In one week, I have read about 5 stories of failed Nigerian startups. I could see a pattern and that spurred me to write this article.

Nigerian startups should not mistake investment funding for profitability.

The more money you start off with, the farther your breakeven point.

Jumia and Konga are two of Nigeria's biggest ecommerce sites today, partly due to the huge funding backup they have since they launched. They both have enjoyed over $ in investments. However, both are yet to become profitable. Infact Jumia just lost 61m dollars in the last 6 months.

I believe the business that can work in Nigerian harsh economic climate is a business that should make profit as soon as it takes off.

The Nigerian economic factors would frustrate any startup that wants to sacrifice for some years before making profit. The recession and forex drought cost Jumia and Konga 70% of their sales as most of their goods are imported.

For me, the key is always start lean, make profit as soon as you can. For Pukena, I ensured we scale up with as little capital as we can and make profit organically and from the profits we can scale further. We don't mind going from house to house washing cars and cleaning houses as long as the money keeps flowing in. Our services in Pukena are solutions to everyday needs and our target market are within our reach. We are positioning Pukena to be the go-to for every middle class Nigerian for his daily service needs. But we are starting small. Not biting more than we can chew per time. For now office is not important. Our office is in our client's homes! Little overhead, more profit.

I learnt that as a Pastor in Winners Chapel. We were taught never to spend more than 30% of the income on overhead. So the lower your income, the lower should be your overhead. In winners, your church branch can't talk about spending on capital project if your project account can't afford it. Very strict financial principles.

Right now in Pukena, we are targeting a gross monthly income of *** millions with as little marketing budget as we can. Hence am teaching my team how to get results with little or no money.

You have peace of mind when you build like this. I have used this principle throughout my business career till date. I always ensured I started small so that everything that comes in is a profit. Its not the easiest way to do business. But its the smartest.

You stand to maintain the controlling shares in your company if you follow this path. Even when you open your doors to investors, they are coming to join and scale an already thriving business.

Most businesses that fail, in my opinion, are businesses, whose owners usually start off with so much fiscal liability, and they keep chasing the shadows to just offset the liability before even talking about profitability, which in most cases, they never do. That was the case of etisalat. When you borrow money at a particular interest rate at a particular time, as time roll by, the value of that loan interest increase and the more difficult is it to pay up.

Start small. Make profit at your own pace. Build a great business

Visit www.pukena.ng to be inspired!

One of the best reads in a while.

financial discipline is the word, follow strive masiyiwa on facebook, he always unveils steps he took to grow his business, he taught on this topic in one of his posts..

This post just weak me..

The reason why business fails in Nigeria op can't figure that out in a simplified manner..

1) Branding : since most new startup in Nigeria already as a competitor you will need to introduce branding to yours... If you are original owner of the idea, my brother be ready for better competitors who are ready to rebrand your ideas with better stake

2)Electricity

3)Government policy : The minimum wage is too small, na person wey chop betta dey buy bottle water

4) promotion : new startup need this you can walk around your locality tell friends about your new mula buzz

5) planning : some buzz lacks sales due to weather, place and religion/tribe,
I don't expect you to set up a puck business in the North as a new startup

Failure in economy too

H

You are right though. Just that most businesses just want to hit it big once they start but unfortunately things happen.
But still doing business in this country is really tough though

Wrong question.

These 2 questions need answer first:

What is the actual rate(not hear say) of startup failures in Nigeria ?

Is the rate any different from what is obtained in other parts of the world(e.g USA: 90% failure rate) ?

The problem of the country is beyond what u wrote walahi

broz, are you selling your site to us or which one is visit pukena and get inspired?
or why not share anything u want to here and let's all discuss abt it.
it's nairaland forum for a reason abi

ki

Start small dream big

$61M in losess

Good advise

Let's forget that this is an advert disguised as an op-ed

Doing business in Nigeria is hard – even harder in the present scheme of things.

1. Harsh and unstable economy: startups are not insulated from the general economy. The healthier the economy, the more viable startups will be in the long run. Businesses in Nigeria will continue to fail left, right and center unless certain things are put in place.

2. To walk, you must first crawl: our Nigerian startups usually aim to fly from the word go. This is not a bad thing in and of itself, but a general disavowal of the harsh truth that Nigeria is not prime for business success is the reason why our startups will continue to bite the dust before their time, or before they have made any meaningful headway.

3. Technology: Startups which are built around first world technologies will fail woefully in Nigeria e.g GoMyWay

4. Purchasing Power: Nigeria is a poor country. When startup founders start marking up their products maniacally, be rest assured no one will bat an eyelid at their corners. E.g. Sheriff Shittu: Showroom.Ng Why would I buy a sofa for N280K when I can buy same for N150K from the market?

5. Bad leadership: I am not privy to the goings-on in the tech space, but from what I have heard knowledgeable people opine: most startup founders are not educationally equipped to manage complex businesses and undertakings.

6. Not market ready: in the words of Tayo Oviosu, founder of Paga, “Nigeria is still at a place where we need base infrastructure in various sectors. There are so many problems to solve. Sometimes we need to walk away from ideas because they are not market ready.”Our problems are myriad."

To gain further insights into the Nigerian tech space, I invite you to read this wonderful piece by Tayo Oviosu: https://medium.com/vcdium/investing-in-nigerian-startups-44401fde99d

Nigeria is not ready yet for some of the services these start-ups tend to offer, offcourse it's a great plus to always see the bigger picture... most of these guys too don't have investors, it's always personal funds, and once there is little or no ROI, Gobe yaf sele....

Most start ups failed because:
1. People find it difficult to separate business and personal finances
2. Most investors spend 70% of their income on non earning assets
3. We actually don't get the maths right most of the time, sometimes when we assume that extra cash to be profit.
Etc

Totally true. The best business model in this our environment, is to start with as little as possible. Every second revenue from start becomes profit.

Cos they think of money first

If you fail to plan, you plan to fail.... Many people will jump into business without adequate market research and feasibility study... In the end, when they fail, they start blaming Buhari and their village people. Thunder fall on all of una head

The most common killer of startup in Nigeria is the failure to itemized the "non-goods/services" expenses.

In simple English, we fail to plan for expenses like phone calls and power supply

Also, startups that focus on profit from day one to survive are likely to fail, part of your plan for at least 3 months is to give out products or services.

Just keep money to keep the business running without profit for at least 3 months

This is very interesting and highly educating. Please I'll appreciate more of this business ideas as I am a starter. Gracias.

hezy4real01:
The problem of the country is beyond what u wrote walahi

hezy4real01:
The problem of the country is beyond what u wrote walahi

Nice Write Up.

I learnt that as a Pastor in Winners Chapel. We were taught never to spend more than 30% of the income on overhead. So
the lower your income, the lower should be your overhead. In winners, your church branch can't talk about spending on
capital project if your project account can't afford it. Very strict financial principles.

The growth of Winners chapel and RCCG from scratch has always been an excellent case study for me.

Start lean and scale up.

Perfect truth.. nice write up OP

cos most of dem don't know what start up actually entails.....Most startups in nigeria take loans b and spend it like a company that have been existing for years.some of dem even use the loans for personal reasons dat arent profitable.imagine a startup using his loan/capital to build skyscraper or rent a an expensive space b4 even starting the business proper.some owners of these startups will spend their first profits on acquiring luxury like phones, cars, trip overseas etc when the business havent gotten uhuru.a very good example is payporte, we all saw how they lavish their monies on big brother Nigeria contestants when they just started operating in nigeria.i guess the money spent of BBN is far ahead of what jumia and konga combined spent on advertising during that period.



pardon my poor english....cos I was typing in haste