role to play in all seven ways to start new business, just as you have also rightly mentioned above. Thanks for sharing, Prof.

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  2. Great, developers in real estate now find opportunities in joint venture rewarding, major developments in Nigeria are an offshoot, Do you have foreign companies, I seek a franchise opportunity

    Reply

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