About 50% of all small and medium-sized enterprises (SMEs) fail globally within 5 years of their existence. This rate is even higher in Nigeria due to a number of factors that are peculiar to our operating environment, such as poor infrastructure. However, the leading cause of the high mortality rate experienced in the SME segment around the world is poor access to finance.
Poor access to finance arises when a business is unable to attract the capital that it needs to maintain its daily operations or expand into new markets and business lines. A number of factors can give rise to this poor access to finance.
On the supply side, it can be the result of insufficient capital among the investors, meaning that there isn’t enough funding to go round. This phenomenon is rare, but it has nonetheless starved many businesses that are otherwise well-positioned to receive funding of much-needed capital.
On the demand side, it can be the result of the poor frameworks existing in many companies due to the low managerial skills and financial literacy levels of their operators. An overwhelming proportion of the challenges faced by SMEs in accessing funding can be attributed to this demand-side factor.
Beyond having a clear vision, a good business plan and a marketable product or service, there are critical frameworks that business operators need to put in place in order to make their companies better prepared to receive and leverage funding. In this piece, I will be focusing on the financial management aspects of such frameworks.
Separate your personal and business finances
The first thing that you must do as an entrepreneur to make your company more attractive to investors is to separate your personal and business finances. As you know, personal and business interests do not mix well. A sign of financial and business management competence that all investors appreciate in any business is a clear distinction between the owner or manager of the business and the business itself.
One of the best ways to achieve this distinction is to open a corporate bank account for your company where all the transactions related to it will be performed. This will help you to maintain accurate records of your company’s cash flow, analyze trends in consumer behaviour and project the future more empirically. It will also help you to resist the temptation of indiscriminately dipping into your company’s finances to meet your personal needs.
Document all your transactions
It should be a no-brainer that you must document all the transactions of your company, yet many entrepreneurs, especially those managing service-based SMEs, fail to do so. As an entrepreneur, you must have a digital or, at the very least, a paper-based journal where all your company’s transactions, both revenues and expenditures, will be recorded.
In today’s highly digitalized economy, it is not difficult to find basic bookkeeping apps that will help you to achieve this. Many of them can even be downloaded free of charge from your smartphone’s app store. At periodic intervals of your choice (daily, weekly, quarterly, half-yearly, annually, etc.), these apps will give you a breakdown of your company’s financial and sales performance and a helicopter view of the business as a whole.
Pay yourself a salary
I mentioned earlier that opening a corporate bank account for your business will help you to resist the temptation of indiscriminately dipping into its finances to meet your personal needs. Well, that is only the first step. The next step is to pay yourself a salary from your company.
The only way that your company can really grow is by reinvesting the profit earned by the company into the company. If you use funds from the business to finance your lifestyle, you will be stifling its growth and it will remain rooted to the spot for many years. What’s more? You can even resort to perpetually borrowing from banks, cooperatives and other sources to keep it going, which is costly and difficult to come by as an SME.
Periodically assess your company’s finances, place it side-by-side with your personal needs and how much you think you are worth and figure out how much you can realistically pay yourself.
This advice is every bit as relevant for SMEs with employees as it is for sole proprietorships. As an entrepreneur managing an SME with employees, you should include yourself in the payment structure just like your employees. Any funds you take from your company beyond what your salary permits should be treated as a loan from your company to you, which you must repay as quickly as possible.
Of course, there is no rule preventing you from drawing from your company’s profit at the end of your financial year, but you should only do this when your company is mature and stable enough to withstand the outflow.
Brush up your accounting knowledge and skills
You don’t need to be a chartered accountant to run a successful business, but acquiring foundational accounting skills certainly helps. You can place your company on a trajectory of accelerated and sustainable growth by taking out time to improve your understanding of accounting and financial management.
Business is all about money, so there’s no escaping this. This advice especially comes in handy when you cannot afford the services of a qualified accountant or a financial advisor.
Digitalize your business
With the devastation wreaked by the COVID-19 Pandemic, every business owner now appreciates the importance of going digital. It is no longer a secret that digitally compliant companies were able to navigate the worst of the crisis better than their brick-and-mortar-oriented counterparts.
Digital technologies have made running a business easier and more profitable than ever before. It has taken many businesses to the doorsteps of their customers. But companies that are yet to adapt risk getting steamrolled and completely run out of business.
Digitalizing your company can be as simple as creating a website or social media pages for it, to make it easier for your target audience to reach you. From a financial perspective, it can be as simple as installing a payment gateway on your website that customers can use to purchase your products and services.
Understand the type of funding your company needs
Finally, not all funding are the same. Some come in the form of loans, while others come in the form of equity capital and grants. It is important to identify the type of funding that your company needs before approaching any bank, angel investor, venture capitalist, private equity firm or donor agency.
A loan is a type of financing that is typically given by banks. You must repay a loan, often at periodic intervals, along with the interest. Loans are more suitable for businesses that are already generating significant revenue.
An equity capital is typically given by angel investors, venture capital firms and private equity firms. It is given to a business in exchange for a certain percentage of ownership and control in that business, called equity.
The investor hopes to recover the equity capital alongside a profit by selling this share of ownership and control to other investors in the future at a higher price. Equity capital is more suitable for startups with innovative business ideas and aggressive growth plans.
A grant is a type of financing that is given to a business that usually does not need to be repaid or exchanged for a share of ownership and control. It is given by donors to businesses that are making a positive social impact or solving a social problem or making a great breakthrough in their industries.
Understanding these types of funding and identifying the one that best suits your company will increase your chances of succeeding in your quest to raise business capital.
About the author
Chinedu Nnawetanma is an SME and startup finance professional currently working with one of Nigeria’s financial institutions. He is passionate about the empowerment of the private sector, especially SMEs, to drive the economic growth and development of Africa. He writes on a wide range of subject matters, including entrepreneurship, financial literacy and youth empowerment. Twitter: @sincerelycgn. Email address: [email protected].
Real estate sector GDP positive in Q4 2020, but still in the woods
The real estate sector like many other sectors of the economy suffers deeply from a dip in macro economic conditions of the country.
According to the Q4 and full-year 2020 GDP data released by the National Bureau of Statistics (NBS), real estate sector returned to positive growth of 2.81% y/y in Q4 2020 following six consecutive quarters of negative growth since the last positive growth posted in Q1 2019 (0.93% y/y).
The significant recovery in Q4 2020 reflects the full reopening of the economy as many residential and commercial projects began operations fully following the suspension of activities during the national lockdown. Overall, the real estate GDP FY 2020 contracted by 9.22% y/y which was well below our 2020 estimate of a 13.7% contraction.
The real estate sector like many other sectors of the economy suffers deeply from a dip in macro economic conditions of the country. In 2016, when the economy went into recession, the sector declined by 6.86% compared with the growth of 2.11% recorded in 2015.
Subdued activities in the real estate and construction industry had a spillover effect on the cement sector where growth slowed drastically to 5.4% in 2016 from 22.1% in 2015 on the back of weak private sector investments and low government spending.
In 2020, as the pandemic ravaged the economy, the real estate sector was not left behind as the unprecedented crisis elevated vacancy rates in existing commercial properties, reduced average footfalls across retail centres and slowed the completion time of many residential developments and infrastructure projects in the country.
This led to an all-time high of a 21.99% contraction recorded by the real estate sector in Q2 2020. The impact of the restrictive measures put in place during the second quarter was apparent in the financial performance of two key cement players (Dangote Cement and Lafarge) as both top and bottom-line performances were pressured.
Looking ahead, we expect growth in the sector to remain weak due to a plethora of factors from high inflationary figures and devaluation which continue to pressure consumer purchasing power to little access to finance which has continued to undermine the demand for housing. Despite efforts geared towards improving mortgage financing or consumer credit, the rate of mortgage financing to housing development in the country remains very low compared to peers in the emerging market.
CSL Stockbrokers Limited, Lagos (CSLS) is a wholly owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.
What does my startup portfolio look like? – by Olumide Soyombo
Olumide Soyombo discusses his flair to invest in some of the most prospective startups in Africa.
I have been privileged to invest in some of the most interesting Startups in Nigeria and other parts of Africa.
This journey started in 2014 and my approach has always been to just do my thing behind the scenes and support the companies I invest in strategically. However, following the Paystack exit, folks have been curious to see what other companies I have backed, so I have finally decided to share.
I believe we have a couple of stars in here and the next couple of years should be interesting. Please support these companies wherever you see them so that my family can eat o…
Gbedu is a music discovery and streaming service built to dispense the rich sound of Africa. They have created an experience that gives young, upcoming (up and coming) artists the chance to get discovered and earn per stream of their music content.
The startup is connecting Africans to the most extensive catalog g of free localized content, leveraging the power of playlisting, offline, and radio-integration to create new interactions and vast, unique music experience per user locale.
Gbedu is freely accessible to all users and pays every content owner.
Industries: Digital Entertainment, Music Streaming.
Piggyvest is the leading online savings & investment platform in Nigeria, helping individuals manage their finances effectively.
The platform enables users to save small amounts of money frequently with minimal effort. They automate the process of saving tiny amounts daily, weekly, or monthly; and then allow savers, withdraw for free on only set withdrawal dates, thereby practically making saving and investingpossible for users of their platform.
Industries: Financial Services, Banking, FinTech
Intelligra is the builder of an open platform created for smartphone financing. The company’s platform offers MNO (mobile network operator) integration and lock technology, proprietary credit scoring algorithms, and device lock solution. The platform also offers an in-store seamless onboarding app and integrates device OEM (Original Equipment Manufacturer), financiers, and mobile network operators, enabling consumers to access affordable smartphones.
Industries: Financial Services, Mobile Financing.
TeamApt is a financial technology company focused on developing Digital Banking, Business Solutions, and Payments Infrastructure. They are rethinking the needs of consumers, businesses, and the financial industry.
Industries: Fintech, Financial Services
VERTO is a complete F.X. and payment marketplace built for business. VERTO helps business operate efficiently on the international stage. The company makes it possible to open a free U.K. business banks account in minutes with the ability to hold up to 39 different currency balances. Additionally, VERTO gives its business users the ability to make or receive payments in foreign currencies and trade those currencies at lucrative rates.
VERTO provides liquidity and price discovery tools for international businesses. The marketplace provides easy access to exotic and foreign currencies with seamless international online payment services. Mono
Industries: Finance, FinTech, Marketplace
Mono is an API financial technology software designed to become the go-to financial data infrastructure API platform in Africa. The company’s software provides access to financial statements for historical and real-time transactions, balances, bank statements, credit and spending patterns. The platform also make s it possible to initiate direct debit payments and recurring debit. They are enabling users to get an accessible way to check their financial statements and transactions conveniently.
Mono is bringing access to financial accounts across Africa securely and reliably.
Industries: Big Data, Financial Services
Spleet is a Nigerian-based prop-tech startup that offers its users a subscription-based, living solution. Spleet provides access to Shared/entire living spaces with flexible payment options (Daily, Monthly & Quarterly Subscriptions).
They have built a platform and partner with homeowners who want to earn constant (recurring, monthly, and quarterly subscriptions) revenue and homeowners who wish to earn non-recurring income.
Industries: Real Estate, Property Management, Vacation Rental
8. Migo (Done via a Syndicate)
Migo is a cloud-based platform that allows customers to use loans, make purchases, and withdraw cash without the need for plastic debit/credit cards.
Migo offers a digital Credit-as-a-Service platform to domestic banks, mobile operators, retailers, and payment processors. The platform includes APIs, frameworks, consumer insights tools, and expertise on best practices that enterprise partners can use to build transformative consumer credit services in emerging markets.
Industries: FinTech, Financial Services, Credit
LendMe is an online consumer loans platform. Users can choose a loan amount in Naira(₦) and set a repayment schedule. The loan limit of the user increases if the user successfully repays loans. The app is available for the Android platform.
Industries: FinTech, Financial Services, Credit.
Bitnob simplifies access to the Bitcoin Blockchain Technology for People to create wealth, grow their wealth and even build and provide support for their businesses. It is a cryptocurrency exchange that allows users in the African Region to buy or sell Bitcoins quickly. One key feature of the exchange is that it enables its users to automatically and periodically save in Bitcoins with as little as one dollar.
Industries: FinTech, Financial Services, Cryptocurrency
Lemonade Finance is a startup that makes it easy to send money to Nigeria from Canada within seconds. Their platform, available on Google Play and App Store, offers some of the best exchange rates at any given time. What’s more, transactions on lemonade are free, safe, and secure.
Industries: FinTech, Financial Services.
Brass is a digital bank that provides small and medium businesses with a suite of products and tools to help them grow. Brass provides bank-backed, fully insured current account services to local companies in Nigeria.Brass makes it super easy for every business to get a current account from any device, cut traditional bank fees and help businesses and people save money.
Industries: FinTech, Financial Services.
Trove Finance is a platform that allows you to invest in stock markets around the world for as low as ₦1,000. Troves allows its users to automate their investments by linking a debit card to the Trove App.
Its Investment app aims to make the process of finding and selecting investments — specifically Stocks & Bonds — accessible and approachable for beginners. With Trove, users can find stock from public companies from Nigeria, and the U.S. Users can also easily access various bonds, cryptocurrency assets, and mutual funds.
Industries: FinTech, Financial Services, Cryptocurrency
14. Gradient Boost
The Gradient Boost is an end-to-end platform training, upskilling, and matching data science talent in Africa to companies. This last mile data science upskilling platform enables companies to build a reliable data science, data engineering, and data analytics talent pipeline of the top data talent in Africa.
They take on talent with strong data science fundamentals and upskill them through mentorship from experienced data scientists.
This enables the young talent to gain strong collaborative skills, soft skills and practical experience. Ultimately, these young talents can prove their abilities to companies looking to hire talent.
Industries: Data Science, Training
SEND is a Digital freight Forwarder & Customs Broker for African Businesses. Send ships container and air cargo to Nigeria, managing the entire process — from suppliers in China, U.S. & Europe, to the customs clearance and then delivered to customers.
Send is making it easy for people and businesses to ship across Africa and to the world. Their web app, mobile app, and API are used to request their shipping services. They then pick up, package, and ship items through major couriers/carriers. Send.ng provides simple yet not-so-available value-added features like tracking and transparent pricing.
Industries: Logistics, Supply Chain Management, Freight Service
Initially, Gloo.ng, a pure-play electronic retailing service dedicated to delivering direct to their clients’ doorsteps, Gloo has now pivoted into the e-procurement space as Gloopro.
Gloopro simplifies purchasing for large enterprises with eProcurement and commerce solutions. As a one-stop platform for large enterprises to optimize the purchasing of material and service inputs not included in their core products or service, Gloopro offers its customers valuable supply-chain visibility.
Additionally, they enable large enterprises to standardize and automate their entire procurement lifecycle across multiple locations with stock reorder level parameterization and budgeting caps.
Industries: Retail, E-Procurement
PushCV is the largest pool of pre-screened candidates in Africa. PushCV aims to help tackle the unemployment epidemic by providing a platform on which only the best talents are connected to top employers and recruiters.
Push CV is focused on the features that matter most to an employer and hence, the job seeker. Through continued iteration on complex employment problems, they seek to provide continuous improvements to the service that already makes thousands of people find their dream jobs a lot faster, safer, and more seamless.
Previously verifi.ng, Bento has metamorphosized into more than just a payroll and H.R. platform to help companies in Nigeria manage their employees’ salaries. Today, Bento has expanded beyond pension, healthcare, and taxes to provide a platform for salary earners to manage what they consume and how they consume.
Bento has provided healthcare and salary advance services by partnering with a healthcare provider, Hygeia, and money-lender, Zedvance. Moreover, it aims to do much more, for instance, helping parents pay their children’s tuition monthly and pay rent monthly.
Industries: Financial Services, Employee services
Leadspace is an alternative commercial real estate startup aiming to create shared infrastructure for entrepreneurs and founders of small & medium-size businesses.
They provide co-working spaces for entrepreneurs/founders of small and medium businesses, mid-level corporate executives, Independent freelancers, remote workers, and creative artists.
Powercube builds clean energy systems that can provide homes with more than 16 hours of power a day with subscriptions as low as N7,000 ($20) monthly. User can control each system with a mobile application that allows them to determine how much power they want to use.
Powercube was started to relieve small homes and businesses from using generators while providing the highest degree of certainty on bills due.
Industries: Clean Energy
Accounteer is a cloud accounting platform for small businesses. A business owner can create invoices, track expenses and follow up on their finances with ease. Accounteer integrates with external services like banks, e-invoicing platforms and e-commerce.
Industries: Financial Services, MSME
Blackbet is a product-driven Africa sportsbook operator. The company has ambitions to expand and delight the global gaming community by bringing safe, imaginative and innovative sports play to a new generation by simplifying the platform and delighting new customers play-by-play.
Industries: Gambling & Casinos
Fantastic.ng is a free-to-play gaming platform focused on sports fans (hence the name Fantastic). Their platform offers its users an experience similar to sports betting and rewards without requiring any payment.
The sports gaming platform runs on a freemium model that allows users to play for free or buy ₦100 token to access premium games with higher rewards.
All rewards are paid in a digital currency called Fan Coins (F.C.s). These F.C.s are then used in the Fan Shop to purchase various items, including airtime, food, phones, laptops, and get cash back.
Currently, the gaming platform offers a Football Manager, Predict & Win and Sports Quizzes.
Location: Lagos, Nigeria
Engage is a customer messaging platform that helps businesses grow and improve customer retention. It is messaging based on the end user’s journey, preferences, and actions through your business application.
Engage is able to achieve this by segmenting your customers based on their attributes (e.g., gender, location, plan, age) and their actions (e.g., used up data bandwidth, canceled subscription, scheduled an appointment, submitted feedback), and allowing you directly “message” these segments or create automation.
Industries: Artificial Intelligence, Business Development, Messaging
Koa is an app-based platform that helps its users save and grow their money at the tap of a button, making it easier for them to reach their financial goals, starting out from Kenya.
With Koa, users can save for what truly matters to them. Their application helps users break down their goals and save towards them daily, weekly or monthly. Additionally, users with a Koa grow the account, gain interest on the amount they have saved over a set period.
Industries: Finance, Savings, and Mutual Funds
26. Paystack (Exit)
Paystack is a payment platform that enables businesses in Africa to accept payments by anyone, anywhere in the world, from multiple local and global payment channels, including credit cards, debit cards, money transfers, and mobile money.
Additionally, Paystack provides tools to help its business users retain existing customers and acquire new ones.
Industries: Financial Services and Payments
Article culled from Medium
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