Starting a business in Nigeria can be an extremely rewarding endeavour; however, it does come with its own set of challenges. With proper planning, research, and knowledge, your business has a high chance of success. This definitive guide covers everything you need to know to start a business in Nigeria.
Conducting market research before starting your business
Before starting any type of business, it’s important you ensure there’s a need or gap in the market for whatever product or service you want to provide. Here are some tips on assessing market demand:
Understand Your Target Customer
Create a detailed buyer persona for who your ideal customers would be. Figure out their demographics, behaviours, needs, and wants. This will help you tailor your offerings accordingly.
Analyse industry trends and growth potential.
Research the current trends, growth rate, and size of the industry you want to enter in Nigeria. High-growth industries like tech, e-commerce, and financial services could be ideal.
Study your competition.
Examine competing companies, products, services, and business models in depth. Identify potential opportunities to improve upon or gaps that are not being addressed adequately.
Conduct surveys and interviews.
Create online surveys using tools like SurveyMonkey or Typeform and share them with your target audience. Conduct one-on-one interviews to get more qualitative insights as well. You can read our Beginner’s Guide to Conducting Market Research.
Choosing the Right Business Structure
This is when you fully own an unincorporated business by yourself. It’s the simplest model, but you face unlimited liability.
Here, two or more people jointly own and operate a business by signing a partnership agreement. There is still unlimited liability, however.
Limited Liability Company (LLC)
This hybrid model combines aspects of partnerships and corporations. It protects your personal assets from business debts and liabilities.
Private Limited Company
Also known as a limited liability company (LLC), this separates your business from your personal finances and keeps liability limited. However, there are more regulations and reporting requirements to comply with.
Determine your capital requirements.
Accurately estimate the startup and operating costs you would incur. Factor in expenses like inventory, equipment, office space, staffing, promotional campaigns, etc. This determines how much investment capital you need to bootstrap your operations.
Choose an optimal location.
Consider factors like accessibility to suppliers and target demographics, infrastructure, labour, taxes, operational costs, and incentives across different states and cities in Nigeria.
You can read up our article on 14 Factors You Must Consider When Choosing the Perfect Business Location.
Registering your business in Nigeria
Some certain regulatory requirements and procedures must be completed for formally registering business entities in Nigeria:
Reserve a unique business name.
Do a company name search at the CAC to ensure the name you want hasn’t already been taken.
Prepare the required documents.
Have copies of your business plan, certificate of incorporation forms, memorandum, articles of association, etc.
Register with the CAC.
Submit all documents and forms to the Corporate Affairs Commission (CAC), along with registration fees, to be legally registered.
Obtain operational permits and licences.
Apply for relevant permits, licences, and certifications from government agencies like state ministries, SON, NAFDAC, etc., depending on your industry.
Register for taxes.
Sign up with the FIRS for tax identification number (TIN) and VAT registration, and submit signed tax registration documents.
Creating a Bank Account and Financing Your Business
To handle financial transactions and get funding, you need to set up business banking.
Select a bank.
Compare account fee structures, interest rates, digital features, and branch availability to pick between top options like Zenith, GTBank, and Access Bank.
Submit the required documents.
Banks will need copies of things like your business registration forms, ID, permits, utility bills, etc.
Open a Current Account
This enables smooth deposits, payments, and withdrawals required for routine business operations through checks, transfers, and debit cards.
Apply for Startup Business Loans
Once registered, approach banks or the BOI for SME loans if more capital is required. Prepare budgets, projections, and collateral accordingly. You can read our Guide to Small Business Funding in Nigeria: Grants, Loans, and More.
Consider angel investors.
Wealthy individuals sometimes provide capital to startups they believe in. Network extensively to find such investors.
Leverage government incentives.
Take advantage of grants, subsidies, and programmes from NGOs and federal and state governments to support youth entrepreneurship and innovation.
Create financial reports.
Use accounting software like Sage to produce detailed financial statements covering your income, expenses, assets, liabilities, cash flows, and profits and losses.
Finding the Right Location and Facilities
To enable smooth business operations, an ideal physical location and facilities are vital.
Rent Office Spaces
For small teams, co-working spaces allow the rental of fully furnished smart offices with meeting rooms and amenities.
Lease commercial property
For larger operations with warehouse needs, commercial spaces like factory sites and office buildings can be leased long-term.
Design a productive workspace.
Optimise office layouts for lighting, ergonomics, collaborative spaces, noise control, and technology integration based on staffing needs and work processes.
Source reliable local suppliers.
Find suppliers and vendors for raw materials, inventory, packaging, shipping, equipment maintenance, and other business services in nearby areas to build relationships.
Ensure reliable power.
Install solar panel systems with inverters and batteries for electricity backup due to frequent power cuts from the national grid.
Set Up Fast Internet
Fibre broadband or leased lines using providers like Spectranet provide speeds upwards of 100 Mbps for smooth connectivity across devices.
Building an online presence
An online presence is mandatory for finding and reaching potential customers in Nigeria.
Create a company website.
Hire a web development agency for a responsive site reflecting your brand identity and offerings, with clear calls-to-action across pages. You can contact SMEG Hosting for a complete website solutions.
Leverage social media.
Maximise platforms like Facebook, Instagram, and LinkedIn to cost-effectively engage audiences, promote products, and generate leads and sales.
Utilise SEO and PPC.
Enhance organic rankings with SEO-optimised content and backlinks while running Google and Facebook ads for greater visibility and traffic.
Enable E-Commerce Features
Incorporate payment gateways like Paystack alongside shopping cart integration to easily sell online. Offer secure online payments, delivery, and support.
Tap Mobile Apps
Develop useful iOS and Android apps to allow quick access to your services, integrations with other platforms, and regular engagement anywhere.
Use customer relationship management (CRM) tools.
Streamline systems for handling all marketing, sales servicing, and support using all-in-one SaaS platforms like Salesforce and HubSpot.
Send email and SMS updates.
Build customer lists to send out newsletters, promotions, and updates through MailChimp integration or bulk SMS services.
Hiring and managing staff
For scaling your operations, building an excellent staff with good management is essential.
Assess staffing requirements.
Determine the number of employees needed for specialised roles across departments like sales, marketing, operations, and finance based on current and projected workloads.
Recruit through multiple channels.
Post job listings on platforms like Jobberman and LinkedIn. Spread openings through employee referrals and local talent networks as well.
Vet and Onboard Candidates
Interview-shortlisted applicants were extensively checked for qualifications, cultural fit, and aligned expectations before drafting offer letters and employment contracts.
Provide extensive training.
Conduct thorough onboarding training on company guidelines, systems, processes, and expectations for optimal individual and team performance.
Set clear goals and performance metrics.
Create individual quarterly and annual performance targets aligned with overall business objectives as part of balanced scorecards for monitoring and maximising productivity.
Compensate and incentivize competitively.
Combine monthly salaries with performance bonuses, sales commissions, equity options, and benefits packages tailored to industry benchmarks.
Encourage open communication.
Schedule regular one-on-one and team check-ins by managers for updates, feedback, and discussions about challenges employees may be facing.
Foster culture and community
Bond teams over shared meals, activities, recognition programmes, and virtual collaboration platforms like Slack to keep staff engaged, supported, and motivated.
Staying legally compliant
Keep abreast of all national and state laws, regulations, and standards governing business practices to avoid legal penalties.
Comply with labour laws.
Adhere to laws around minimum wage, working hours, leave policies, overtime, terminal benefits, harassment codes, and unions.
Meet Tax Payment Deadlines
Pay all federal and state taxes, like company income tax, PAYE, withholding tax, and VAT, accurately and before deadlines to avoid fines.
Renew licences and permits.
Apply for on-time yearly renewals of all operational licences, product certifications, and regulatory approvals required for legal functioning.
Uphold industry regulations.
Stay updated on provisions for your sector around pricing, specifications, consumer protections, labelling requirements, etc., and implement changes promptly.
Obtain the necessary insurance.
Safeguard your business assets, employees, and liabilities through adequate coverage relevant to your operations, like fire, burglary, marine, health, etc., from reputed providers.
Ensure workplace safety.
Make regular investments to meet industry safety standards for equipment maintenance, protective gear, workplace conditions, regular risk assessments, and emergency protocols.
Protect intellectual property.
Apply for trademark and patent registrations to secure proprietary brands, products, content, and other IP assets and enforce rights in cases of infringement.
Store data and documents securely.
Follow data privacy best practices by obtaining consent for collection and implementing robust cybersecurity policies for accessing, handling, and storing confidential customer and company information.
Contract Reputable Professionals
Develop lasting engagements with finance partners, lawyers, IT vendors, and specialists for auditing accounts, resolving disputes, and ensuring system security and regulatory compliance.
Adopting cost-effective marketing tactics
Promoting your offerings to local markets often has to be achieved through lean methods tailored uniquely to Nigeria:
Leverage influencers and strategic partnerships.
Get endorsements from bloggers, YouTubers, and Instagram influencers relevant to your target market. Foster B2B partnerships with companies in complementary domains to cross-promote brands.
Offer free samples and gifts.
Hand out trial-size samples of products and branded giveaways like t-shirts, bags, pens, etc. during in-person business networking events, trade fair exhibitions, and community functions.
Participate in industry events.
Put up well-designed stalls to showcase your latest offerings at sector-specific conferences, seminars, and conventions attended by key prospects. Distribute brochures and merchandise.
Print local directory listings.
Feature in Nigerian Yellow Pages and regional business directories frequently browsed locally for supplier searches in categories relevant to you.
Leverage print media.
Though declining in relevance, strategically place ads, advertorials, and press releases in niche, locally popular newspapers and magazines read by your target groups.
Go viral on social media.
Increase visibility dramatically by creating hashtag campaigns, engaging visual content, and appealing discounts exclusively available to social media followers.
Promote through online communities
Actively network by sharing your content and participating in discussions on Facebook groups, WhatsApp groups, forums, and classifieds frequented by prospects. Offer valued insights, resources, and assistance.
Reward Referrals and Loyalty
Implement referral programmes that incentivize existing customers to recommend you to new leads through discounts and vouchers. Offer members-only promotions to return buyers too.
Optimise conversions with retargeting.
Remarket your brand across the web and social media to previous site visitors through pixels and custom audiences to recapture leads and increase repeat sales.
Adapting products and services for local success
Making offerings well-suited to Nigerian consumer preferences and use-cases takes researching specific nuances:
Integrate flexible payment options.
Enable pay-as-you-go models, instalment plans, bank transfers, and cash on delivery alongside cards and wallets to drive mass adoption, which is still hindered by low card penetration.
Strengthen After-Sales Support
Provide readily available and responsive customer assistance through call centres, ticketing systems, and remote tech support to resolve common problems faced by users with limited technical familiarity.
Account for Resource Constraints
Design minimised hardware requirements, offline functionality, and smaller packaged SKUs with lower pricing tiers for segments challenged by limited purchasing power and infrastructure issues like power cuts or connectivity drops.
Provide detailed demonstrations.
Accommodate longer decision-making cycles and reluctance to purchase unfamiliar offerings by patiently educating walk-in visitors and giving extensive product demos to first-time customers.
Bridge Language Gaps
Beyond English fluency, add multilingual interfaces or staff conversational abilities in languages like Hausa, Yoruba, Igbo, and Pidgin commonly used by segments, especially at lower income levels.
Adapt brand messaging
Ensure branding, packaging, and messaging resonate with local sensibilities instead of appearing overly western or foreign for easier connections and likeability. Blend global expertise with local understanding.
Meet cultural expectations.
Account for unique religious needs, dietary preferences, celebrations, traditions, and customs in your offerings, such as holiday discounts, vegetarian and halal options, festive branding, etc., to appeal inclusively.
Allow price negotiations.
Be open to some back-and-forth haggling on prices and customisation requests typical of small business interactions instead of rigid listed pricing enforced silently to get greater conversion success.
We believe this guide will be of great help to you. You can read our 100 Profitable Business Ideas to Start in Nigeria for great business ideas.