Surviving the Recession: Nigeria SME and Entrepreneurs Guide - By Femi Onakanren

The current challenges facing the country and businesses operating in the country are multifaceted. We are grappling with a perfect storm of challenging issues and unfavorable developments beyond our control. These have been further exposed by our longstanding failure to strategically plan for the future by developing tailored solutions, build required and sustainable structures and properly implement enabling policies. In the end, small businesses and entrepreneurs are caught in the middle; vulnerable on business and social front with little control on determining how to effectively escape the nightmare.

As stated previously, recovery from economic recession on macro and micro levels are out of the control of the SMEs, Micro Entrepreneurs and Startups. Fundamentally, the resolution of the current economic situation is at governmental levels and dependent on a well-balanced, structured strategic approach; suitable fiscal and monetary policies, grassroots integration, enabling environment for doing businesses etc. that provide for both short term and long term scenarios.

So, while we wait, pray and hope for more favorable returns (improved revenue, FDI, FPI, better policies etc.), here are some suggestions on how businesses survive (and thrive?)


Reconcile with Reality

The truth is, our current woes were not really a surprise; any following, concerned or discerning individual would have seen it a mile away. All forecasts and trending developments indicated the inevitability (which makes it more alarming that we were caught pants-at-knees). Unfortunately our dithering and befuddling fiscal and monetary policies dug us deeper. The wise business man/ woman needs to wake up and accept the current reality; it’s going to get worse before (if even) it gets better. The economic forecasts and projections that guided your quarterly or monthly assumptions need to be reviewed and adjusted. The business needs to take to mind a conservative approach by keeping at pace with projections.


Reduce Loan Exposures

In these times, reduced liability is an important approach and should be a key watchword. As much as possible, do not look for new loans and actively seek to restructure existing ones. Reduced exposure would help your business's ability to survive the challenging situation, plan for the future and position for the right adjustments without looking over your shoulders all the time; this is a race that can't be run in halves and distractions of any kind (especially capital related) have extinction level significance. Though some may reason that what you’ll be paying back at the time of repayment would be worth less, it should be noted that what you borrowed would also have depreciating power to achieve your objectives, sinking one deeper in hole.


Use Equity

To raise money for your business you'll need to give up a part of your business. Valuation will be an issue and it would be good to quickly execute a valuation report (adjusted for forecasts and trends). Now I know that establishing valuation can be tricky and seem technical but in the simplest terms, it means how much is your business (assets, liabilities, contacts, etc.). So, to survive, you may need to spread your risks to raise the funds required to do business. You may use a transaction partnership, profit sharing model or a full on equity for cash model (amongst others). Remember, 50% of something is better than 100% of nothing.

Change Operating Business Model

You may need to take a second look at your operating business model. For ease of understanding, an operating business model is a plan for the successful operation of a business on how you deliver value to your customers and beneficiaries; it identifies sources of revenue, the intended customer base, products and expenditure (Capex and Opex). Leaner resources mean it can't be business as usual. You will have to critically review key areas such as suppliers, credit system etc. to manage your resources, customers, sales channels and risk exposures.


Adjust Expenses

Times are tight and tough decisions will have to be taken with all the fortitude of a beleaguered general. Luxuries and non-essentials would have to eliminated; some of these may be staff, change of office space, adjusted working hours etc. Non critical payments may have to be deferred and/ or re-negotiated. Merge operations and activities under single, simple channels and block waste. It must be noted however that only an honest, critical evaluation will aid in making the right decisions one which expenses to prune.


Adjust Expectations

Businesses are built on projections and expectations. However, what was projected from the beginning and the foundations/ assumptions have also changed significantly; your expectations should take a similar review. Further, this review would help you plan and make inform decisions on some of the other issues identified in this guide. This adjustment will also help you see how quickly you can realistically return to profit and how long you can survive. We cannot stress enough that while ambition is a requisite for any entrepreneur, this is a period for managed expectations.


Seek Alternatives

You may need to review all your chain of service and actively explore alternatives in every area of operation either it is your supplier chain channels or raw materials (which can be close substitutes). It is important in the spirit of full disclosure to advise your clients of the challenge and share your plan of action; their support and on-boarding is very critical. Alternatives are quite plentiful, what is needed is the desire to see them and the courage to attempt. For example, you may be struggling to meet server obligations with your longstanding preferred partner while a little work would reveal close alternatives who can give similar services without hampering your service quality.


Consolidate Existing Customers

Rather than using limited resources to obtain new customers, deploy more of your resources to keeping your existing customers happy and patronizing; this is a sure way to guarantee your continued existence as a business. You must remember that your customers are going through the same rough challenges and would be similarly looking for alternatives for any product or service. Devise non-threatening avenues to show appreciation of their committed patronage, appreciation of shared plight and incentives for continued support. A little leaven can go a long way.


Don't Spread Yourself Thin

With an acknowledgement of the current reality, the business must focus on deploying a leaner approach towards doing business as has been stressed repeatedly. There is no point stretching your resources, you just become sub-optimal on all fronts and this could prove more damaging to the state and corporate survival of your business. This strategy involves focusing on a particular product line, customer niche or suppliers. This will aid your ability to deploy your resources effectively as well as build consolidated relationship with key partners. This does not mean you leave yourself flagrantly exposed to the associated risks, it means you chose to concentrate your energies and resources at the most optimal point. The decision should be well informed and use metrics such as greatest impact on bottom-line, greatest exposure, quickest to implement etc.


Apply for Help 

There are several funding, management support and advisory opportunities and services available, don't be shy to explore all. Some are available at no cost while others may come with manageable fees. For those with fees, it is important to remember that resources are scarce; every support to manage your risks and reduce your exposure is a lifeline that should not be ignored. Further, every expense must provide measurable value; either in avoidance of sunk cost by reducing avenues for errors (proper/ professional evaluation) or by accessing support structures and assistance (capital or otherwise) when made available for free. Management is a key part of any business and asking for help should also extend to seeking mentoring or advisory team guidance. These must be carefully chosen based on professionalism, shared values, achievements and peer recognition as they may open other doors of opportunities for your business.

This is not an exhaustive list; they are just suggestions and definitely do not assume to be all knowing nor a panacea for all woes. Finally, we would like to point out that this is not a wholesale solution; the nature of business, industry/ sector and regulatory constraints would determine which of the above would be applicable to your business.

Surviving in a challenging economy #smebizplatform

Yesterday we had Ubong King of protection plus in the studio sharing his insights on the topic. We felt there was no better person to do justice to this than a man who built a successful million dollar business that has lifted many out of poverty from nothing and I mean nothing! That's story for another day.

Enjoy the excerpts from our discussion with him yesterday;

"The world economic forum report shows that Nigeria is number 124 out of a hundred and forty four nations, Ghana and Cameroon are ahead of Nigeria. What money does Ghana have that Lagos alone doesn't have? A Chinese man will come to Nigeria, he will look at us and see that we have buying power, we have the population, he sees that we have no good roads, no light, he sees fuel scarcity, diesel is expensive and he knows that you live in a room & parlour and he knows you cannot afford even I-Better-Pass-My-Neighbour generator, so he makes rechargeable lamp.

He sees your problem and he does a business tailored to your problem. Because he knows that money answers to solving problem. When you identify a problem and proper solution to it, money follows automatically. One advantage we have in Nigeria, is that we have the population.

If you are asking yourself what do I do from here, you need to sit down and roll-up your sleeves and then begin to compartmentalize issues. What is the end gain? I want money. What am I ready to give? Time. What area do I want to invest in? How much money do I have or can I mop up? People keep telling me I don't have capital. My question is, do you have money to renew your data when it expires? If yes, then you have capital.

If you work and you want to do business, it is not the kind of money you have that determines the business, it is the kind of idea you have. You can go online and search; what you can do with 20 thousand naira, and you will get results. You will see over 50 options. Depending on what you want to do, you need to ask yourself, what kind time do I have? Food is not for a lazy man.

People need to attend seminars to overcome fear. That's the difference between a rich man and a poor man. Rich people invest in assets, while poor people invest in liabilities. The problem with Nigerians is that we are too dependent on government. What we must understand is that the government depends on tax, tax depends on businesses. If there are no businesses there is no tax, there is no money for the government.

75% of Nigerian population is made up of youths, 40% of this youths are unemployable (no skill/no understanding and sense of direction). This means that 58 million people are unemployable. 20 years from now, most of them would have been married and would have giving birth to children. So if we think the challenge we are facing now is a problem, let's wait for that time." (We have to act fast)

To have a one on one with Mr. King, join his platform through kingsmenafrica

Cheers everyone.

5 Cost Saving tips for entrepreneurs - Staying afloat #inthelineofduty

I apologize for failing to post the entrepreneur showcase of the week. It was due to some technical difficulties (this phrase must be tired! Lol). I'll post it as soon as it's sorted.

On my way out yesterday, I saw my "oyana" brother, he took one look at my fuel guage and laughed. He said "this is the typical fuel level of a hustler" hehe. My fuel gauge always swings between quarter tank and reserve (*covers face*), unless at times I get a windfall (I could use one right now). I make sure I have just enough to get to my destination and back.

I also read a post by Nimi Akinkugbe of money matters in Punch or so, she talked about selling your gold jewelry. I laughed, because I've been there. I wish I had read her post before then though. She gave tips on how to negotiate and ensure you're getting value for the gold. Many times, people are just desperate for cash and they don't bother to get information on rates and look at alternatives before they sell. In my case, it was my first time and I was just excited to be getting the oh so needed cash (when will I stop saying this, hehe!).

Anyway, all of these things got me thinking about a topic for discussion, Saving tips for an entrepreneur. I know I am not an expert, so don't quote me. I just want to share my tips from my experience. Maybe someday, I can get aunty Nimi to share proper financial tips on here, for now though, you're stuck with me!

#Inthelineofduty - Staying Afloat

I use the phrase, staying afloat because that sums it up the best way. Can't think of a better word. Till you get that big break (if you hang in long enough, you will), you need to survive and many times we have no clue how.

Start with an Expense assessment 

Nimi was on moments with mo yesterday, it was an encore episode. She was on with a pastor, whose name escapes me now. The Pastor had all this fancy quotes about money and life and he was fun to watch. Fun aside, I learnt quite a bit.

Well, I borrowed this first point from her. It's not directly a cost saving tip, but more like the place to start. Have you ever monitored you expenses for a day (let's keep it simple, start with a day first)? She suggested getting a notepad and pen to take note of every single dime you spend and on what. Do this for a few days and review. You can then prioritize and decide what are your true needs and the others that are just wants.

1. Reality Check

When you have sudden access to money that is not planned for, your thinking is impaired. I remember those days of huge upfront payments in the bank! You get ideas like, "I need a new car", "I have to have the nokia communicator (where's that phone now?)", "I need to buy that 50k aso-ebi", "I need that human hair to look good" and so on. There are so many things you absolutely think you cannot live without, that you surely can live without. You'd be surprised. Some of us face the reality sooner than others. There are those little things that drill a big hole in your pocket that you need to keep in check or just forget about, totally. I'll speak from the side of a woman now, only because this is what I know;

- Aso-ebi

You really don't have to buy it! Seriously. Wear what you have with pride. If you gather all the money you spend on these things over a year, you would wonder where all that money came from.

Be true to yourself. Summon the courage to look your friend (sometimes, its not even your friend!) square in the eye and say, awww thanks, but I am not buying. Yes! If she argues, throw in "you know I don't earn a salary yet", try that. I say it all the time, ain't no shame in that biko.

- Hangouts

It's nice to hangout. But you know your pocket. It'll all be worth it in the end. You are building something. Don't be pressured in to spending money you don't have. See ehn, there is no shame in saying "I don't earn a salary yet", case closed. Those who are your true friends will understand and maybe offer to pay for you, if you must absolutely go out with them. Besides there are loads of cheap and cheerful hangout options, ask me, I know.

- Hair

This one is a real "agabana" (money siphon), lol!! We ladies are constantly looking for something to do with our hair. I am glad the ridiculously expensive human hair buying era is going out, whew! I must confess, I bought one of dem things while I was working and I rocked the hell out of it, to justify the money I spent! But it was just one. I know some ladies who have like five - straight, curly, wavy, short etc! They have a justification for each one. Haba! Gold is far better if you must spend like that, at least you can resell, but who would want to pay for the hair you've been wearing for years? Ewww.

I wear my hair natural now. It's fun, cheaper (can be, if you're not a product junkie, lol) and I feel liberated. I haven't been to a salon in a long time. I wash my hair myself, and when my sister, Tolu and cousin, Oye(who are always on youtube learning new ways to style natural hair) are not available, I cook up something. Sometimes it works, sometimes it doesn't, but heck! *singing* I am not my hair, I am not this skin, I am the soul that lies within.... - Indie Arie.

- Clothes & Shoes

I am not a fashionista but I was listening to Remi Fagbohun or so on cool fm recently (she's an image stylist); she said, define your style and decide on a budget that works for you. There's something for everyone. If you can't afford a Christian Louboutin, buy a guess on sale! Yes, sale!

Plan your buying, don't buy on a whim. It's tough I know, because, everybody runs a mobile shop these days, so temptation is ever before you! Oh lawd. You're stepping out of church, church fa! and someone has a car booth open with clothes, hair accessories, shoes, name it! All in your face. You think, let me just look and then you're hooked. They even offer to collect post dated cheques and unless you're a shameless onigbese (money ower), you would want to honour your cheques.

Resist the devil!!!! That's all I gat to say.

- Food

Running the home is not a joke! Even when you do bulk purchases, it's as if you are constantly buying this and that to supplement. A thousand naira here, three or more thousands there! I want to pull my hair out sometimes when my nanny calls to my attention something that has run out. I step in the house and she goes "milk ti tan (milk is finished)" or " ko si oshe mo (there's no more soap)" aaaargh!! It is by the grace of Jesus that I don't lash out at her when she delivers these messages with delight (or maybe I imagine this, that she has a happy look on her face).

I used to be a sereren (how do I translate this now?) cooking addict, there must be shrimps, there must be panla (those long 3k ones!), there must be goat meat, a whole lap etc. Omo, I have diversified into quick fixes that are balanced too now. Luckily, I am surrounded by great cooks in my estate who teach me how to utilize the different veggies growing in our backyards! I had this discussion with some friends in a group I am in too a few months back and we came up with a list of meals you can whip up with just 3,000 naira max, less even (Before now, my mind could not conceive the possibility) Speaking of which, I should share it here. I'll raise it in the group again.

Source - http://www.keepcalm-o-matic.co.uk

2. Budget

As simple as this sounds, it can be so annoying. In my university days, my dad would make us present a budget (on paper) of all the expenses for the term. We never found this funny, we'll stand there while he analysed and cut all the cut-ables. "You need a new bag? What about the one I bought you last year? Grumbling, we'll dig it out for inspection. What is wrong with it? Will you clean it up and get it ready...." DELETE!! That was a typical excerpt from our drills. Now that I am older and wiser - if I must say so myself, I am grateful for the drill because it set a foundation for me.

So this is tip number 3, always plan your expenses for the week, month and year if you can project that far. If not, monthly is fine. Trust me, it helps.

3. Keep your integrity and creditworthiness

Such a lengthy tip eh? Lol. Let me break it down. The guest with Nimi on the show yesterday said he built his real estate business with nothing but his integrity and network. I can so relate to this, because if not for this, I know I would have been bankrupt by now, as in "asiri mi a ti tu" lol. No kidding.

Try to manage your cash flow as much as possible, if you can stretch payments to your suppliers by a week or a month, why not! Ensure no cash leaves your possession that doesn't have to. More importantly, when you have such arrangements, pay as at when due, in the event of unforeseen circumstances (there will be those times), keep your suppliers updated.

I come from a large nuclear family so I have so many people to run to for quick cash and because I try (try being the operative word here), not to take them for granted, I can always count on them. I have friends too who always always come through for me.

During my MBA, our finance facilitators would always say, some amount of debt is good for your business. Ahem, I guess so, but I haven't towed that line yet. I am of the impression that your business has to be at a certain level of predictability for you to try that, especially with the crazy rates we get in Nigeria. I can't come and die of hypertension.

4. Bartering and Partnerships

I hope this is self explanatory. Remember the phrase, "trade by barter", that's just what it is. You can save yourself loads of money by doing this. You do not need to exchange cash for everything. Look for creative ways to transact business with people.Also look for complementary products or services so you can form partnerships and take advantage of this for instance in cutting your marketing and advertising costs.

5. Save & Invest (wisely)

This is the most important of all the tips, I think. Did you know that if you started saving 200 naira every day for just 5 days of the week from the beginning of the year, you would have had 44,000 naira in savings by now? Imagine if you did 500 naira per day. I know for sure that this is easier said than done, because I did set out to do this, this year. I even had my "piggy bank box aka Kolom" set up for it...... No comments. Let's just try again next year.

Since the stock market crashed, many of us have given up on shares, dismissing it as a useless investment option. Useless as it may be, the shares I bought when I was still working have saved me many times in the course of my entrepreneurship journey. Every time I look at it and think I have sold everything, I see one bonus or something somewhere that brings me back to base. Trust me, if you have cash now, invest some of it in shares (ensure that you get advice from an expert).

I just read through from the top, this is getting longer than I planned. I'll stop myself here. I bet you know other ways to survive and might like to share, please feel free to comment. You know I get excited when I get feedback! Make my day :-)