Nigeria, the ‘giant of Africa,’ and the most populous country on the continent, boasts of having the largest economy in Africa, with an aggregate GDP of $468.6 billion, according to World Bank estimates.
Despite the fact that it has a vast population, which is of great advantage to business owners, running a business in the country comes with various challenges.
Some of them include irregular power supply, the challenge of accessing funds for capital, lack of infrastructure, inconsistent government policies, bribery and corruption, and a host of others.
The following are solutions to the challenges business owners experience in Nigeria.
1. Access to capital/loan
Entrepreneurs can fund their business using the following conventional methods:
a. Internal funding
Businesses, in general, prefer to fund their expenses and growth with internal funds, i.e. the cash and savings they already have on hand.
The main benefit is that you don’t have to repay any money or incur any debt.
b. Debt finance
Debt financing for your business entails borrowing money from a lender, such as a bank or other financial institution.
Credit cards, overdrafts, and loans are the most common forms.
On the plus side, because no other parties have ongoing shared ownership of your business, you can retain control of it and its profits. Furthermore, interest is frequently tax-deductible.
The disadvantage is that you must repay the money you borrow – usually with interest.
So, while debt financing may be a good short-term solution, it may also lead to additional problems in the future.
Many businesses also find it difficult to obtain debt financing without security, particularly if they are new or do not have adequate equity.
c. Equity finance
Equity finance is the third most popular business capital solution. In this case, an investor allocates funds for your business with the aim of having a stake in your company.
Venture capitalists (professionals who invest in existing businesses) and angel investors are two common types of investors (individuals who invest in start-ups).
Because the investment is not a debt that must be repaid, it is less risky than debt financing.
d. Human Resources Flexibility
Small businesses’ lack of capital can be addressed by implementing cost-effective compensation strategies.
Labour is a major cost center in any organization, and increasing labor efficiency can help a company save money.
Flexibility in human resource management is critical for allowing a company to offload unwanted labor during non – peak periods.
Consequently, startups are advised not to hire permanent employees to avoid the risk of idle labour capacity when operations slow down.
Furthermore, small businesses should implement productivity-based compensation to ensure that employees are compensated based on the value they provide to the company. This strategy ensures that every dollar spent on labour adds value to the company.
e. Developing Positive Supplier Relationships
The problem of a lack of capital in small businesses can be addressed by developing long-term relationships with suppliers to encourage them to supply inputs on credit.
Procurement is a significant cash consumer, and implementing effective payables management strategies can assist a small business in navigating capital challenges.
To protect relationships with suppliers, a business should use up the credit periods offered by suppliers while also making timely payments.
f. Avoiding Credit-Based Sales
Credit advances to customers can be used to strengthen customer relationships.
However, because it ties up capital, it poses a cash flow risk to a small business.
Controlling credit sales is critical for protecting the company from cash flow issues caused by customers’ failure to pay on time.
2. Solutions to bad roads/infrastructural facilities
Business owners should ensure that their factories are situated in a centre where raw materials can be sourced.
They can also make use of inverters as a cost-effective alternative for irregular power supply.
The challenge of multi taxation can be solved by changing the structure of your business.
As an entrepreneur, you do not have the benefit of an employer paying a portion of your taxes. Medicare taxes and social security must be paid in full.
You must still pay those taxes if your company is taxed as a Limited Liability Company (LLC), though in some cases you may be able to eliminate the employer-half of those two tax responsibilities.
This could be a wise decision for some small businesses. This is a great way to reduce your taxable liability.
4. Regulators compliance
Business owners must ensure that their staff understand the significance of compliance. Furthermore, they should create a link between their security team and legal and stay up to date on regulatory changes.
5. Enhancement of entrepreneurial abilities and culture
The mere existence of an idea, despite how inventive and bright it may seem, is insufficient to ensure its success.
Entrepreneurs must understand the importance of keeping business and personal affairs separate, as well as the importance of structure in business operations.
The lack of a defined structure has an impact on productivity, operational processes, and, ultimately, profitability.
6. Dealing with creditors
Business owners struggling to pay off their debts, which is threatening the financial health of their organisations, should not wait until they miss a payment.
Debt accumulation not only hinders the successful running of the business, but it also affects the organisation’s ability to obtain low-interest rates and loans and harm the company’s credit score.
Entrepreneurs should call their creditors to negotiate better terms before the debt is turned over to a collection agency.