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Chew on this before you consider scaling your startup @AremoFisayo

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If you have been hanging out with entrepreneurs and tech guys (they like to be called Tech-preneurs), you will come across a popular tech-preneur jargon called “scaling”. You see these days everyone wants to “scale”.

So let’s quickly define what “scaling” is

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“scaling” is about growing revenue at an exponential rate while only adding resources at an incremental rate. Achieving scale might mean increasing your revenue to $2k, while cost moves from $200 to say $250. Sounds cool right?

Let’s consider this scenario, if it usually would costs you $200 to generate $1k, if you increased that $1k revenue to $2k and your cost moves from $200 to $400, you have not necessarily scaled! This is because you doubled your revenue while doubling your cost as well.

Scaling is not synonymous to growth. You can grow revenue and not achieve scale. You are not scaling if your revenue and cost grows at matching rate. This means that scaling involves careful planning, if you will ever get the chance to brag. “ We have scaled”

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We would look at two major ways scaling is achieved;

  1. Product/Service Expansion
  2. Geographic Expansion

Product expansion typically involves layering on additional product lines to further engrain your position within your product value chain and of course capture a wider target audience.

For instance, an online retail business selling mobile phones – say www.mobo.ng can expand its product offering to include PCs and accessories. This product expansion drive will position this mobile phone retailer within the computer electronics value chain while expanding its customer base.

So rather than www.mobo.ng just being known for just mobile phones, the business then has a reputation for offering a wider product range. If  www.mobo.ng successfully implement its product expansion plans, the likely outcomes will be an increased revenues and a wider target market.

However, it is important to note this revenue increase would only make business sense in the event that the revenue increase outstrips the cost of providing this additional service (in terms of percentage increase).

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Scale can also be achieved via geographic expansion. For instance, our case study online retail business – www.mobo.ng started its operations from Lagos, Nigeria.

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As a result of appreciable demand from other parts of the country www.mobo.ng might decide to make its services available in both Port Harcourt, Onitsha, Abuja or even go “international” to place like Ghana and Kenya (Nigerian Techpreneurs have a thing for these places)

Surely this will address demand from these additional locations, but www.mobo.ng must also take cognizance  of the cost of providing these services in the new locations, for the geographical expansion to make sense it should be lower than the benefits of such expansion.

In Nigeria, amongst techpreneuers there has been a craze for massive geographic expansions in the name of scaling. I have seen articles on building a Nigerian Startup or a Startup from Nigeria, essentially pressuring founders and entrepreneurs to “scale” to other African countries because Taxify has “scaled”.

Let me clearly mention here, the fact that your business began operations in Ghana and Kenya does not necessarily mean that you have scaled! You might just be digging the grave for your business. Scaling must never be an emotional decision, it must be a business decision.

Operating efficiently in Nigeria alone is tough! Nigeria is large (183 million people strong and counting). I reckon that before you consider a regional expansion, you should have conquered a certain market (especially your local market).

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DON’T SCALE WITH YOUR INEFFICIENCIES! You must understand your local market, gain control of all (at least most) of your business dependencies. Understand and address your business problems first before thinking expansion.

In fact, I advise that businesses should start with a single product line to learn about the market, then layer on additional complimentary products before thinking of geographic expansion.

Learn to take your punches on a small scale. Trust me, the market will punch you! It will be a disaster to get punched at the same time in 3 different countries.

Trust me, Nigeria is large, but very diverse. Your strategy in Lagos won’t probably work in Kaduna and you would have to tweak your approach in Abuja.

Ask entrepreneurs, Lagos is fast paced, the traffic is killing. But Abuja is a lot slower and complacent (at least from the Lagosian perspective). If your value proposition is convenience for instance, the way an Abuja resident thinks of convenience is way different from the Lagosian view, hence you must find a way to tweak your product offering or delivery method to suit both markets, let alone Kenyans and Ghanaians.

So, thread with caution. The slow steps of a Tiger should never be interpreted as cowardice! Once you have a full hang of your business and you strike, No one will be able to stop you!

Happy entrepreneuring

Fisayo Durojaye

 

 

Nairametrics is Nigeria's top business news and financial analysis website. We focus on providing resources that help small businesses and retail investors make better investing decisions. Nairametrics is updated daily by a team of professionals. Post updated as "Nairametrics" are published by our Editorial Board.

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Coronavirus

Covid-19 Update in Nigeria

On the 25th of May 2020, 229 new confirmed cases and 7 deaths were recorded in Nigeria bringing the total confirmed cases recorded in the country to 8,068.

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COVID-19: FCMB reschedule operations

The spread of novel Corona Virus Disease (COVID-19) in Nigeria continues to rise as the latest statistics provided by the Nigeria Centre for Disease Control reveal Nigeria now has 8,068 confirmed cases.

On the 25th of May 2020, 229 new confirmed cases and 7 deaths were recorded in Nigeria.

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To date, 8068 cases have been confirmed, 2311 cases have been discharged and 233 deaths have been recorded in 34 states and the Federal Capital Territory having carried out 45,683 tests.

Covid-19 Case Updates- May 25th 2020

  • Total Number of Cases – 8,068
  • Total Number Discharged – 2,311
  • Total Deaths – 233
  • Total Tests Carried out – 45,683

The 229 new cases were reported from 15 states- Lagos (90), Katsina (27), Imo (26), Kano (23), FCT (14), Plateau (12), Ogun (9), Delta (7), Borno (5), Rivers (5), Oyo (4), Gombe (3), Osun (2), Anambra (1), Bayelsa (1).

READ ALSO: COVID-19: Western diplomats warn of disease explosion, poor handling by government

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The latest numbers bring Lagos state total confirmed cases to 3595, followed by Kano (919), Abuja at 519, Katsina (335), Borno (255), Oyo (244), Jigawa (241), Ogun (240), Bauchi (232), Edo (191), Kaduna (189),  Gombe (148),  Rivers (121), Sokoto (116), Plateau (95).

Kwara State has recorded 79 cases, Zamfara (76), Yobe (47), Delta and Nasarawa (46), Osun (44), Ebonyi and Imo (33), Kebbi (32), Niger (28), Adamawa (27), Akwa Ibom (24), Ondo (23), Ekiti (20), Taraba and Enugu (18), Bayelsa (12), Anambra (10), Abia (7), while Benue state has recorded 5 cases.

Lock Down and Curfew

In a move to combat the spread of the pandemic disease, President Muhammadu Buhari directed the cessation of all movements in Lagos and the FCT for an initial period of 14 days, which took effect from 11 pm on Monday, 30th March 2020.

The movement restriction, which was extended by another two-weeks period, has been partially put on hold with some businesses commencing operations from May 4. On April 27th, 2020, President Muhammadu Buhari declared an overnight curfew from 8 pm to 6 am across the country, as part of new measures to contain the spread of the COVID-19. This comes along with the phased and gradual easing of lockdown measures in FCT, Lagos, and Ogun States, and will take effect from Saturday, 2nd May 2020, at 9 am.

 

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READ ALSO: Bill Gates says Trump’s WHO funding suspension is dangerous

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DateConfirmed caseNew casesTotal deathsNew deathsTotal recoveryActive casesCritical cases
May 25, 202080682292337231155247
May 24, 202078393132265226353607
May 23, 202075262652210217451317
May 22, 2020726124522110200750337
May 21, 2020701633921111190748987
May 20, 202066772842008184046377
May 19, 202064012261921173444757
May 18, 202061752161919164443407
May 17, 202059593881826159441837
May 16, 202056211761765147239737
May 15, 202054452881713132039544
May 14, 202051621931683118038154
May 13, 202049711841646107037374
May 12, 20204787146158695936704
May 11, 202046412421521090235894
May 10, 202043992481421777834794
May 9, 202041512391271174532784
May 8, 202039123861181067931154
May 7, 20203526381108460128184
May 6, 20203145195104553425071
May 5, 2020295014899548123704
May 4, 2020280224594641722912
May 3, 2020255817088240020702
May 2, 20202388220861735119522
May 1, 20202170238691035117512
April 30, 2020193220459731715562
April 29, 2020172819652730713692
April 28, 2020153219545425512322
April 27, 20201337644102559942
April 26, 20201273914152399942
April 25, 20201182873632229252
April 24, 202010951143312088552
April 23, 20209811083231977532
April 22, 2020873912931976482
April 21, 20207821172631975602
April 20, 2020665382311884662
April 19, 2020627862221704362
April 18, 2020541482021663562
April 17, 2020493511841593172
April 16, 2020442351311522772
April 15, 2020407341211282672
April 14, 202037330111992632
April 13, 202034320100912422
April 12, 20203235100852282
April 11, 202031813103702382
April 10, 20203051770582402
April 9, 20202881471512302
April 8, 20202742260442262
April 7, 20202541661442042
April 6, 2020238650351982
April 5, 20202321851331942
April 4, 2020214540251850
April 3, 20202092542251800
April 2, 20201841020201620
April 1, 2020174352091630
March 31, 202013982091280
March 30, 2020131202181210
March 29, 2020111221031070
March 28, 20208919103850
March 27, 2020705103660
March 26, 20206514102620
March 25, 2020517102480
March 24, 2020444102410
March 23, 20204010112370
March 22, 2020308002280
March 21, 20202210001210
March 20, 2020124001110
March 19, 20208000170
March 18, 20208500170
March 17, 20203100030
March 16, 20202000020
March 15, 20202000020
March 14, 20202000020
March 13, 20202000020
March 12, 20202000020
March 11, 20202000020
March 10, 20202000020
March 9, 20202100020
March 8, 20201000010
March 7, 20201000010
March 6, 20201000010
March 5, 20201000010
March 4, 20201000010
March 3, 20201000010
March 2, 20201000010
March 1, 20201000010
February 29, 20201000010
February 28, 20201100010

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Business News

U.S.A calls for an independent probe of AfDB president, Akinwumi Adesina

There were allegations of a certain number of appointments and departures deemed questionable and several contracts approved under Adesina’s leadership which were in violation of the bank’s statutory and ethical rules.

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AfDB partners DFID to unveil $80m infrastructure financing for Africa, ADB launches $3 billion “Fight COVID-19” Social Bond, US calls for an independent probe of AfDB president, Akinwumi Adesina

This appears not to be the best of times for Akinwumi Adesina, the President of Africa Development Bank (AfDB), who is in the process of canvassing votes for a second term. This is because the United States Government is pushing for more investigation into his activities.

The U.S Treasury Secretary, Steven Mnuchin, has called for an independent probe into allegations by a group of whistleblowers against the AfDB President, thereby rejecting plans by the bank’s board to stop the investigation on the issue.

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According to a monitored report from Bloomberg, a letter which was dated May 22 and addressed to the Chairperson of the AfDB board of directors, Niale Kaba, stated that the US Treasury Department disagreed with the findings by the bank’s ethics committee that cleared Adesina of any wrongdoing.

According to the US treasury secretary, “We have deep reservations about the integrity of the committee’s process. Instead we urge you to initiate an in-depth investigation of the allegations using the services of an independent outside investigator of high professional standing.”

It can be recalled that a group of anonymous staff had accused Adesina of multiple cases of abuse and breaches of the bank’s code of ethics. The allegations include various cases of alleged breaches of the code of conduct, unethical conduct, private gain, an impediment to efficiency, preferential treatment, and involvement in political activity, all affecting confidence in the integrity of the bank.

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(READ MORE:AfDB, Asian Bank, others worsen poor nations’ debt problem – World Bank)

There were allegations of a certain number of appointments and departures deemed questionable and several contracts approved under Adesina’s leadership which were in violation of the bank’s statutory and ethical rules.

Although Adesina insisted on his innocence, having been cleared by the bank’s Ethics Committee of all charges brought against him, the whistleblowers expressed serious doubts about the ability of the African Development Bank to conduct an independent investigation. Therefore, they said they did not have enough confidence in the Ethics committee handling the case dispassionately.

The criticism by the United State Government, who is the biggest non-African shareholder, follows questions about the bank’s internal processes and comments by World Bank President, David Malpass in February that multilateral lenders including the AfDB tend to lend money too quickly, and in the process add to the debt problems in Africa. Adesina had refuted this claim, describing it as not fact based.

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Economy & Politics

Nigeria’s GDP grows by 1.87% in Q1 2020, as non-oil sector weakens

Nigeria’s Gross Domestic Product (GDP) grew by 1.87%(year-on-year) in real terms, representing a drop of 0.23% points compared to Q1 2019 and 0.68% points decline compared to Q4 2019

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Covid-19, Conditional cash transfer: FG gives reason for disengagement of 2 Payment Service Providers, President Buhari asks the Chief Justice to release prisoners due to coronavirus

Nigeria’s Gross Domestic Product (GDP) grew by 1.87% (year-on-year) in real terms in Q1 2020. This is according to the first quarter (Q1) GDP report, released by the National Bureau of Statistics (NBS) on Monday.

According to numbers contained in the Bureau’s report, the performance recorded in Q1 2020 represents a drop of 0.23% points compared to Q1 2019 (2.10%) and 0.68% points decline compared to Q4 2019 (2.55%), reflecting the earliest effects of disruption caused by Covid-19 pandemic and crash in oil price.

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Oil sector

According to the report, Nigeria’s oil sector recorded a real growth rate of 5.06% (year-on-year) in Q1 2020, indicating an increase of 6.51% points relative to the rate recorded in the corresponding quarter of 2019 (-1.46%).

However, when compared to Q4 2019 which recorded a growth rate of 6.36%, oil sector growth decreased by –1.30% points. The contribution of the Oil sector to aggregate GDP stood at 9.50% in Q1 2020, up from figure recorded in the corresponding period of 2019 (9.22%) and the preceding quarter (7.32%), as the share of the non-oil economy declined.

During the first quarter of 2020, an average daily oil production of 2.07 million barrels per day (mbpd) was recorded. The production level was higher than the 1.99mbpd recorded in the same quarter of 2019.

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READ ALSO: FG seeks partnership with National Council of Registered Insurance Brokers, here’s why 

Non-Oil Sector

The non-oil sector grew by 1.55% in real terms during the reference quarter (Q1 2020), this was slower by -0.93% points compared to the rate recorded during the same quarter of 2019 (2.47%), and –0.72% points slower than the fourth quarter of 2019 (2.26%).

According to the Bureau’s report, growth in non-oil sector was driven mainly by Information and Communication (Telecommunications), Financial and Insurance (Financial Institutions), Agriculture (Crop Production), Mining and Quarrying (Crude Petroleum & Natural Gas), and Construction.

In real terms, the Non-Oil sector contributed 90.50% to the nation’s GDP in the first quarter of 2020, less than its share in the first quarter of 2019 which was 90.78% and the fourth quarter of 2019 recorded as 92.68%. Activities that witnessed weaker performance relative to Q1 2019 include Quarrying, Road transport, Accommodation and Food services as well as real estate.

Service, Industry sectors remain resilient as economy posts slowest growth in 6-quarter

Nigeria’s service sector showed strong resilient in the period under review as it contributed 54.39% to the aggregate GDP, up from 53.64% recorded in Q4 2019. Also, the industrial sector recorded a marginal increase in its contribution to GDP at 23.65%, up from 22.25% in Q4 2019. Meanwhile, the contribution from agriculture sector contracted to 21.96% from 25.16% in the previous quarter. Contraction in the agric. Sector maybe largely traceable to the planting season.

A closer look at the GDP report shows that 1.87% growth recorded in Q1 2020 represents the slowest in the last 6 quarters (2018 Q4 – 2020 Q1). In Q4 2018, GDP growth rose to 2.38% as the economy continued its slow recovery from the 2016 recession.

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The slow growth momentum had been sustained through the subsequent quarters until the latest contraction which is attributable to disruption caused by the Covid-19 pandemic and oil price.

 The Bottom Line

GDP is Nigeria’s biggest economic data and it measures the monetary value of everything produced in the country. It depicts the nation’s total economic activity. A decline in GDP means major economic activities are slow or sluggish, which may be a result of several factors.

  • It is important to note that while the Nigerian economy contracted slightly in Q1, growth in Q2 is expected to dip largely in Q2 due to lockdown across major economies of the world which disrupted both supply and demand chain.
  • The Oil sector, Travel and Tourism, Hospitality and Manufacturing are among sectors expected to contract largely in subsequent through 2020
  • According to IMF, the Nigerian economy is expected to contract by -3.4% in the year, as Covid-19 pandemic and oil price shock exacerbate the vulnerability of Nigeria fiscal and monetary landscape.

READ ALSO: Foreign investors ship $21.14 billion to 22 States in 10-month 

 

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