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For Startups

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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What You Should Know about VAT

Gone are the days when small and medium-sized scale business owners will say forget Value Added Tax (VAT). It is for big companies. If you continue to operate your business with that mindset, both the amount for VAT and penalties will keep piling up.  VAT is a tax that is added to the price of goods or services. It is charged at a rate of 7.5 percent. The current battle by some State governments to collect VAT in their various states instead of the Federal Government is a great concern for every business owner. Every business owner is by law a tax agent to the Government. It means that officially your business is meant to file VAT to the Federal Inland Revenue Service (FIRS) on or before the 21st of every month. Who pays VAT? VAT is paid by users of the paid goods and services. Every business that makes sales of products or services either at a stretch or cumulatively the sum of twenty-five million nairas (N25,000,000) or more in a year is liable to pay VAT. Considering this new development, the governments will employ all kinds of law enforcement, including touts, to collect more VAT. This will put more pressure on business owners and their cashflows. This law enforcement when they visit you as VAT defaulter, you will have to settle them, and still pay the VAT you owe including the penalty. What a loss! Put your house (business) in order by doing the following; 1. Separate your personal finance from business finance by simply placing yourself as a business owner on salary. If your business cannot pay salary then wages. 2. Stop using your company account to assist people who have relations overseas just because there is a promise of extra cash. You cannot prove is not for business afterward. Then you will be forced to pay VAT out of it. 3. Start keeping proper records of all your business transactions. 4.  If in the last three (3) or six (6) months you have not made sales or purchases worth six a million (N6,000,000), do not charge Value Added Tax anymore to your customers this year. The reason is that you may not be making up to twenty-five million Naira (N25,000,000). 5.  Even though you do not charge Value Added Tax you are supposed to be filing VAT to either FIRS or State Board of Internal Revenue depending on the state of residence. Presently, Rivers and Lagos states are the leading states in Value Added Tax collection. Hello entrepreneur, you cannot afford as a business owner in this present economy in Nigeria not to file Value Added Tax. The need and demand for money by the government at all levels have never been like this. This will push the government to take measures you may consider “not business-friendly”.   Read Also: Here’s Whats New on Tax Identification Number

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Legal Structures You Need as a Media Agency

Hello Zainab, I currently run a Media Agency with my co-founder.  We are looking to scale by representing various Content Creators, and platforms, that is while they create the shows, songs, or content, we would be the ones to handle the business aspect of things We have been doing business on a month-to-month basis, what legal structure do we need to put in place to handle all our deals as a Media Agency? Thanks Do-it-right Business Owner   Hi Do-it-right Business Owner, I’m always glad to hear of people creating solutions and doing it well, so I owe you a smile. Starting with your question on a recommended legal structure, the first thing you need to do is to incorporate your business. You shouldn’t confuse this with registering a business name. An incorporated company differs from a business name as it is a separate legal entity while in the case of a business name, there is no separation between the proprietor(s) and the registered business. Also, you should get a founders agreement that governs the relationship between founders. It defines all the roles, obligations, and benefits of each founder. It’s always better to sort this out at the early stages of your business. You should also have terms and conditions which indicate intellectual property usage and rights with the content creators. You should also look at having a privacy policy for the use of all the personal information you will gather. With all this said, you should still seek legal advice from a lawyer who can help you out with more intricate details. You can find one here As an additional resource, you can read up these articles:- Types of business entities, Setting up a legal entity for your business in Nigeria. These videos could be helpful too- Diylaw Video 1, Diylaw Video 2 Keep succeeding Do-it-right Business Owner

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Why Startups Fail and How To Mitigate this

Technological Startups in Africa are innovative about providing solutions to challenges that exist in Africa. However, with these solutions come several bottlenecks which eventually create a barrier to the survival and sustainability of the business. There are several factors that contribute to the failure of start-ups in Africa and the ability to learn from these failures would support a new way of thinking to help mitigate these risks. In this publication, I would be sharing risk factors from working with not less than 100 companies in the technological, FMCG, retail, agro, fashion, events, confectionary, and manufacturing in providing consultancy services and some of the patterns I found led to the business failure. 1. Huge Injection of Capital Without Traction Generating and implementing an idea has to go through several stages of design thinking to ascertain the viability of such a product before it is released into the marketplace based on the feedback from prospective end users. Due to the fact that some early-stage entrepreneurs have already built a name in the ecosystem can easily make them access funding even when an idea is still just an idea that has not been properly researched but because entrepreneurs sometimes are also very emotionally attached to an idea sometimes, they can make several assumptions without considering the facts and then begin to seek capital inflow to kick-start this idea. Traction is important because it signifies growth and growth could be seen in the form of demand which eventually leads to cash flow. Investing in an idea is too risky and even riskier for an early-stage entrepreneur with limited experience and exposure. In order to ensure an idea would scale, it is important to employ design thinking to limit assumptions. 2. Not Working With the Right Team Not Working with the right team has huge consequences in itself. A start-up should have one core, and it is in the ability to execute with the team. Because most start-ups bootstrap at their early stage, they tend to work with whoever is available and not necessarily the skilled and competent professionals who would hit the ground running and deliver the required expectations. I remember working in a pharmaceutical start-up where mislabeling of medications occurred because the professional involved was not aware of the procedures as a pharmacist would. This could have been a huge mistake if it was unnoticed until it reached the retailer who did checks and found out. The right time would limit the time a task is expected to be done. Start-ups should never play down on experience, proficiency, and competence. In fact, it is necessary to develop specific in-house procedures for hiring that fit the company’s culture. 3. Lack of Product-Market Fit A product could be a fantastic one, but if the market is not ready, then its sustainability is questionable. A very innovative start-up that came with the idea of solving the challenges of travel is GoMyWay, this Start-up was launched in Nigeria but did not thrive. Was the product fit for the market in terms of providing the needed solution to the already existing challenges, I would say yes, however, factors such as kidnapping, assault, killings have created trust in the mind of travelers and so this traveling application that was supposed to connect a traveler with a car with another traveler going in the same direction could not survive because the safety of travelers was in question. 4. Government Regulations Several administrations of government have worked tirelessly to make the business environment conducive, however, there are still gaps to ensure that the start-ups do not get gagged as their benefits are very key to economic development. The recent move to create a start-up bill to ensure that the interest of start-ups can be protected is one to secure sustainability and increase interactions with regulators in such a way that regulators understand the peculiarities of these businesses and work around policies that would not see capital investments go down the ground with just a regulation. I believe the start-up bill would create stakeholders in the overall value-chain and then ease how business is done. There are other factors that contribute to business failure and the listed are some common ones that affect businesses based in Africa. I however believe that as there is an ongoing conversation to create a roundtable for stakeholder’s interaction, there would soon exist synergy in the ecosystem.

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Common Mistakes to avoid as a Startup

Entrepreneurs invest both financially and emotionally in their businesses whether overseeing a team of Two (2) or One Hundred (100).  They are self-motivated and enjoy a challenge at meeting the specific needs of their customers. These businesses, often founded on the basic concepts of innovation, organization, and vision are not without risks, which could be internally, and externally generated ranging from financing to market fluctuations, and competition. These risks notwithstanding, the entrepreneurs can still operate effectively in a risk-filled environment, when they are armed with the right information. This article highlights the common mistakes entrepreneurs often make in their businesses, with a view to equipping these business owners with the information vital for business sustainability. These are the ten common mistakes you often make as an entrepreneur: Choosing the Wrong Business Structure – Registering a business entity is the first step you take before starting a business. However, many entrepreneurs fail to do this, or sometimes when they do, they register the wrong entity. It is important to have the right structure in place. No Founders’ Agreement – Many entrepreneurs end up having issues with their co-founders because the terms of the relationship were not clearly defined. It is advisable to enter into a Founders’ Agreement clearly stating the terms, and vesting shares to the co-founders at a later time to protect the interest of your company. No Intellectual Property Protection – Many entrepreneurs fail to protect their ideas and inventions. They get carried away with the excitement of having created something novel and do away with registering at the applicable registry. It is important to register your intellectual property. No Business Plan – It is said that many entrepreneurs are sometimes not businessmen. They have innovative ideas but do not think of how to turn those ideas into scalable businesses. A business without a proper business plan has failed from the beginning. Thus, it is important to have a business plan highlighting all the business goals and the timeframe within which they should be fulfilled. In addition, it is important to have a business plan as this is the first thing an investor will look at to consider if the business is worth his investment. Neglecting Regulatory Compliance – Many entrepreneurs ignore strict compliance to the regulatory framework and this gets them into trouble. It is important to ensure that your taxes are properly filed; the required licenses (if any) are acquired, and the conditions required by law for a particular industry you operate in are met. No Employment Contracts – Entrepreneurs when starting a business fail to enter into employment contracts with their new hires. It is important to have a contract highlighting issues on salary, Intellectual Property ownership, and assignment, non-competition, vesting arrangement, stock options, and so on. Have an experienced lawyer prepare a standard employee contract for your company. Getting in Bed With the Wrong Investors – Many entrepreneurs raise funds desperately and do not carry out their due diligence on the investors. When you raise funds desperately, you tend to overlook some issues or give equity in your company away without properly considering the implications it would have on the company later on. It is advisable to raise funds only when you need it to simply build upon what you have. Not Having Standard Contracts – It is important to get all your standard legal documentation in place such as your Non-Disclosure Agreements (NDAs), terms and conditions, etc. Not Keeping Accounting Records – The majority of entrepreneurs fail to do this. It is important to keep records of every penny that goes in and out of the business. This will not only give your business integrity in the eyes of your investors but will also help you monitor how well your company is doing. Not Having Experienced Lawyers – Entrepreneurs have a mindset that it is only when they desperately need a lawyer that they get one. It is important to get a lawyer (not just any lawyer but one experienced with startups, the ecosystem, and your industry) to guide you from inception through the scaling. Sustaining a business takes hard work and dedication embedded in a bespoke business model that has the potential to stand out in the marketplace. However, the very purpose of these businesses which is profit-making can be defeated in situations where the employers are not proactive enough to overcome some avoidable mistakes. Read Also: Ten Marketing Tips for Startups

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Things to Consider Before You Outsource

If you have never outsourced a service for your company, we might need to profile you or have an interview with you. Superhuman, how do you get everything done yourself? Oh, you don’t? Outsourcing has come to stay. As a business owner, you cannot do everything by yourself,  neither can your employees. Okay maybe your employees can, but having too many of them on your payroll will tell on your balance sheet at the end of the month. Let’s look at some of the pros of outsourcing: 1. Cost factor, of course In reality, this is the reason a lot of business owners consider outsourcing in the first place. Hiring for every role on a full-time basis is quite expensive. Employers get to cut the cost of taking on a new employee and still get the job done. Of course, the point is to look for the best hands for the price you can afford and not necessarily going after the lowest-priced person. 2. You get a pool of skill set to fish from You may pride yourself on having the creme of the industry as employees in your business, but the truth is there are a gazillion that will still elude you. What outsourcing does for you is that it gives you the ability to determine which skill set is lacking in your company. 3. And you get to save time There are times you need particular skills for specific one-time projects. Instead of getting new staff for that particular project, the wise thing to do would be to outsource all or certain aspects of that project until the project is complete. Not only does this save you time it also saves you money. Having established that outsourcing is a brilliant idea, the challenge then becomes how do you protect your intellectual property? Not to make you wary (okay maybe a little bit), but do you know: the person who literally puts their fingers on the keyboard and creates or does any work  is the “author” of that work and owns the copyright to the work? So for a business that has outsourced its software development, which most businesses do, how do you protect your business and stop yourself from unknowingly giving out your software to your developer? 1. You know what you are outsourcing Really, how do you protect your Intellectual property if you don’t know what you are outsourcing? The first step for you should be to know what you are choosing to outsource. “Identify what your IP really is, who owns it, and who controls it. 2. Identify the right developer for you This involves checking out the developers, their reputation, and whether they are a good fit for the project you have in mind. You should also make sure the selected developer has all the needed resources to protect your IP from theft or unauthorized use. 3. Most importantly, pay attention to the key provisions in your contract Don’t just draft up a contract without taking note of the following essential details: A. If a non-disclosure agreement (NDA) has not been signed, include a confidentiality provision in the contract. That way, the developer is restricted from sharing any of the information you provide, the internal workings of your business, your software or program components, and other things you specify. If you’d rather go for an NDA, however, we can help with that. B. You have to own all IP rights. The reason for this is simple. As mentioned earlier, (s)he who authors the code (work) owns the code (work), so you want to make sure you have that eliminated with an IP assignment clause included in your contract.  The clause assigns the IP to you, making you the owner of the IP during and after your contract. This also gives you the ability to license your IP to third parties. C. Your contract must state clearly how you want the developer to protect your IP. This should include, who will have access to it, under what circumstances, etc. D. Spell out the termination clearly. This is a no-brainer. You know at some point, the relationship will have to come to an end, either because the transaction has been concluded or before the transaction is concluded for some other reason. Ideally, you should spend time hashing out under what circumstances termination can occur, what happens after termination, and how to ensure you own your IP. E. Have control of your source code. It could be a nightmare, running after a developer after completing a job to tell you how to access your source code. Some may call it bad faith, but you know it’s courting peace. If there is a dispute or disagreement, you have control of your assets and there’s nothing the developer can do about it. F. Make sure you don’t pay for your developer’s mistakes. You should be indemnified by the developer in case he infringes on a third party’s IP right in the course of working on your own software. Even though outsourcing is meant to relieve you, it can do more harm than good if not handled in the right way. In addition to the contract, make sure you copyright all source codes and design either in your name or company name. In Nigeria, software is considered literary work and can be protected under the copyright act.  If you’d like to copyright your software, we’ve got you. Clarity is quite relevant with IP rights especially if you are looking to use the software or outsourced work as part of other projects you are looking to sell or license. Any smart buyer or licensee will insist you provide a warranty that you own the software or other work fully and legitimately. Read Also: Four Things to Consider Before You Outsource a Company

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Thriving Through Disruptions – Tips for Startups

In a constantly changing and evolving business environment, business owners, entrepreneurs, and business managers are always seeking innovative ways to manage threats that could potentially ruin their business.  Growing a business entails creating solutions to everyday problems such as constantly identifying your target market in order to increase your revenues, sourcing suitable talents as employees, ensuring efficient business operations, and surpassing client’s expectations with minimal resources. There are however the not-so-everyday challenges that businesses must respond to; these sometimes come in form of disruptions and they have the potential to suddenly change the way a business has been operating. Disruptions can generate positive results especially if a business is built to respond and not only react to sudden changes. Disruptions could come in the form of infrastructural changes which can impact the physical location of a business, the shutdown of a supply chain, entry of a competing business in the market, regulatory changes, etc. In recent years, startups and even established businesses have had to grapple with disruptions from the covid-19 pandemic, change in government policies, regulations or laws, and technological innovations. Irrespective of the model of disruption, businesses should be built to anticipate, respond and thrive through the uncertainties that disruptions bring. In Nigeria, disruptions caused by changes in government policies and regulations have been the bane of many Startups. Notable examples include the ban on motorcycle and tricycle operations by the Lagos State Government, CBN restriction on the use and trade of cryptocurrency, the restriction placed on Fintech companies by the Nigerian Securities and Exchange Commission, prohibiting these companies from offering foreign securities (listed on other countries stock exchange) via their digital/online platforms. We cannot forget the most recent regulatory disruption – the suspension of the use of the Twitter app in Nigeria which has not only disrupted the marketing strategies of many startups but also thrown spanner in the works of alternative customer service channels used by many businesses in Nigeria. Disruption has the potential to cripple business operations but businesses can be proactive to ensure that they remain adaptable to take on any challenge posed by such disruptions. Some tips for adaptability are: Business Diversification- Having a single product line in a volatile business environment may not be advisable. To survive, Startups can begin to diversify their businesses by offering new products/services to their target market. It is also important to diversify different segments of your key operations. This for instance could be by having multiple supply chains, different communication channels for customers, and different marketing strategies for different customer segments. Business Model Reinvention: Businesses must ensure that their business models are flexible and innovative to enable them to enter into new markets. Reinventing the business could mean connecting with your customers and clients using technology in order to expand your reach or packaging your products differently using different brands. Explore possibilities of partnership: Businesses can explore the opportunities of collaborating with existing businesses using integrations. You can collaborate with your suppliers, retailers, or other businesses, thus creating complementary products/services. This collaboration can also lead to the creation of a diversified product/service for a different market. Constantly analyze the business environment: In order to predict disruptions and act in time, businesses need to analyze both internal and external operational risks which can hamper their operations. Businesses must simulate possible disruptions, and create make-shift solutions which can ensure that the negative effect of disruptions is better managed. Businesses can also have a business disruption and continuity plan. Seek professional Advice – Businesses can engage professionals who will help them identify the inefficiencies in the different segments of their business. Professional advisors can also help businesses put in place mechanisms that can make a business better suited to adapt to disruption. For instance, for regulatory disruptions, a legal professional can engage the regulator so that the regulator is better able to appreciate the non-traditional business models in that industry. Disruptions to your contractual transactions and relationships (e.g non –performance of contractual obligations due to the pandemic) can equally be managed when armed with sound legal advice. Businesses must come to terms with the fact this is a disruptive age and any business which will be sustainable must be built to adapt to change and respond quickly to challenges using innovative techniques.

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How to define a Product-Market Fit

An antenatal app provides low-income pregnant women in hard-to-reach areas with medical information. What is wrong with this product? A product without a market fit is one where the majority of people are not buying (or using) the product and/or among those who buy (or use) they do not get the value out of the product. A product without a market fit is one where the biggest driver of growth, word of mouth, is not spreading and so the product is not growing in terms of usage and revenue.  What exactly is product-market fit? Product-Market Fit is when there is alignment between the value proposition of your product, your personas (users), and the channel through which you are delivering your product. Back to the example at the top, the most obvious problem with the product is the channel of delivery. Low-income women in hard-to-reach areas most likely do not have access to mobile devices that can host apps.  When you have either one of the 3 factors; personas, value proposition, and channel unaligned, you will experience a poor product-market fit. In some instances, you might experience success, which is extremely deceiving as it is short-lived. As so many Venture Capitalists, demand start-ups show evidence of product-market fit before they invest in the startup.  To show there is a product-market fit you will need to conduct consumer, market, and product research; here are the steps you need to take  Determine the personas: your persona is your target audience; the group of people you want to sell your product or service to. Learn more about target audiences in our previous post:  https://msmehub.org/staging/6671/tips-how-to-defi…ur-target-market/ Identify the needs of your target audience: conduct a need assessment to understand your target audience’s needs. Learn more about target audiences in our previous post:  https://msmehub.org/staging/6671/tips-need-assessment/ Define your value proposition: your value proposition is selected from a list of possible value hypotheses which are key assumptions that you believe underlie why a person is willing to pay or use your product. When listing your value hypothesis, think of value as a combination of features your product provides, the benefits to the users, and whether or not these are worth it. It helps to speak to people (through interviews or focus group discussions) when listing out your value hypothesis.  Determine your distribution plan: understand what distribution channels you have available that will be able to get your products to your target audience seamlessly. Develop & Test a minimum viable product: your minimum viable product is a test of the premise of your business idea. It is when you use limited resources to create a prototype of your product and distribute it through your channel to your target audience. When people interact with your minimum viable product it provides data that helps you validate whether there is a need for your product and how to optimize the product and channel of distribution.  Once steps 1-5 have been completed, you can be confident that you have accurately tested your product-market fit.  Contact Versa Research your trusted data, research & consulting partner!    References https://leanstartup.co/a-playbook-for-achieving-product-market-fit/ https://mailchimp.com/resources/product-market-fit/

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