How To

How to Structure African Startups to Go Global

Africa has recently made significant progress toward realizing its ambition of being a launching pad for most startup businesses. However, Africa’s track record of maintaining and ramping up startups is a different tale. Only few African startups with global impact exist on the continent, the most stemming from the tech industry. In comparison, the Western and Eastern part of the world have countless businesses with global reach which the African continent is a major customer to. Taking an example from the tech space, China boasts of more than 100 pillar startups, the United States can boast twice the count of China. In contrast, African startups with recognition and financial power are few and there are at most a quarter of other continent’s counts. According to Statista (2020), African startups are emerging massively with Nigeria predicted to have over 3,300 startups as at 2020, the largest number in Africa. Following that, in the same year, South Africa and Kenya recorded roughly 660 and 600 startups, respectively. It is evident the African continent is charging up for a universal value creation. Moving startups beyond Africa to meet customers on a global scale requires startup entrepreneurs to put in conscious efforts that will achieve this goal. This is necessary due to existing factors such as migration of native Africans to other continents, needs common to many irrespective of race and color and the need to put Africa at the top of productive continents. The methods to structure African startups for global takeover can be categorized in channels, value and investment strategies. Channels (Mediums) Strategy Utilize tech solutions: There is barely an impact desired lately that does not introduce the role of digitalization. Embarking on a global quest without a remote strategy will result in slow impact and oftentimes costly processes but the involvement of tech in startup activities make operations more efficient and effective from the point of showcasing its solutions to delivery of value to customers. Value Strategy Create a global product: People buy products that satisfy their needs. African startups should envisage offering solutions that go beyond its immediate region as there are demands for solutions across the globe. Bear in mind that target markets are widely spread across the globe. Potential customers could be anywhere be it the least region to the greatest region. Giving value to regions with needs peculiar to proposed value: Unique to some regions are lifestyles, fashion, beliefs people are comfortable with. Therefore, A startup that seeks to expand its customer base can create value that will meet the particular region according to their lifestyle and culture. Seek for areas in need of what a startup has to offer. Removing the “African” clause: On a global level, there is room for cultural diversity and universality. The “African” clause here is holding up to the ideology that a business must stem, build its team, grow and die in Africa alone without spreading it to the world. This way, the African potential resides only within the continent but an expansion to other continents put up African startups for a show. It is important that African startups accommodate international collaboration and publicity. Relationship Strategy Seek international support: Business networking is a powerful tool that helps spread businesses. This technique is tested and proven reliable even in the conventional pattern of running businesses. Power of “Word of Mouth” spreads businesses faster. Likewise, establishing relationships with international and united bodies gives the opportunity to sell business solutions to immediate networks who in turn share to their own network thereby, bringing more customers. Investment (Financing) Strategy Level up through the series of startup funding: In the phases of startup thriving, there are series of its funding and investment sourcing staging from Series A to Series B to Series C. Each stage has requirements peculiar to investors/sponsors, startups excelling through each process demands improved efforts as this strategy is usually competitive. Only a small percentage of African entrepreneurs make it past the Series B investment level which takes a toll on revenue generated through capital investors. African startups can sign up for global investment slots, grants and sponsorship that will expose them to a wider customer base every time they pitch solutions.

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Tips and Tricks of Choosing a Business Name

Your Business name will be associated with you for a long time. So, it’s critical to think about it thoroughly before forming a company, developing a website, or making signage and other promotional items. To help you started, here are a few pointers. How important is a name? Apple. Google. Yahoo. History is replete with examples of industry giants who had names that were at best, nondescript, and at worst, irrelevant. So, should you invest time and energy in choosing a ‘good’ name for your company?  And how do you go about achieving this? Choosing a Name The following criteria should be taken into consideration in choosing a good business name: It should be available as a domain name It should evoke the thing it names It should be easy to pronounce It should be inoffensive globally (or at least in your target markets) It should have positive associations It should be easy to say It should have unambiguous spelling It should be memorable It should not be too long You can also create polls, surveys and leverage communities on social media (e.g. Facebook, Instagram and LinkedIn) to get input from the larger world and your target customers when choosing a company name. Registering a Domain Name When choosing a domain name, you are advised to have full dot-com availability. If you can help it, you should ideally endeavor to stay away from the following: Hyphens Special characters Dot-net Dot-org Other top-level domains Country domains Changing Your Name Ideally, the name you choose should reflect: Who you are What you do How you do it It’s not the end of the world if you decide after a year or so that your business name is not quite right. However, you would have largely wasted any earlier marketing effort in building up awareness. Action Steps Brainstorm 5 potential names for your business Use social media to determine the most popular version Check hosting websites such as Godaddy and Bluehost to confirm the availability of your chosen name   Read Also: Converting your Business Name to a Limited Liability Company For more posts from this author, visit: www.gloryenyinnaya.com    

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Asking Potential Investors the Right Question

We have shared with you tips on how to get investment ready, how to select the right investors; and now we will share with you questions you should be asking potential investors before you take their money.  Here are 15 questions you should be asking your potential investors  What types (or focus sectors) of companies have they invested in, in the past? What kind of support do you provide to these companies? What kind of investments (in terms of value and round) do you provide?  How many investments have you made in a company? Do you typically lead investment rounds? Or do you prefer to co-invest? How many investment rounds have you led? How long does it take to close? What is the first thing we need to do after closing? What do you expect from us going forward if you invest in our company? Will you be personally involved in the company? What metrics would you be tracking? How often would we be required to provide progress reports? What is your most successful investment? Are you willing to share the contact information of 2-3 companies you have invested in? These are questions that should guide your decision-making on whether the investor is the right fit for your company and for you. But most importantly make sure you listen to your gut feeling and ask any other questions that arise from within.  Contact Versa Research your trusted data, research & consulting partner! References https://www.forbes.com/sites/alejandrocremades/2019/02/21/20-questions-entrepreneurs-should-ask-investors/?sh=1c1988d97670

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What Investors Look for in a Start-up

A start-up needs investments in order to reach out to its numerous customers especially when the demand for their product or service is high. The major reason for investments in start-ups is the steady growth experienced. Start-up founders need to understand that an investor is not a friend but an enabler with financial capability to help sustain the growth of the business, who in turn expects to get returns in the form of dividends or equity in the overall stake. Investments in a start-up could be by a venture capitalist, financial institution, crowd funders, family and friends, corporate investors and government organizations. Why Cash Flow for A Start-up Is Better Than Profit Start-up Founders are usually trapped in the need to begin to make profit and might wear themselves out when business does not look profitable. Profitability is not the most important factor to measure the growth of a start-up. Every investor understands that to classify a start-up as ready for investment, it has to show steady cash flow in their financial statements, which is the primary check to showcase the healthiness of the business. Determinants of Start-up Investments Team The success of a start-up depends largely on the team and most especially the experience and expertise they bring to the organization. Start-ups are very fragile and therefore risky to invest in. However, with a qualified team whose portfolio reflects a level of experience and exposure in a similar role or organization proves to the investor that decision making would be properly done and tasks executed with precision. A great start-up team is usually  a team that has knowledge of product development and management and also the ability to connect with people in order to sell the products. Traction Traction is the metric to measure the growth of an organization. How many sales have you made within a specific period of time? How many downloads? How many customers are being served? Traction represents the overall cycle of how deepened the dealings of a business has fostered consistent growth with the customer. The tractions are usually represented in charts to display the gradual progression. Licenses Investors are concerned about the level of work that has been done by the start-up founders and these can be shown in obtaining the necessary licenses, intellectual property and compliances to enable the smooth running of the business. Investors want to ensure their investments are secure and would seek a level of understanding in ensuring that the necessary regulations are being adhered to. Risk Management Policy Investors like to know what the next line of action would be if the plan does not go as expected, it could also be that the plan is executed as expected but then the business experiences difficulty, what would the next line of action be in order to continue to stay in business. Risk could range from personal risk, financial risks as well as health and safety risks. Your Competitive Advantage Investors are aware that there are other existing businesses like your own, one of the ways to showcase that a start-up is ready for investment is to leverage on what makes you better, amplify it in your promotions and show measurably how it has helped to create exponential growth better than your competitor. Bear in mind, that alongside the factors mentioned, the start-up founder with a good portfolio is the capital reason for making capital investment. Without strength of character, staying power, grit, tenacity and resilience, investment in a person might not suffice. Read Also: How to be Investment Ready

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A Start-up Guide to Tax

Tax is a compulsory contribution levied by the government. Taxation is important in any economy and its effects remain significant because it helps greatly in the redistribution of income and gives the government funds that it can use to finance public services such as the provision of adequate national security, public infrastructure, power, good road network and a host of other social amenities. So, it’s important for you to pay your taxes. Whilst there are different types of taxes, we will focus on those you should know and pay as a small business. Companies Income Tax: The Companies Income Tax (CIT) is a tax imposed in Nigeria on the profits of registered businesses. It also includes the tax on profits earned by foreign corporations doing business in Nigeria. Limited Liability Companies, including public limited liability companies, pay the CIT. Non-residents are subject to CIT on their Nigeria-sourced income, while resident companies are subject to CIT on their worldwide income. Corporate income tax is calculated using accounting profits that have been taxed. For companies with a turnover of more than N100 million naira, the CIT is currently charged at a rate of 30%. For companies with a turnover of between N25 million and N100 million, it is also charged at a 20 percent rate. The tax is calculated using data from the previous year (i.e. tax is charged on profits for the accounting year ending in the year preceding assessment). According to the Finance Act 2019, companies with a turnover of less than N25 million are exempt from paying company income tax. A non-resident company with a fixed base or a permanent establishment (PE) is taxable on the profits attributable to the fixed base in terms of business profits. As a result, it must register for CIT and file tax returns. Value Added Tax: It is a consumption tax that is levied on a product or services whenever value is added at each stage in the chain of production to the point of sale. It can also be said to be an indirect tax placed on the domestic consumption of goods and services, except for those that are zero-rated (not liable to tax), such as food and essential drugs, or goods or services generally exempted by law. This means that any person or individual, corporate or sole organizations that consumes or buys any taxable any taxable product or service will have to pay VAT. In Nigeria, the average VAT rate charged on the purchase price of certain goods and services is 7.5%. As soon as you register your business, whether as a company or a business name in Nigeria, you are expected to start filing VAT returns. VAT is paid by your customers on whatever money they pay you for your goods or services. Where a business does not earn revenue in a month, or hasn’t started operations, the business is expected to file a NIL return, i.e., you go to the FIRS office nearest to you and fill a VAT returns stating that you made no earnings that month. Stamp Duties: Under the Stamp Duty Act, stamp duty is payable on any agreement executed in Nigeria which includes those relating to any property situated in Nigeria. It is chargeable either at fixed rates or in proportion to the value of a transaction or a property, depending on the class of instrument. Where you prepare documents bordering on deed of assignment of a property, memorandum and articles of association of a company, and legal mortgage, ensure that you have them stamped. It is important to do so because it ensures that these documents are admissible when they are tendered before any law court in Nigeria. There are agencies in the 3 tiers of government who collect and enforce taxes. At the Federal level, there is the Federal Inland Revenue Service (FIRS), at the State Government level, there are the respective State Boards of Internal Revenue (SBIRs) of the thirty- six states of the Federation, one of which is the Lagos Inland Revenue Service (LIRS). Local Governments also administer rates and levies collectible by them through their various councils. Tax is a very crucial component of business that every start-up should be aware of, which is why it’s fine to seek professional advice from a tax expert who can them through the process. We advise you do the same too. Read Also: Registration of Micro, Small and Medium Enterprises (MSMEs) for tax purposes Read Also: Key things to know about the Nigerian Tax System  

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How to Reach the Right Investors

As an entrepreneur, you may have the investment teaser deck, and know the profile of investors you are looking for but you may still struggle to source the investor. Sourcing investors is one of the most critical parts of securing funding from an investor.  In this article, I will share with your some tips on where to source the right investors that will provide you with the resources to grow a sustainable and scalable business: Join incubator and accelerator programs as this gives you and your venture visibility Join Angel networks and communities Be a part of support organizations’ communities Join associations that relate to your industry Reach out to Universities with strong business or entrepreneurial programs Reach out to your current network and see which connections they have  Use Linkedin to search for investors and view their profiles Network with other investors that might not be right for you, as they can connect you to others Research your competitors and identify who their investors are  Create a profile on online crowdfunding or investment profiles Attend events and conferences related to your sector of focus Host events Identify where the ecosystem congregates and be there Put yourself and your skills out there by being a mentor to other new entrepreneurs With this, you can create an investor target list where you highlight their contact details, past investments, connections you have in common if applicable, where they are based, where you found them, why they are a good fit for you, and any other relevant information. Remember that the role of your investor is to provide the expertise, network, and investment to help make your business sustainable and scalable. Contact Versa Research your trusted data, research & consulting partner!   Read Also:  How to Select the Right Investors

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How to Leverage Story Telling for Your Business Pitch

There are a number of reasons a business needs investments, these investments could be in the pre-seed, Series A or B and regardless of whatever stage the business is operating, the major reason for seeking investor’s funding is usually for expansion purposes. This expansion could be in the line of products or the need to serve more customers in their growing numbers due to exponential demands. Why Storytelling? Story telling has been found to be the underlying magic when pitching to investors. Effective story telling has to be genuine and linked to the WHY of the business i.e. the challenge the founder(s) were trying to mitigate when they set up. It also has to be told with clarity backed up with research-based statistics on prospective customers that are in need of such solutions. Highlighted below are the key elements of a Pitch Deck The Pitch Structure The pitch deck structure while different in the pieces put together as templates by different businesses, should still have the most essential ingredients and answer the potential investor’s questions. These items in a pitch deck should be on each slide Cover Page The cover page is a basic design that captures what the organization does. Usually the logo of the organization and the tag line, which serve as their value proposition to clients. The cover page should be very simple in design and text. Introduction The introduction is the executive summary of the pitch deck. All the parts in a pitch deck should follow a simple rule “less is more”. The Pitch deck should have very limited words and should be clear. Problem State the problem in a very clear and concise manner. This slide should capture in bullet points the problem your business is trying to solve. Solution The solution slides need to state the function of your product or service as it addresses the problem you have stated. Try not to get into mentioning features as what is important here is how your product will benefit customers. Product Demo If you are making a physical presentation, your product demo should be in a video of 30 seconds or less about how your product or service functions to provide the solution. If you do not have a video, then a pictorial view of images can also be used to represent this. Market Size You can adopt two approaches. You either take the top-down or bottom-up approach. The top-down approach is to find out the size of the market and estimate how much of that size you think you can capture. I think the top-down helps to be more realistic as what you hope to capture can either be expressed in years or in the lifetime of the business. Business Model What would your business model be? Are your products going to sell for a particular price? Would your customers have to subscribe to it weekly, monthly, or daily? This is what your business model represents. Some social media platform runs on a freemium model where users do not pay to use such platforms; however, the platform then makes money from advertisers wanting to gain visibility from this number of users for their products or services. Competition List your competitors whether they are direct or indirect and mention how you are better than them. For example, the indirect competitor for a carbonated drink is water and most bottling companies have succeeded in making their products a unique alternative to water by serving a refreshing taste. Mention here what makes you stand out. Go-to-Market When you launch a new product, it is necessary that a market plan exists; it helps to answer the question of how you would acquire customers. What steps are you going to take for customers to engage you? Would you have a direct market, use radio or television, social media, sponsored adverts, print, etc. to reach out to your targets. Team Your team information should display competence. Most start-ups have a product developer and a marketing officer. This can be seen in the likes of companies like Apple where Steve Jobs is the Chief Marketing Officer with communication prowess and ability to get customers to buy while Steve Wozniack was the developer. 2-3 team members can be the founder or co-founder and launch the start-up and add other team members as the organization grows. Milestones Investors only want to make a contribution because they look forward to returns on their investment (ROI), no investor is your friend. This is the section where you show your traction in the form of partnerships, number of downloads, and most importantly that you generate consistent cash flow and serve a good number of customers Fundraising Information How much funding would you need and in what ways are you going to apply the funding you get. What this funding injection would generate within a specific timeframe. These are questions you want to answer in this slide. Funding is usually needed for operational costs such as rent, staff salaries, office equipment, licenses or certifications, and many more depending on your business needs at that moment. While receiving funding for your business is a great move, it can also lead to the death of start-ups as initial exposure to huge funding without experience or the ability to manage such funding could lead to instant gratification. This is why some start-ups have raised funding but are not profitable. I suggest that a business proves through its financial statement to be profitable enough before seeking funding in order to grow a sustainable business model.   Emmanuel Otori has over 9 years of experience working with 100 start-ups and SMEs across Nigeria. He has worked on the Growth and Employment (GEM) Project of the World Bank, Consulted for businesses at the Abuja Enterprise Agency, Novustack, Splitspot, and NITDA. He is the Chief Executive Officer at Abuja Data School.

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How to Develop an Operations Plan

A critical component of your business plan is a strategy for managing your company’s operations. A comprehensive operations plan needs to answer the following questions: Operations strategy How will operations add value? What will you emphasize – cost, quality, timeliness, flexibility? Does your process give you a competitive advantage? Scope of Operations In-house or outsource? Product and process design? Order fulfillment? Customer service/technology support? Installation? Describe how you will get off the ground running as a business Product/process development Intellectual property Rollout strategies – regions, products, channels Marketing strategy – advertising launch, activations, online Agreements with key customers/partners Strategic alliances Facilities and equipment installations Market tests or beta tests Key hires Describe the initial management team for the business Background and experience for each management team – a strong start off management is vital for investors Any holes in the management team? If so how do you plan to address it? Board of Directors or Advisory Board? Organizational chart Ownership structure Corporate Social Responsibility/Impact Investing In summary, an operations plan should describe the process for producing and delivering your product/service and is a critical element of your business planning exercise. Read Also: Key Components of a Business Plan I

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How to Position for Sustainability

Businesses require a well-thought-out process to stay afloat and abreast with market dynamics. The importance of this basic plan is even more pronounced with the uncertainties of our time – the incidence of COVID-19, regulatory changes, economic downturn and many other disruptive factors. While some businesses have recorded massive and positive growth despite these disruptions, other businesses have wound up or struggling to stay afloat. This article will highlight the 5 (Five) important factors that entrepreneurs need to consider in their business operations if they must grow sustainably. These factors are: Finance – Capital is the lifeblood of any business; it is important for take-off, operations and growth. You can finance your business either through debt or equity (other people buying shares in your company) or you can adopt a mix of both equity and debt. You can also consider grants, commercial loans or bringing on Private Equity or Venture Capital companies. Whatever financing option you take, the growth potential of your business and the amount of risks you are willing to take now, must be keenly considered. An entrepreneur may need to seek professional advice to take on the most suitable option. Growth – Growth is a product of consistent and intentional efforts with the application of sound strategies in achieving business objectives. To grow, the business needs to create value. So, to advance in business, the entrepreneurs need to answer the WHY Question. What is the key product or service this business has created? Is it really meeting a need? What is my product fit? Who are my target customers/clients? The WHY questions will guide you in making the right decisions and the answers to them will set the stage for business growth. Talent Recruitment – A suitable workforce is crucial to furthering business objectives and attaining set goals. Hiring should be done with objectivity, excellence, purpose, and on a needs basis. Entrepreneurs should build a team that can align with the values and ethos of the business and who can key into its vision and imbibe its culture. Establishing Systems & Structures – Entrepreneurs need to initiate and institutionalize appropriate mechanisms and procedures to ensure the efficient running of their businesses even in their absence as founders or CEO. Ensure that your employees understand the business dynamics and can make valuable decisions even in your absence. Use of Technology –It is important that entrepreneurs leverage on technology as a tool to create an efficient system and improve their business service delivery. Technology keeps disrupting the norm and any entrepreneur who does not adopt technology stands the risk of losing its business to its competitors.  

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Why You Need a Business Plan

“By failing to plan, you are planning to fail.’’ (Benjamin Franklin, Inventor, and Businessman) As a budding entrepreneur, the need for a well-written plan that communicates your intentions to internal and external stakeholders cannot be over-emphasized. The purposes of a business plan include: A business plan describes the venture you will create to exploit an idea or concept. A business plan is a written document that describes in detail how the business is going to achieve its goals. A business plan lays out a written plan from an operational, marketing, and financial viewpoint. It serves as an action plan, road map, fundraising, and sales tool. Common mistakes in writing a business plan include: Vague value proposition – mostly existing ideas Difficulty laying out the operationalization of idea Extremely optimistic financial projections – no sensitivity analysis Improper definition of your market Inability to identify risks and possible mitigation A bankable business plan should have the following critical elements: The Company Overview The Marketing Plan The Operations Plan The Financial Plan In our next post, we will explore each of these critical elements in further detail.

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