The Central Bank of Nigeria (CBN) recently made public its frustrations with the slow pace of disbursement of the many intervention funds dedicated to the SME sector, especially the one meant for agribusiness. Much of the fund hasremained with the central bank where it is domiciled for on-lending to operators. In order to fast track the disbursement of this and probably the other funds piled up at the CBN, it has proposed the establishment of a national microfinance bank to disburse the fund.The view of this column, which was published earlier, is that such a plan is another example of our culture of treating symptoms instead of diseases. Why are the funds not being accessed by operators? Is it the vehicle of disbursement (banks) or the terms of the facilities that we should twick? If it is the vehicle, should we replace it with a vehicle known to always malfunction? These are some of the issues we wish to address but from a different perspective – the perspective of the some unacceptable action of our entrepreneurs.
We had suggested the use of the most successful microfinance banks in the country to handle the intervention. But we need to look at some other challenges that will continue to hunt both the funds and our entrepreneurs, even after the vehicle is replaced by other means. In that regard, we should look at the many shortcomings of our local businesses and see how to help them upgrade their conduct. There is a general lack of discipline across the nation. Part of the consequences of indiscipline, which has become a culture in Nigeria, is that people do not observe rules or obey the law. This is why there is a market on every street, and even in the most sacred of places but nobody wants to be in a proper market. The most important master plans, have been distorted because officials are induced to convert residential and recreational facilities to commercial use. Result: businesses need not be properly registered to win multi-million contracts. Documentation is a no no. Meanwhile, nothing formal, including access to funds can be done without these. This why SMEs always have their loan applications thrown out and they can hardly present a bankable project.
This malaise has crept into every human endeavour in the country such that many government businesses are done with unregistered companies. Eventually most of the micro and small enterprises in the country operate without registration. When they hear of any freebee they rush to “buy documentation”. Some have no addresses. The starting point for improving the lot of the SME sector therefore is to help them to operate within the basic rules of business. Our entrepreneurs must learn to begin their businesses not as ad-hoc activities, which is what they do currently, but to follow time-tested processes of starting and running businesses. This deficiency is one reason for the non-disbursement of the funds.
At the beginning of every year, many people enter the business world as entrepreneurs. These are people who have decided to do their own thing and brave the wind and weather of self-employment. Some will probably be doing so for the first time while for others, it may be like a Second or Third Missionary journey, having tried and failed before. People get into business for a number of reasons and in many different ways. While some people dream up an idea, go ahead to flesh it outand form a business around it, others wake up from a deep, smooth sleep devoid of any dreams, and print a business card. Without any hesitation, they launch into the murky waters of private enterprise. There may not be a predetermined end for the later set of businesses but the certainty of success weighs more on the side of the former – businesses that are properly set up. This is why we want to share some thought on the virtues of properly designed and executed entry to the world of business by the micro, small and medium enterprises.
The starting point on the journey to a successful entrepreneurial life is to have a niche that is yearning to be filled – an offering to be made to the public. The concept of value proposition comes handy in this regard. Marketing specialists are always focusing on value proposition, which is what someone or an entity brings to the discussion table. Every business entity must have a value proposition to its proposed clients – what they plan to bring to the market, either as a product or service?There must be a unique feature of the product or service that makes it able to solve problems for the clients. It is the promise an entity makes, regarding its ability to solve a problem. Value proposition is not a niche; it is the way and manner a niche is intended to be filled. It therefore follows that those entering into business must first define the niche they target to fill and have clear understanding of how to fill it. This niche definition is to be followed by properly establishing a vehicle to deliver it – the company. Every business must be properly documented, which includes the registration papers, books of accounts and procedures manuals.
Information is central to the success of any business. We must get it before we lunch. Every business entity is the result of somebody’s assumptions about a state of affairs or a phenomenon. It embodies what the person thinks is missing and what he could do to remedy the situation. When a man sleeps and dreams up a business idea, he makes certain assumptions about the idea. For instance, anyone who proposes to set up a helicopter service between Lekki Phase One and Murtala Mohammed Airport must have assumed certain things. Some of the assumptions could be that the Lekki neighbourhood has the financial power to support such a service because the residents are mostly high income business people. It could also be that they run businesses to which time is of the essence. In addition, he may also assume that the traffic situation in the axis is bad enough to justify such alternative mode of transport. On these basis, he may conclude that a helicopter service would sell. If these assumptions are incorrect, they will lead to a business still-birth or the formation of an entity that may be dead on arrival.
How do budding entrepreneurs ensure that the assumptions they make and upon which they plan to build a business are correct? Research. Starting right involves a number of things, including information. Most successful entrepreneurs begin with a study of the market they propose to enter. Research does not always have to be done by the five star management consultants that are often unaffordable. There are different strategies for obtaining information about a product or service without breaking a bank. Information about the proposed business is important and that is why banks insist on a feasibility report. Unfortunately, many entrepreneurs do not place much value on this vital document. They have it all in their heads and, trust the banks, they refuse to go into anyone’s head to read his business plan. They are turned down for the uncertainty of their plans, which actually may be very sound and clear to the entrepreneur. It is just too hard to see what is in a man’s brains.
Be careful how you treasure what is in your head. You may be the only person that know it exists, and there is little or no demand for goods and services the existence of which is not known to humanity. Misconceptions are dangerous in business, especially after middle age. Some retired people do not realize that there is a difference between the private enterprise they are setting up and the big corporation they served and from which they retired. They expect to carry into their private and much smaller businesses the influence and goodwill they enjoyed in their previous positions in corporations. There is always the temptation for people to go into business in the areas of their last formal employment.
This is understandable as there lies their strength and experience. That is also where they have contacts and goodwill. However, it is important to note that the influence and following that executives possess while in office is discounted by as much as 50 per cent once they leave that office of power and influence. Even presidents and governors have woeful stories to tell about the draught of traffic to their offices when they leave their powerful public offices. I think it was former President Jimmy Carter of the United States that once revealed that his telephones stopped ringing practically soon after he left office.Being powerful in one’s last job and having a good knowledge of the goings-on in the area is good but it does not obviate the need for proper market research as a starting block in a small business being created by an entrepreneur. Markets shift; people move and products lapse. So does influence and power.
Emeka Osuji
