Many years ago, I rubbed minds with a budding entrepreneur who wanted some investment advice. This entrepreneur was trying to decide between investing one million naira in a transportation business (with a projected monthly return of about 100,000 naira to 120,000 naira at the time) and investing the same sum in livestock production.
The conversation spawned some insights that are applicable to various kinds of businesses and investments. So, I have taken the liberty to reproduce the most important highlights from that conversation, spiced with some personal examples, in the hope that someone will have a few takeaways.
If you would like to know the most profitable investment decisions you can make in our present economy, you will find this piece very useful. While I won’t categorically tell you the business or enterprise you should venture into, I will offer practical insights and guidelines to help you clarify your options and make an informed decision.
The best businesses are built on informed decisions, not emotional ones. Share on XOur risk appetite differs. Our passion, skills and time must also come into play. So, you need to do feasibility studies on the investment options you’ve been presented with; then critically consider some salient points.
1. How much of that business do you know? Do you have the requisite skills?
Never base business and investment decisions on emotional factors. Investigate before you invest. Don’t allow noise and conjectures about the profitability of a sector to be your prime motivation. Do your own research. If something sounds too good to be true, more often than not, it is too good to be true.
A friend once made me an offer to invest in cotton business in the north. I do not doubt my friend’s integrity but I turned down the opportunity because I don’t do what I don’t know. That’s why I don’t do bitcoin or any cryptocurrency. I don’t understand them.
Don’t fall for hype—do your research before investing! Get practical insights from real-life business experiences. Share on X2. Are you going to run it yourself or will your success depend on another person?
You must answer this question before you proceed. The greatest resource any business needs is not financial but human. I’m not downplaying the place of capital but if you have the greatest capital and you have poor human resources, the poor human resources will make nonsense of that capital. On the other hand, good human resources will maximize little capital.
Carefully consider if you have to commit funds to another person’s care—especially if you want to invest in someone’s business. I have been burnt a few times in this regard. I once invested in a plantain chips business. The business model looked great. Our strategy was to sell on the Third Mainland Bridge.
It was purely a cash and carry business. The boys who sold the chips had to pay before taking their packs of chips for sale. Well, let’s just say I was stupid. I trusted this ex-colleague who asked me to be a partner. We signed an agreement. She even started attending our church at a point. As soon as I disbursed the funds, she disappeared. She doesn’t pick my calls anymore. I’m still trying to get my investment back. Karen, I know you will read this.
3. Do you have a market for that business?
Many people push out products before they start looking for a market. Poor strategy. You must develop your market before you push out your product or service.
In December 2018, I sold some broilers I raised. There were chickens everywhere. I had to bring some home and display them outside my home to sell, with some incentives to my security guard. I also gave out quite a few as Christmas presents—I just couldn’t continue to feed them.
Most people push out products before they start looking for a market. This is a poor strategy. Market comes before product, not the other way around. Share on XI remember that when I raised another batch around July 2019, I went to some WhatsApp groups to advertise my chickens. A few people asked for pictures but never got back.
Thankfully, I stumbled on an offtaker who now takes everything I raise. So, do you have an off taker? Market comes before products and not vice versa. Otherwise, you’ll consume what you produce.
4. How much of a setback are you able to cope with or handle?
Each business has its own challenges. Businesses also have different phases: incubation, infancy, growth, etc. A business needs to be nurtured and groomed just like a seed that is planted. It won’t bloom overnight
I started a yam and pineapple farm with a friend. We even planted and harvested tomatoes as a form of mixed crop farming. Our first yam harvest was good. The pineapples were very sweet. I was eager to plant again after the first harvest, until my attention was called to the theft going on. Thieves were harvesting my yams overnight—heaps upon heaps. My investment was going down the drain.
Eventually, we caught some of the thieves and I was alerted that they were at a police station. Guess who they were? Residents of the village where the farm is. One of them worked on the farm and I paid him. There was one whose child attends the public school that I adopted in that village. His son wears the uniform I bought for him; yet he stole from me.
The whole village came to beg me, including the Baale (traditional ruler). I asked the police to release them. Later that evening, the Baale called me to inform me that they were not able to pay the bail demanded by the police at 5,000 naira per suspect
There were two suspects. He pleaded with me to rescue them. I called the policeman and transferred 10,000 naira to him. They stole from me; yet I paid for their bail. You know what I did next? I’ve abandoned the farm until I can secure it properly.
I started an online marketplace business with some younger friends a while back. They sold me the idea and I decided to fund it. It started beautifully and we were already aspiring to be the next Jumia or Konga. We sold a variety of items across selected cities in Nigeria. We signed contracts with a few delivery firms—it was before the proliferation of courier firms. Every Sunday, I sat down with the team to review our sales. The numbers looked good.
But then, three factors undermined the success of the business. First, we had a lot of returned items (mostly quality control issues). Second, the other guys took on a corper (a member of the National Youth Service Corps) against my advice. We were paying the corper’s expenses and wages from our little capital.
The third factor was the main one—all of us still held our day jobs; so there was very little supervision and low commitment. I only had time on Sunday. Well, the business died and my investment went down the drain. I bore the brunt as I contributed 100 percent of the capital.
Good partnerships require everyone to have skin in the game—otherwise, you’ll get skinned. Share on XI learnt a big lesson—even in partnership, everyone must have skin in the game. Otherwise, you’ll be skinned. Prepare for shocks. It can come from unexpected expenses or circumstances. Someone I know got a tax bill of four million naira from a state government and almost gave up.
5. What’s the potential for growth?
This is important. What does the future look like for that business? We call it future outlook. If there is no future, you’re just marking time.
Also consider if there are value chain opportunities. Are there a set of activities that surround that product? Which one can you handle? Can you process rather than sell in a raw state? Can you do value addition? Rather than sell live goats, can you set up an asun joint? There is more money to be made when value is added.
6. If this business is not immediately profitable, are you still willing to commit to it? Are you willing to run a marathon?
Success does not happen overnight, it happens over time. If you’re in it just for the quick bucks, you’re on a long thing. You must be willing to wait while you do the work. Delayed gratification is the mindset here. Wait while it grows. If you can’t wait, you can’t grow. A good business will achieve stability in about five years. That’s my personal experience.
Are you ready to run a marathon with your business? Success takes time and commitment! Share on XLet me share specifically about transportation business. I have my fair share of experience here also.
Factors to Consider before Going into Transportation Business
1. Are you going to drive it or will you look for a driver?
I once had a Nissan car that I bought specifically for use as a cab. I got a driver who was to deliver 700 naira to me on a daily basis. He picked the car before 6 a.m. and returned it after 10 p.m. most days.
Well, I think he turned in the required amount only once. Then the complaints came—the car broke down, police caught him, Road Safety arrested him, tyre had a problem—all sorts of complaints. The guy had a new story each day. He will make a good scriptwriter with his fertile imagination.
Rather than deliver to me, I delivered to him. It was that bad. I changed one driver after the other. They were as useless as they could come. I had to sell off the Nissan.
Then I decided to do the cab business myself. I still had my Volvo 340 DL. I closed from work and resumed as a cabbie—from 6 p.m. till about 10 p.m. First night, I made about N700. Second night, it was N1,200. There were nights I made N1,500 in just a few hours.
2. If you look for a driver, are you MAD enough to slap him or beat him up if he fails to deliver?
Can you fight? If you can’t fight, maybe you should stop at this point. It takes great courage to do transport business. You must be mad to deal with mad people. If you can’t fight, don’t enter the ring. Transport business is real ijakadi. You need to be able to harass your driver. If you’re timid, I pity you. Those guys have no mercy. I wasn’t mad enough so I left the business.
I have one rule in business and finance. If I respect you too much, I can’t do business with you or lend you money. That’s why I can’t do business with my pastor or lend him money. That’s why I can’t do business with family members.
3. Are you buying a new vehicle or a fairly used one? If fairly used, do you have the usage history? Repairs are a major expense.
Always know the history of the vehicle you’re buying. Or take a good auto-mechanic along when you’re about to make a purchase decision.
4. Cash flow is not the same as profit.
From your anticipated N25,000 to N30,000 weekly, make provision for repairs, arrest by Road Safety, disturbance by policemen, tyre repairs and replacements, etc. There are so many permits to be obtained—hackney, local government, inter-state, etc.
There will be wear and tear on the vehicle. Never assume that cash flow is the same as profit. Remove your expenses, including the cost of labour. Think about transport business well, especially if that is where all your savings will go into. If you don’t have any other income, think well.
Hope you learnt a few things.