According to the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), a small-scale business refers to an enterprise that falls within a specific range of criteria in terms of size, investment, and a workforce of 1 to 49 employees (including the business owner or proprietor).
However, starting a small-scale business in Nigeria, like anywhere else, demands careful planning, unwavering commitment, and the right knowledge to thrive in the Nigeria business landscape. In this comprehensive article, we will guide you on how you can start a small scale business in Nigeria.
Table of Contents
How to start a small scale business in Nigeria
Here are the steps on how you can start a small scale business in Nigeria:
Step 1. Idea Generation and Market Research
Obviously, there can’t be a business without an idea. So this is a crucial step in starting a small-scale business. In idea generation, you explore and brainstorm potential business ideas. The focus is on identifying concepts that align with your passions, skills, and expertise.
If you need help generating good business ideas to pick from, check out these key resources;
- 65 Most Profitable Small Scale Business in Nigeria
- 57 Lucrative Small-Scale Business Ideas
- Best 18 Small Business Ideas from Home
- Best Profitable 26 Small-Scale Business Ideas
For more business ideas you can click here
When you have gotten that perfect business idea for your business, you can now conduct a market research to know the profitability of the business and how viable it is in the Nigerian market.
In conducting a market research on your business idea, the following key elements must be considered;
- Understanding Demand
- Analyzing Target Audience, and
- Evaluating Competition
In addition, market research methods may include surveys, focus groups, interviews, online research, and analyzing industry reports. The data collected during market research provides valuable insights that inform your business decisions and help refine your business plan which is the next step to be taken.
Overall, the combination of idea generation and market research enables entrepreneurs to identify viable business opportunities and develop a strong value proposition.
Step 2: Develop a Solid Business Plan
A business plan is a detailed written document that acts as a roadmap for your business journey from its inception to achieving success.
By presenting a well-structured plan, you provide clarity and direction to yourself as the entrepreneur and to potential stakeholders like investors and lenders.
This comprehensive plan outlines various essential aspects of your business, setting the course for a successful and thriving enterprise. These essential aspects are;
- Business Goals, Mission, and Vision
- Target Market
- Product/Service Description
- Pricing Strategy
- Marketing Plan
- Sales Strategy
- Operational Plan
- Financial Projections
- Funding Requirements
- Risks and Mitigation Strategies
Because this is a small scale business you might not necessarily need to create a lengthy business plan, a 2-3 page business plan will suffice in your business.
Learn how to create a business plan from this article; How to Write a Business Plan
Step 3. Legal Requirements
In meeting the legal requirement of your small scale business in Nigeria, there are three major accept of the legal requirement that must be satisfied;
- Business Registration
- Tax Regulations
- Obtaining a Business License and Permit
1. Business Registration:
Registering your business is a vital legal step in establishing a small-scale business in Nigeria. It involves formally documenting and securing your business’s identity with the appropriate government authority, the Corporate Affairs Commission (CAC). All that is required to register your business in Nigeria is a business name and proof of identity.
Learn how to register your business in Nigeria from this key resource; How to Register a Business Name in Nigeria.
2. Tax Regulations:
Complying with tax laws and regulations set by the government is essential to avoid legal repercussions that could impede the smooth operation of your business.
Applying for a Tax Identification Number (TIN) with the Federal Inland Revenue Service (FIRS) or with the State Inland Revenue Service is the first step in complying with the tax law in Nigeria. Below are key taxes that may apply to your business:
- Value Added Tax (VAT): A consumption tax on goods and services provided by businesses.
- Company Income Tax (CIT): A tax on the profits of registered companies in Nigeria.
- Personal Income Tax (PIT): A tax on the income of individuals, including business owners and employees.
- Withholding Tax (WHT): A tax deducted at source from payments made to suppliers, contractors, or service providers.
- Education Tax (EDT): A tax imposed on companies for funding education in Nigeria.
3. Obtaining a Business License and Permit:
It involves researching and complying with the regulatory requirements that are specific to your industry or the type of business you intend to run. Various businesses may need different licenses and permits to legally operate. For instance, the food industry requires you to obtain a business license and permit from the National Agency for Food and Drug Administration and Control (NAFDAC).
Step 4. Location and Infrastructure
Choosing the right location and ensuring adequate infrastructure are crucial decisions that can significantly impact your business operations and growth prospects.
In choosing your business location, some items must be factored into your decision-making process such as; Accessibility, proximity to suppliers, target market proximity, and competitor analysis. if you get those items right in choosing your business location, you have indirectly ensured the smooth operation of your business.
While on the other hand, Infrastructure refers to the physical and organizational facilities and structures needed to support your business operations. Such as; Utilities (electricity, water, and internet connection), future and fittings, safety equipment, etc.
Step 5. Set Up Financial Systems
Setting up financial systems involves putting in place organized and efficient financial processes to track and manage the flow of money within your business. By implementing robust financial systems, you can make informed decisions, maintain financial stability, and set the foundation for long-term growth. Below are the benefits of setting up a financial system for your small-scale business;
- Track Income, Expenses, and Profitability
- Budgeting and Financial Planning:
- Cash Flow Management
- Financial Reporting and Analysis
- Compliance and Tax Management
- Decision-Making and Investor Confidence
Remember to regularly review and update your financial records.
Step 6. Build a Strong Team
Your team members are the backbone of your venture, and assembling a group of skilled and motivated individuals who align with your business’s vision can have a significant impact on its success and growth. The number of staff to recruit will depend on how many employees you deem fit to work within your small-scale business.
But let it be known, your team is an invaluable asset to your small-scale business. So, hiring the right people, nurturing a positive work culture, and fostering a sense of shared purpose will propel your venture to new heights. And as they look up to you for leadership also try to be a motivator to them
Step 7. Secure Funding
There are various funding options available to entrepreneurs, and choosing the right one depends on your specific financial situation and business needs. Below are different funding options:
- Personal Savings
- Bank Loans
- Angel Investors
- Venture Capitalists
- Strategic Partnerships
- Friends and Family
Carefully assess your funding options, consider the associated terms and conditions, and choose the option that aligns best with your business goals and financial situation.
You can learn how to access government loans and grant through this key resources; Federal Government Loans for Small Business in Nigeria
Step 8. Marketing and Branding
They involve creating a strong brand identity and developing effective marketing strategies to promote your products or services to your target audience. By developing a strong brand identity using your business name, logo, tagline, colors, and overall brand messaging. You differentiate your business from competitors, making it stand out and unique in the eyes of your target market.
In other to successfully sell your brand to your target market, you must engage in marketing your business. This can be accomplished through various methods, such as:
- Traditional Marketing Channels:
Traditional marketing channels include offline methods such as print advertising, direct mail, billboards, radio, and television commercials. Depending on your target audience and industry, traditional marketing can still be effective in certain contexts.
- Digital Marketing Channels:
Digital marketing utilizes online platforms and tools to reach a broader audience. This includes tactics like social media marketing, email marketing, search engine optimization (SEO), content marketing, pay-per-click (PPC) advertising, and influencer marketing.
- Building Customer Relationships:
Focus on building and nurturing relationships with your customers. Encourage feedback, respond to inquiries promptly, and provide exceptional customer service. Satisfied customers are more likely to become repeat buyers and brand advocates.
Always keep in mind that the purpose of marketing and branding is to win over your target audience and make a lasting impression on them about your business.
- How to Get a Loan to Start a Business in 11 Steps
- How to Start a Business in Nigeria in 9 Easy Steps
Final Thoughts on Starting a small scale business in Nigeria
Starting a small scale business in Nigeria requires; Idea generation and market research, developing a solid business plan, meeting the legal requirements, location and infrastructure, setting up financial systems, building a strong team, securing funding, and marketing and branding. By following the steps outlined in this article, you can set your business on the path to success.
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