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5 Ways to Innovate Your Business and Stay Ahead of the Competition

Dear Business Owner,

What readily comes to mind when people think about business innovation is product innovation. Contrary to this popular belief, business innovation goes way beyond just product innovation.

 

In this edition of the Wema Bank SME Newsletter, we will bring to you the different innovation that you can implement as a business owner to differentiate your company from its competitors and help it gain competitive advantage.

 

1. Product Innovation: Product innovation is the most obvious form of business innovation. It involves the development of a product or service that significantly improves existing products or services in the market. This improvement can be in the functionality's form, design, or look and feel.

 

For a while, it seemed like we had reached peak innovation in smartphone technology, as new smartphone models released by popular brands like Apple and Samsung did not differ significantly in functionality or design from their predecessors. That was until the Chinese company, Royole, in 2018, launched the first commercially available smartphone with a foldable screen, the Royole Flexpai.

 

The foldable smartphone technology is now considered a game-changer and the next big thing in the smartphone industry and other companies like Samsung and Huawei have since rolled out their own versions of the foldable smartphone.

 

2. Process Innovation: While product innovation deals with a tangible or intangible item, process innovation is systemic. It focuses on making meaningful improvements to internal operations, activities, tools, and techniques like production method, delivery method, equipment, and software to reduce cost or turnaround time and boost revenue. You can achieve process innovation through technology and digitalization, and its major aim is to improve efficiency and effectiveness in production and service delivery.

 

At the onset of the COVID-19 Pandemic, many Nigerians could no longer visit the branches of banks to perform transactions because of restrictions on movement. Those who did so had to queue up for several hours before being attended to.

 

To address this challenge and make banking more convenient for their customers, many Nigerian banks upgraded their banking apps and made it possible for their customers to perform almost all banking transactions with the use of a web or mobile app. Today, individuals and businesses can even open bank accounts and apply for loans online, without having to visit a branch or interface with any banker.

 

3. Marketing Innovation: Marketing innovation seeks to capture the imagination of a company's target customers, arouse their interest, and hold their attention well and long enough to motivate them to check out and buy its product or service.

 

In 1984, Nike – which was then a struggling, small US footwear manufacturing company – signed a deal with promising basketball rookie, Michael Jordan, to market its customized brand of athletic shoes, the Air Jordan. Back then, the NBA permitted players to only wear white shoes. However, Jordan went against this rule and whenever he was in the court, his red, black and white shoes stood out and were easily noticeable amidst the sea of uniform shoes that every other player was wearing.

 

As Jordan's fame and success increased, so did the popularity and sale of Nike's shoes. While Nike expected to only make $3 million in sales in the first four years of the deal, it ended up making $126 million in the first year alone. It has proven to be one of the shrewdest and most lucrative marketing partnerships in history. Jordan has since become a billionaire and the richest former athlete in the world and Nike has since become the largest footwear company in the world.

 

4. Technological Innovation: Technological innovation is the application of technology to boost the performance and efficiency of business processes, products, or services. It can involve the application of technology to erstwhile manual processes or the replacement of outdated equipment and software with significantly improved versions.

 

It is important to note that it is not every business innovation that involves technology. We can achieve some innovations without technology. Likewise, it is not all technological improvements that can be classified as innovation. Technological innovation can also overlap with other forms of innovation, such as product and process innovation. Hence, an innovation can be both a product innovation and a technological innovation.

 

Though not entirely new, virtual assistants and chatbots have recently gained widespread acceptance in the business world. Many organizations now deploy them to provide first-level responses to customer complaints and frequently asked questions, digitalizing large parts of the customer support process and reducing the need for human interface (and dedicated personnel) to high-level issues.

 

5. Business Model Innovation: In simple terms, a business model is a company's strategy for carrying out its business, creating and delivering value to its customers and making money. It involves everything from market segmentation to product development and from revenue model to partnerships.

 

For instance, Netflix enables users to stream thousands of movies and TV shows with an app for a monthly subscription fee. Similarly, Coca Cola sells soft drink concentrates and syrups to bottling companies around the world, who then add water and fizz and sell the bottled drinks to final consumers through a chain of distributors, wholesalers, and retailers.

 

Business model innovation is the most radical, challenging, and unpredictable form of innovation, because it involves changing or making noteworthy modifications to an existing business model. For Netflix, this may entail building cinemas where subscribers can physically go to watch movies instead of streaming them via an app. For Coca Cola, it may entail bottling its soft drink concentrates and syrups by itself, which will entail buying over all of its bottling company partners or building its own bottling factories from scratch.

 

You should only go the route of business model innovation if your existing business model is failing or if a different business model offers a much better prospect than your current business model.

 

Key Takeaways

 

Having gone through some of the major forms of innovation that you can implement in your business, it is important to point out that innovation should be a continuous activity and not a one-off event. One-off innovation can give you a temporary edge over your competitors, but it is only through continuous innovation that you can sustain that competitive advantage.

 

With so much information out there, getting intel on a competitor's innovation, is – sometimes – only a few clicks of a button or phone calls away, making it relatively easy for your competitors to figure out and replicate your innovation. Shifting demands of consumers can as well render an innovation obsolete.

 

You also shouldn't rely on one form of innovation. It is important that you continuously explore opportunities for innovation across all aspects of your business, from product development to operations and from marketing to service delivery. That way you will always be one step ahead of the competition and before your competitors can decipher your innovation, you have already moved on to the next one.

 

Chinedu Nnawetanma

RETAIL AND SME

9 Key Steps to Building a Successful Business

A business needs more than just finance to succeed. Businesses operate in a very complex, competitive, and dynamic environment, with many internal and external factors coming into play. Therefore, it is important that a business owner or operator gets the business management process right at every step of the way.

Entrepreneurial capacity, which is the ability of a business owner to identify and effectively leverage business opportunities, is one of the most overlooked elements of the business success mix. The business owner or operator is like the architect of the business – he envisions the business from the conceptual or seed stage; designs its short-term, medium-term, and long-term strategic plans; and mobilizes the resources required to translate these visions and strategic plans into a thriving venture.

Unfortunately, many business owners and operators lack the capacity required to optimize the potentials of their businesses, with or without funding. In this edition of Wema Bank's SME Newsletter, I will outline some of the steps and measures that every business owner or operator needs to take and put in place to ensure that their business survives the high mortality rate that has plagued startups and micro, small and medium-scale businesses around the world.

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1. Know Your Motivation: It is essential that you clearly identify and understand why you are in business in the first place. People start up a business for different reasons. These range from the need to earn an income to the need for professional independence and autonomy, and from solving an identified economic need to making a social impact. It is important that you identify and understand what drives you as an entrepreneur, because this will be your guiding principle going forward.

2. Do Something that Resonates with You: You need not venture into entrepreneurship just because other people are doing that. You need not start a fintech company because it is "the in thing," when your real passion lies in fashion. Passion is the fabric that holds all the other elements of entrepreneurship and business management together.

3. Develop an Entrepreneurial Mindset: Entrepreneurship is one of the most complex and unforgiving career paths that an individual can take. The stakes are very high, just as the rewards and returns can be very attractive. In the economic concept of the factors of production, the entrepreneur is defined as the risk-taker who combines all the other factors like land, labour, and capital for profit. The first step towards developing an entrepreneurial mindset is to embrace risk. Nothing ventured, nothing gained. Other important attributes of a high-achieving entrepreneurial mindset are setting SMART goals, being focused, staying committed, and having moderate optimism.

4. Find Your Niche: A niche is a subset of a larger market with similar characteristics, needs and preferences. Among organizations, for instance, a niche market can be the banking industry, the oil and gas industry or tertiary institutions. Likewise, among individuals, a niche market can be high-net-worth individuals (HNIs), athletes or nursing mothers. Businesses that start off by serving a niche market have a greater chance of succeeding than businesses that start off by serving a large, heterogeneous market. This is because businesses that serve a niche market can over time develop specialization in their offerings and own that space. This is not to say that serving a heterogenous market from the outset is an entirely bad idea, it is just that your lean resources as a startup or an SME will be stretched very thin. With time and enough traction, businesses that start off by serving a niche market can expand into other markets through diversification.

5. Do Not Create a Solution for a Problem that Does Not Exist: To have a greater probability of being commercially successful, you need to create a solution for a problem that exists now, rather than one that may arise in the future. A business essentially exists to meet the needs of people and/or other businesses who will pay to have that solution. Simply put, if nobody needs or wants your "solution," no one will pay you for it.

6. Clearly Understand the Market and the Problem: Finding a niche market to target is one thing, understanding the needs of that market is a different thing altogether. Conducting a comprehensive market analysis will reveal the key demographic, psychographic, and economic characteristics of the market and help you understand why the problem you are trying to address exists and how best you can address it.

1. Know Your Motivation: It is essential that you clearly identify and understand why you are in business in the first place. People start up a business for different reasons. These range from the need to earn an income to the need for professional independence and autonomy, and from solving an identified economic need to making a social impact. It is important that you identify and understand what drives you as an entrepreneur, because this will be your guiding principle going forward.

2. Do Something that Resonates with You: You need not venture into entrepreneurship just because other people are doing that. You need not start a fintech company because it is "the in thing," when your real passion lies in fashion. Passion is the fabric that holds all the other elements of entrepreneurship and business management together.

3. Develop an Entrepreneurial Mindset: Entrepreneurship is one of the most complex and unforgiving career paths that an individual can take. The stakes are very high, just as the rewards and returns can be very attractive. In the economic concept of the factors of production, the entrepreneur is defined as the risk-taker who combines all the other factors like land, labour, and capital for profit. The first step towards developing an entrepreneurial mindset is to embrace risk. Nothing ventured, nothing gained. Other important attributes of a high-achieving entrepreneurial mindset are setting SMART goals, being focused, staying committed, and having moderate optimism.

4. Find Your Niche: A niche is a subset of a larger market with similar characteristics, needs and preferences. Among organizations, for instance, a niche market can be the banking industry, the oil and gas industry or tertiary institutions. Likewise, among individuals, a niche market can be high-net-worth individuals (HNIs), athletes or nursing mothers. Businesses that start off by serving a niche market have a greater chance of succeeding than businesses that start off by serving a large, heterogeneous market. This is because businesses that serve a niche market can over time develop specialization in their offerings and own that space. This is not to say that serving a heterogenous market from the outset is an entirely bad idea, it is just that your lean resources as a startup or an SME will be stretched very thin. With time and enough traction, businesses that start off by serving a niche market can expand into other markets through diversification.

5. Do Not Create a Solution for a Problem that Does Not Exist: To have a greater probability of being commercially successful, you need to create a solution for a problem that exists now, rather than one that may arise in the future. A business essentially exists to meet the needs of people and/or other businesses who will pay to have that solution. Simply put, if nobody needs or wants your "solution," no one will pay you for it.

6. Clearly Understand the Market and the Problem: Finding a niche market to target is one thing, understanding the needs of that market is a different thing altogether. Conducting a comprehensive market analysis will reveal the key demographic, psychographic, and economic characteristics of the market and help you understand why the problem you are trying to address exists and how best you can address it.

7. Know Your Competitors: Except you are addressing a novel problem, chances are that there are already other businesses offering the solution that you intend to offer. These are your competitors. Who are they? What are they doing? What are they not doing? What can you do differently? What is their market share? These are some of the questions that will guide you in positioning your business to stand out from your competitors.

8. Innovate: What readily comes to mind when business innovation is mentioned is product innovation. Contrary to popular belief, innovation comes in different ways. It can come in the form of product innovation, service innovation, business model innovation, process innovation, technological innovation, marketing innovation and social innovation. Adopting any of these types of innovation will differentiate your business from the competition, leave a positive mark on your customers, and boost customer satisfaction. It is also important that you continually innovate as a one-off innovation cannot give you a lasting competitive advantage.

Author- Chinedu Nnawetanma

Why are Many Small-Scale Businesses Failing in the 21st Century?

The Micro, Small and Medium Enterprises (MSME) ecosystem is often referred to as the engine room of the Nigerian economy as it employs over 80% of the workforce and contributes about 49% to the Gross Domestic Product (GDP). As of December 2020, the number of MSMEs operating within the country stood at 39.6 million compared to 41.5 million in 2017, representing a 4.5% decline. 

According to Investopedia, approximately 20% of small businesses fail in their first year, 50% fail within five years, and 33% make it to 10 years. These failures and eventual collapse are caused by both internal and external factors among which are poor management skills, lack of finance, poor preparation and poor knowledge of the sector and its value chain. The collapse of these businesses can be attributed to a few factors: 

 

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1) Lack of proper business planning: It is essential that a business owner has a good understanding of the business they own. This allows such individuals to be able to effectively communicate with investors and the public. A business plan provides a written-down plan of action, a road map that speaks to both a business's internal and external audience. 

Investopedia outlines the most important components of a business plan as

 An Executive Summary: This is a brief introduction to the business and its internal stakeholders. It also outlines the mission statement of the business.

 

Market analysis: This shows an in-depth understanding of the industry the business operates in, highlighting market leaders and other competitors. Market analysis also portrays the need(s) the business will be addressing.  

Sales Plan: This addresses how the business plans to attract and win market share. This will also require an understanding of the business' competitive advantages and plans around modes and channels of advertisement. 

Service and Product Offerings: This outlines the offerings of the business, their pricing, and their benefits to the customers 

Financial Planning: This will include plans and projections for the business, and

new businesses will have to show all targets and estimates for future years. 

Budget: This shows the cost attributed to each aspect of the business, including staffing, stock purchases, Operational expenses, and miscellaneous expenses. 

2) Funding: In Nigerian society, many people believe the best way to fund an idea is by making use of your savings or by raising funds from friends and family. While this path may not be easy, it is no doubt a good one as little to no interest rate is charged. Another alternative is opting for loans from banks and other financial institutions.  

New entrepreneurs might apply for more money than they need from a bank which then makes it harder to repay within the allotted timeframe.  

Lewis, L.V. and Churchill, N.C. (1983) mentioned five stages a business ought to pass through. 

These stages include the existence stage, survival stage, success stage, take-off stage and resource-maturity stage. Business owners must identify the stage in which their business is before applying for a loan. Many business owners at the existence stage take big loans from banks and other financial institutions and end up not being able to repay. It is therefore appropriate for an entrepreneur to know when to apply for loans, the types of funding available and have a funds management framework to guide how much is needed. 

4) Inability to Adapt to Changes: Businesses operate in a world where consumer behaviour, needs and tastes are constantly changing. Consumers’ behaviour pre-Covid19 has drastically changed and is still changing as they settle into the new world order. There is a need for SMEs to ensure that they stay abreast of new market trends and consumer behaviours and adjust their product offerings and marketing strategy to best align with new market behaviour and requirement. 

5) Lack of Sales: One of the major reasons why SMEs fail is their inability to generate constant revenue through sales of their goods and services. Nothing hurts a business faster than not being able to reach its projected sales goals to enable it to stay afloat. One of the ways that this can occur is when the business has customer concentration risk issues (a situation where too 

much reliance is on a particular customer or few customers). Business owners will have to diversify their customer base by ensuring their marketing strategy is well developed to reach a vast number of their available market size. 

6) Poor/Inadequate Management: This is by far the easiest thing to get wrong and the most important part of owning a business: the ability to manage both the human and material resources at a business owner’s disposal. Failure to acquire the required business acumen on the part of business owners and/or management is a pitfall entrepreneurs should avoid and mitigate.  

 While the owner may have the skills necessary to create and sell a viable product or service, they often lack the attributes of a strong manager and don't have the time to successfully oversee other employees. Smart business owners outsource the activities they do not perform well or have little time to successfully carry through. In areas where the funds available are not sufficient for outsourcing, entrepreneurs are advised to register and attend management training programmes to help improve and develop the required skill. 

Conclusion

In conclusion, business owners should be able to embrace evolution in the business world. A business owner who is not able to understand the continuous improvement and growth in the business world is at the losing end and their business will in no time go into extinction. It is therefore advisable for a business owner to identify and predict the present and future of the business world in order to understand the level of consistency, skill, knowledge, and growth that is needed to sustain the business.

Author- Gbolahan Owoeye

Managing Rising Energy Costs as a Growing Business in Nigeria through Renewable Energy

 

Dear Business Owner, 

According to the latest Consumer Price Index report of the National Bureau of Statistics (NBS), Nigeria’s inflation rate for March 2022 stood at 15.92%. This represents the 

highest rate recorded in the country since October 2021, when it was at 15.99%. One of the major factors responsible for this spike is rising energy prices in the country and around the world, which can be seen as a direct impact of the ongoing war between Russia and Ukraine. 

The conflict between the world’s second largest exporter of oil, Russia, and its Eastern European neighbour, Ukraine, has created fears in international markets of an impending shortage in the supply of oil due to the economic sanctions and embargoes imposed on Russian exports by NATO member states. As with every other commodity that obeys the law of demand and supply, this market sentiment has increased the demand for oil (and, consequently, its price) as companies around the world position themselves to hedge against any future shortages. 

 

Even before Russia’s invasion of Ukraine, energy prices had been on the increase in the country with the price of petrol surging beyond N170/litre (from N165/litre) in many parts of the country as consumers grappled with fuel scarcity caused by the recall of the adulterated petrol of about 170m litres that was in circulation at the beginning of the year.

The price of diesel has also shot up significantly since the beginning of the year, moving from an average of N288/litre in January 2022 to over N700/litre by the end of March 2022. Many businesses that depend almost entirely on diesel-powered generators have been forced to adjust their operating hours to reduce their operating cost.

 

The National Electricity Regulatory Commission (NERC) also recently revealed that electricity tariffs charged by electricity distribution companies (DisCos) in Nigeria would go up in the coming months following the removal of power sector subsidies by the Federal Government.

These rising energy costs, coupled with inadequate power supply from the national grid,

have made it necessary for business owners in Nigeria to explore cheaper off-grid sources of energy. Renewable energy sources like solar, wind, biomas, hydro, geothermal, tide and wave readily come to mind when the discussion around alternative energy arises. However, of the lot, only solar energy is widely available in the Nigerian market for both residential and commercial use. This is due to the relative advancement in indigenous expertise in solar photovoltaic technology, especially as it relates to the assembly, installation and repair of solar panels. 

SMEs and other businesses looking for more affordable long-term alternatives to fossil fuel energy sources can look towards solar energy. Though the initial outlay on procuring a solar energy system (solar panels, batteries and inverters) may be huge, it doesn't come with the regular purchase of fuel as its source of energy comes freely from nature.

 

Solar energy systems are also substantially more durable than petrol-powered and diesel powered generators. A solar battery can last between 5 – 15 years, while the lifespan of a typical solar panel is 25 years, with both requiring minimal and infrequent servicing. To eliminate the impact of the initial outlay on solar solutions, businesses can take advantage of the various flexible payment plans made available by solar energy companies. Many solar energy service providers in Nigeria have come up with lease-to own plans that enable customers who cannot afford to pay outrightly to pay by installments over a tenor of 1 – 6 years, while others have rolled out usage-based payment models that only charge customers for the units of energy they consume. Low-cost financing options from commercial banks like Wema Bank PLC are also available for businesses and households that want to transition to solar. All in all, the market for solar energy – and other forms of renewable energy – in Nigeria is huge, as many communities in the rural parts of the country still lie beyond the reach of the national grid, while those that have access to it complain of its inadequacy. 

According to the Association of Nigerian Electricity Distributors, Nigeria currently has an electricity supply gap of about 180,000 MW and some of this gap can be filled by renewable energy. The government has thus far played a critical role in encouraging the growth and development of the renewable energy industry in Nigeria by offering various forms of incentives to foreign and domestic investors. It can complement this by offering incentives that will increase the demand for renewable energy by the general public, especially businesses, such as offering tax credits to businesses that transition from polluting and hazardous fossil-fuel-generators to renewable energy sources. Besides its positive impact on the environment and on the bottom line of these businesses in terms of cost savings, the adoption of renewable energy will curb the demand for, and importation of, petroleum products and go a long way in stabilizing the foreign exchange rate. According to the Central Bank of Nigeria (CBN), about 40% of the country’s scarce FX is spent on the importation of petroleum products like gasoline (petrol) and diesel annually.

The adoption of renewable energy has a far-reaching positive impact on both businesses and the society, and it is a strategy that the government and Nigerian businesses should elevate to the front burner. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

This newsletter was prepared by the Wema Bank SME Advisory Services Team. To get free advisory support for your business and also find out more about the bank’s low-cost financing offerings for SMEs, kindly send an email to smehelpdesk@wemabank.com. 

How To Grow Your Business With The Power Of Branding

Branding is a unique art that is essential for all companies, especially in a crowded competitive marketplace. Creating a brand enables a company to set itself apart from every other competitor by creating a perception of its goods or services beforehand. 

The branding journal defines branding as the process of giving meaning to a specific organization, company, product, or service by creating and shaping a brand in consumers' minds.The objective is to attract and retain loyal customers and other stakeholders by delivering a product that is always aligned with what the brand promises. 

Branding is a very powerful tool that can make the most mundane things outstanding. Water, for instance, is one of the most consumed items in the world. It is also one of the most accessible things in the world. However, through branding, we have seen water bottlers differentiate themselves and charge a premium price for a readily available resource. 

Despite its uncanny ability to make the existence of a company stick in the heart of the audience, there have been questions regarding the importance of branding to SMEs. People often ask, "Is having a good brand important for an SME business?"  

  The answer is yes! Branding matters regardless of the size of the business.  Why does branding matter to SMEs?  As earlier stated, a strong brand allows a company to be differentiated from its competitors in the market. Here are more reasons for you to invest in branding: Strong brands enhance business performance primarily through their influence on current and prospective customers, employees, and investors· Branding has been a part of the marketing strategies that have affected an amazing push and growth on the performance of businesses around the world· 

It provides an opportunity for businesses to build trust by delivering on the promises of their brand. With branding, SMEs can attract top-quality talents by demonstrating what their company offers which a larger corporation might not offer. Note however that branding is one thing, maintaining a strong brand that will keep your company glued to the heart of your customers is another.  

Building your brand when a business is set up, it builds a reputation, whether good or bad. It is at this point that the initiation of branding should come in, to control what the reputation will look like. Hence, it is recommended for businesses, especially SMEs to start branding the moment a business is being set up.   

  

 

 

 

 

 

 

 

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Here are some key considerations for building the right brand for your business: 

Embarking in the branding process is impossible without a branding strategy. This should form part of your overall business strategy.

The purpose and mission of the business must be clear. When this is well defined, the core values to be communicated to the entire world will be well structured and stated. It is necessary to choose a suitable voice that is understood by the audience to register the brand in their minds, thus making yours the preferred brand for your target market.   When a company is set to build its brand, some inevitable questions must be asked to carry on. Questions like; who am I? How do I want my customers to feel? How am I different? How do I come across? What do I want to achieve?  

Who am I?  

This is the kind of impression and picture created in the heart of the customers about the  company.

What do I want to achieve?  

The question of what to achieve can be derived from your vision, mission, purpose, and values. 


These three things must therefore be well defined.

How do I come across?  The techniques to be adopted while communicating your values need to be defined as well. As a business owner, you must be able to pinpoint words and terminologies to be used to describe your industry, products, and services to your customers.

How am I different?  Here, any entrepreneur or business owner should know what uniquely stands the business out. This is where a conclusion on how the customer sees the business distinctively is made. It's essential to identify and develop the key differentiators. These differentiators become a robust set of unique features and benefits that will form the basis for establishing and maintaining the business’ competitive advantage.  

How do I want my customers to feel?  This is also a vital aspect of branding; knowing the feeling your company will evoke while customers interact with you. Right now your brand is making the people important to its success feel one thing or another. The question is, are those feelings helpful or a hindrance? Actions need to be taken to make sure that these feelings are positive.  

What makes a strong brand?  In deploying your brand strategy, below are some of the factors with which to measure its strength: An ability to condense the peak performances of your company, thereby making them tangible over a long period.

Clear brand core values, an unambiguous positioning, and a long-term brand strategy, a  consistent voice creates a memory in the heart of your audience. This voice can be professional, informal, sophisticated, simple, conservative, a bit sketchy, etc., and must be consistent on blogs, sites, social media platforms, emails and even ads.

 

 
 

Conclusion

Branding is a critical success tool for all businesses. If well deployed, it can be the difference between a struggling business and a successful business. Business owners must therefore dedicate resources to building and maintaining a strong brand.

Beyond just building the brand, Business owners must believe in their brand and what it represents regardless of what competition is doing. The company culture must also reflect the brand as staff are the company’s biggest brand ambassadors.  

Do these, and your company just might take over the market!  

  

 

  
  
 

Author- Gbolahan Owoeye

The 2022 Budget: What You Need To Know

Dear Business Owner,

Welcome to the year 2022. We believe that you will have a fruitful and rewarding run this year.

The new year often presents us with an opportunity to review and re-evaluate. We hope you have taken the time to reflect upon your business in the past year and to make viable plans for this year. Your plans should include the goals you will attain as a business, your strategy for attaining those goals, and of course your budget.

Speaking of budget, President Muhammadu Buhari signed the 2022 Appropriation bill on the 31st of December 2021. The budget tagged “Budget of Economic Growth and Sustainability” is designed to achieve the following:

  • Diversification of the economy with robust growth of MSMEs
  • Investment in critical infrastructure
  • Strengthening security and ensuring good governance
  • Enabling a vibrant educated and healthy populace
  • Reducing poverty and minimizing regional, economic, and social disparities

In this month’s Newsletter, we will analyze the 2022 national budget, highlighting the portions we consider most vital to you and your business

Why You Should Care About the National Budget

The budget impacts the economy, and the state of the economy impacts your business. Every serious entrepreneur looking to draw up budgets for his business (which we highly recommend) and put in place pragmatic plans for business growth must not do so in isolation of the national budget.

Below are a few of the ways that the national budget might affect your business

  1. How money is spent and invested by the ministry of finance impacts fiscal deficit

  2. The extent of the deficit and how the deficit is being financed impacts money supply and interest rates in the economy

  3. High-interest rates imply a higher cost of capital, lower profits, and lower stock prices

  4. Higher taxes reduce disposable income

  5. Reduced disposable income, in turn, reduces the ability to pay for goods and services

  6. A decrease in demand for goods may translate to a decrease in your profit margin as a business

Now that we have convinced you to care, let’s dive right into analyzing the budget

 

 

 

The deficit of N6.39tn is expected to be financed by new borrowings, privatization proceeds and drawdown on loans secured for specific projects.

Key Assumptions

  • Benchmark Oil price – US$62 per barrel
  • Oil production volume – 1.88 million barrels per day
  • Inflation rate – 13%
  • Average exchange rate – N410.15 / US$1
  • GDP growth rate – 4.2%

Below are some of the ways the government plans to raise money for funding the budget

  • Enhancing tax and excise revenues. 
  • Reviewing the effectiveness of policies for tax waivers and concessions
  • Increasing customs revenue through technology 
  • Preserving the revenue derived from the oil and gas sector.

 

Implications for the Business Owner

  • The budget has a deficit of N6.39trn to be funded largely via borrowing. To put things in perspective, this deficit is 35% higher than the total amount budgeted for in 2015. Increasing government debt has consequences on the economy that could trickle down to your business, such as an increase in taxation, interest rates etc.

 

  • There is no provision in the budget for fuel subsidy from the 2nd half of the year. You should be prepared to pay higher amounts for PMS once this subsidy is removed. This will impact your cost of doing business directly through increased power and transportation costs, and indirectly through the expected inflationary impact of the subsidy removal. We recommend that you make adjustments to this. However, it is not a certainty that the subsidy will be removed by the government.

 

  • The government has imposed a 6% tax on the turnover of Offshore companies providing digital services to individuals in Nigeria. This includes services such as electronic data storage, high-frequency trading, online advertising etc. In addition, the companies are obliged to charge, collect, and remit VAT. This will cause a marginal hike in your cost of consuming digital products/services. For example, your social media advertising cost will be affected by this.

 

  • The government has also imposed an N10 per litre excise duty on all non-alcoholic, carbonated, and sweetened beverages in the country. Whether you are trading in these beverages or consuming them, you should expect a marginal increase in their prices

 

 On the bright side, monies have been set aside in the budget for conducting the national population and housing census. The last time Nigeria had a national census was 15 years ago. Data from the census will better position the government to strategize and make decisions that affect national development

 Also, there has been an expansion in the country’s revenue base. This year, 65% of projected income will come from non-oil sources. This will better stabilize the economy, cushioning it from shocks that may arise due to movements in international oil prices.

2021 FINANCE ACT: SOME NOTABLE CHANGES

Recall that we shared major highlights of the 2020 finance act with you last year. On the 31st of December 2021, the 2021 finance bill was signed into law. Below are some of the changes introduced by the new act:

  • Increase in Education tax payable by Nigerian companies from 2% to 2.5%
  • 10% Capital gains tax chargeable on disposal of shares worth N100m or above in any 12 consecutive months, except the proceeds of such disposal is re-invested in the shares of a Nigerian company.
  • FIRS has been mandated to enforce the payment of the Nigerian Police Trust Fund levy. Rate is 0.005% of the net profit of companies operating in Nigeria
  • Companies engaged in educational activities are now expected to pay Corporate Income Tax, including those whose activities are of public character

Companies operating in select sectors with a turnover of N100m and above are subject to a science and engineering levy of 0.25% of their profit before tax. The sectors include banking, mobile telecommunication, ICT, aviation, maritime, and oil and gas.

Ndianabasi Udondian
RETAIL AND SME

The Impending New Covid-19 Variant: How SMEs Should Prepare To Safeguard Their Business

Small and Medium-Sized- Enterprises (SMEs) play a key role in national economies around the world both in developed and developing countries: generating employment and contributing to GDP growth. Small businesses act as important tools to achieve environmental sustainability and more inclusive growth.

Over the last few decades, globalization, rapid technological advances and dizzying products development have propelled small- and medium-scale enterprises (SMEs) toward sustainable innovation to gain competitive advantage. The growth of this space is now threatened by the devastating impact of the covid-19 pandemic.

Since the beginning of the COVID-19 pandemic, the SARS-CoV-2 coronavirus that causes COVID-19 has mutated (changed), resulting in new variants of the virus (Delta variant and omicron variant are examples of notable variants). The impact of the Covid-19 pandemic affected every industry as it disrupted supply chains and forced the shutdown of various businesses. The period of closure and movement prevention policies adopted by governments in many countries have greatly affected SMEs, paralysing their operations, weakening their financial positions, and exposing them to financial risk

Unfortunately, after months of steady decline, COVID-19 cases and hospitalizations are creeping back up which is of great concern globally.  As the world is adjusting gradually to the new normal, it is very necessary for SMEs to take advantage of leveraging on sustainable innovation and strategies in growing their business beyond.

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Various strategies have been identified as potential drive which SMEs can use to improve their competitiveness in global markets amidst developing covid-19 variant:

  1. Networking and Flexible production strategies: SME’s can exploit the networking space to identify new markets and promote their products through various online sales platform. These online channels offers enormous opportunities such as e-commerce sales and lower operating cost.
  2. Continuous Entrepreneurial Skills Development: entrepreneurial capabilities are also important in increasing the development and survival rates of start-ups. There is need to keep growing new skills and ideas in maintaining sustainable business growth.
  3. Improve on product branding: SMEs should make branding an integral part of their business plan rather than an afterthought. Branding helps in creating demand for products and services, resulting in faster sales. Even for B2B business, branding creates recognition, reputation and trust resulting in better conversions.
  4. Adapting to current market trends: market trend keeps changing and unpredictable because of these newly discovered variant cases. SMEs need to be monitoring trends in their product/service markets continuously to ensure customers satisfaction requirements are met and changes in customer preferences are caught early.
  5. Preplanning and learning from experience: Preplanning has always been considered a strategic management process that helps to fight against uncertainties. Outbreak of Covid-19 created a wake-up call regarding external uncertainty and degradation in the social and economic development. SMEs should identify substitutes for product ingredients ahead of disruptions or be able to pivot to new products in case of problems with some products.

Behind every crisis is an opportunity, as the saying goes but opportunity favours only those who are prepared. The 2008 global financial meltdown hit so hard and created disruption that will remain fresh in the minds of many people for years to come. To those who were prepared, the economic recession was the best of times and to those who weren’t prepared; it was the worst of times. The global economic recession came like a tsunami and swept away lots of businesses; both big and small.

The business environment is continually changing all over the world, SMEs are central to the collective goal of increasing productivity turnover and ensuring that the benefits from increased globalisation are sustained. SMEs entrepreneurial opportunities represent an important vector for economic and social participation.

Greater flexibility and capacity to plan can give SMEs a competitive advantage in global markets relative to the current new normal economy challenges, as they are able to respond rapidly to changing market conditions.

Conclusion

The Covid-19 pandemic is the new normal and it seems it will be with us for a while. The introduction of new virus variants will keep changing the dynamics of doing business worldwide. While the prospects for many SMEs may look discouraging, the pandemic still presents opportunities for businesses that are proactive. A good example are the companies that pivoted from making gels or other FMCG products to manufacturing hand sanitizers. It is advisable now for SMEs to assess the damages their companies may face and strategically create protection measures that will assist in mitigating the impact of the pandemic while maximizing the opportunities that will most certainly present themselves once the pandemic is contained.

Author- Gbolahan Owoeye

The eNaira For Business Owners

As promised, we recently, and while our alumni are aggressively applying all that they learned in their business operations, we remain ever vigilant in our duty of spotting and identifying new and exciting opportunities for our customers.

The end of the year is fast approaching, and what a year it’s been. Traditionally, the end of the year brings with it much reflection and planning, as we look back at the closing year and look ahead to the coming one. Amid all this thinking, however, one can often miss out on promising opportunities which may present themselves as the year ends. Therefore you need a trusted business partner (i.e., Wema Bank) to keep an eye out on your behalf.

In the context of the Nigerian market in 2021, one of such opportunities which we have flagged is the rollout of the CBN’s eNaira on Monday, October 25, 2021. This innovation, the first of its kind on the African continent, is billed to expand nationwide access to banking, enable more remittances, and increase Nigeria’s GDP by $29 billion over the next ten (10) years, and it offers up an exciting plethora of opportunities for you as a business owner, to grow your business. It is because of the exciting potential of this new currency that we at Wema Bank have decided to make the eNaira the subject of this month’s newsletter.

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But isn’t it bitcoin?

Think of your regular everyday business transactions. If you are like most Nigerians, the scene playing in your head would go something like this: a customer walks into your shop and identifies a product that they want to pay for. At the point of payment, the customer will reach into their pocket and pull out their wallet (or a crumpled wad of cash), count out the required number of notes, and then hand them over to you as payment. You will then take the cash, recount it to verify that it is the right amount, and then put the money in your own wallet (or in the till of your cash register) and (sometimes) hand over a receipt. Once this is completed, the transaction is done.

With the eNaira however, this same transaction would be performed entirely without the use of physical cash, as payments will be made with the use of mobile devices—much like our regular bank transfers today.

Contrary to what you may think, the eNaira is not bitcoin. Unlike bitcoin (and other coins like Ethereum, Dogecoin and so on) which are cryptocurrencies that are not issued by a central authority; the eNaira is a digital currency issued by a Central Bank—a Central Bank Digital Currency (CBCD). This means that the eNaira is a legal tender of the Federal Republic of Nigeria, and as such is a direct liability of the CBN. It is therefore regulated and subject to the various banking laws of the nation.

Johnson Chukwu, the Founder and Managing Director of Cowry Asset Management Limited explained the eNaira by saying, “it’s not in coins and it’s not in notes, it’s in [a] virtual format. So, you can’t physically hold it, but you have it as a store of value, as a piece of payment, and it’s backed by the good faith of the central bank . . . for every unit of that currency you hold, the central bank can give you physical naira.”

The CBN has continuously reiterated the fact that the eNaira is not intended to replace the physical Naira but is only expected to work alongside it; as expressed in the digital currency’s tagline: “Same Naira, more possibilities”. Furthermore, the eNaira and the Naira will always be exchanged 1:1.

You can consider the eNaira as yet another stage in the CBN’s drive to reduce cash usage in Nigeria.

Why do I need the eNaira?

The eNaira will complement existing payment options that are currently available via mobile banking apps, point of sale (POS) terminals, USSD, Quick Response (QR) codes, Internet banking and other channels.

In its Design Paper for the eNaira, the CBN has stated that it intends for the eNaira to do the following:

  • Improve the availability and usability of Central Bank money
  • Support a resilient payment ecosystem
  • Encourage financial inclusion
  • Reduce the cost of processing cash
  • Increase revenue and tax collection
  • Enable direct welfare disbursements to citizens
  • Reduce the cost & improve the efficiency of cross-border transactions
  • Facilitate diaspora remittances

Additionally, transactions executed with the eNaira will guarantee:

  • Instant settlement
  • 9% service availability and reliability
  • Low charges
  • No dispensing errors
  • No reconciliation issues
  • Low charges (the CBN has assured users of zero charges for the first 90 days of the eNaira’s launch—October 25, 2021)
  • Nationwide acceptance
  • No dispensing errors
  • Advanced data privacy and security

As a merchant on the platform, the following types of transactions are available to you:

  • Merchant/Business to (commercial) bank account
  • Merchant/Business to Person (Individual)
  • Cash or (commercial) bank account to eNaira Speed wallets

Merchants will pay no fees for withdrawals and deposits to and from their bank account. They are also required to sweep their outstanding eNaira balances into their account(s) with a financial institution at the end of every day. There are no limits on transaction amounts for merchants (business owners). It should also be noted that the customers will not earn interest on eNaira deposits.

The eNaira payment system will offer a broad range of services that will expand as adoption arises and new use cases are developed.

How can I get the eNaira?

To access and use the eNaira, you will have to create an eNaira wallet, which is the digital storage that holds the eNaira. This wallet, the CBN’s Speed Wallet is available for free download on the Google Play store and the Apple App store. Each wallet is tied to a BVN or NIN and can only be used once to prevent duplicate identities and wallet creation on the eNaira platform.

The requirements for a Merchant Wallet are as follows:

Category Requirement Daily Transaction Limit (₦) Daily Cumulative Balance (₦)
Bank Account Holders BVN, TIN & Bank confirmation Send

No limit

Receive

No limit

No limit (with Auto sweep trigger)
         

 

The eNaira payment system will be compliant with AML/CFT guidelines to ensure its safety and integrity, and to achieve this, the CBN has adopted an account based CBDC, meaning that all eNaira wallets are linked to the user’s account in an approved financial institution, like Wema Bank. To facilitate this, customers will have to select their preferred banking partner (Wema Bank) during the onboarding process.

Once the wallet has been created, users will be able to transfer money into it from bank accounts or credit cards and send and receive payments to others using the digital currency.

Also note that the technical partner of the CBN for the eNaira rollout, Bitt Inc., has announced plans to release a version of the eNaira wallet that will be accessible to previously unbanked users.

Conclusion

In its Regulatory Guidelines on the eNaira, the CBN outlines the roles of merchant users of the digital currency. These are:

  1. Providing customers with alternative channels for making transactions using the eNaira
  2. Providing cashback services for customers
  • Publicising the option of eNaira payment for transactions at merchant locations
  1. Protecting their eNaira speed wallet credentials against fraudulent access.

The successful delivery of these roles will ensure for an inclusive and rewarding user experience with the eNaira.

As said previously, the expectation of the CBN is that the eNaira will complement the “traditional” (physical) Naira by providing a less costly, more efficient, generally acceptable, safe, and trusted means of payment. This is sufficient reason for a businessowner to seek to move their payments and other financial transactions to the eNaira ecosystem.

In addition to the aforementioned benefits, the potential offered up by the eNaira as a tool for cross-border trade and remittances, particularly in light of the launch of the Africa Continental Free Trade Agreement (AfCFTA), is one that promises to boost the business operations of any businessowner who onboards on the platform. This, if all the reasons that have gone before are not enough to sway you, is certainly reason enough for the astute businessowner to get some eNaira as soon as possible.

Author- Somtochukwu Okoroafor

How To Expand Your Business With The Leverage Of Franchising

Small and Medium Enterprises (SMEs) have been termed as the engine of growth of an economy. This implies that they have been recognized as the major variable for promoting private sector, development, and partnership in an economy. Copious literatures have been written on Small and Medium Enterprises indicating historical experiences of economic growth and development in various countries replete with success stories of the salutary effect and positive impact and contributions of SMEs in industrial developments, technological innovations, and export promotion. However, SMEs in developing countries face enormous challenges in attracting investors and accessing modern technology to enhance growth. Among these challenges is an inability to achieve economies of scale through integration or linkages, and the problems of size and relative isolation caused by the difficulties in entering national and global value chains driven by large multinational corporations. The most common barrier to expansion faced by today’s small businesses is a lack of access to capital. Even before the credit-tightening of 2008-2009 and the “new normal” that ensued, entrepreneurs often found that their growth goals outstripped their ability to fund them.

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In a bid to expand SMEs, various strategies have been suggested by different authors. For any Small and medium business willing to grow in a sustainable market, it is recommended that franchising should be adopted.

Franchising is a marketing concept which can be adopted by an organization as a strategy for business expansion. It is a type of business that is owned and operated by an individual (franchisee) but that is branded and overseen by a much larger—usually national or multinational—company (the franchisor). Where implemented, a franchisor licenses some or all its know-how, procedures, intellectual property, use of its business model, brand, and rights to sell its branded products and services to a franchisee. In return, the franchisee pays certain fees and agrees to comply with certain obligations, typically set out in a franchise agreement.

Adopting a franchise system business growth strategy for the sale and distribution of goods and services minimizes the SME's capital investment and liability risk. Franchising is an alternative form of capital acquisition in that it will allow small and medium businesses to expand without the risk of debt or the cost of equity.

However, since the franchisee signs the lease and commits to various contracts, franchising allows for expansion with virtually no contingent liability, thus greatly reducing the risk to the franchisor. This means that as a franchisor, not only do SMEs need far less capital with which to expand, but their risk is largely limited to the capital they invest in developing their franchise company—an amount that is often less than the cost of opening one additional company-owned location.

The franchise system is not an equal partnership, especially due to the legal advantages the franchisor has over the franchisee, but under specific circumstances like favourable legal conditions, financial means, transparency and proper market research, franchising can be a vehicle of success for both franchisor and franchisee.

In addition, franchising is certain to aid a small and medium business in capturing a market leadership position before its competitors encroach on its space. Franchising not only allows the franchisor financial leverage, but it also allows it to leverage human resources as well. Franchising can allow small and medium-sized business to compete with much larger businesses than theirs, so they can saturate markets before these companies can respond.

How do SMEs expand business with leverage on Franchise?

To start with, the SME in question will do well to recognize or identify its strengths. This can be accomplished with the use of the SWOT analysis matrix. The SME is also expected to have a solid business plan, as it going to be carefully selecting its franchise owners and ensuring tight control. The franchisee should get in details the competitive strategy, business concept, marketing strategy and of course the location strategy of the business.

According to Newman, to ensure an expansion of business through franchise, such business should build up its share of the market first before opening franchises outside its immediate area. It is important that such business fully penetrate its home market first, then gradually grow its base and expand outwardly.

Another way by which an SME can expand through franchise is to have a good robust business model to perform well and be a formidable competitor in its industry. The enterprise needs to use its early franchise location to test out and perfect its concept. The business model should be capable of perfecting the economic feasibility, product appearance and so on.

The businesses involved should ensure that all necessary legal documents such as franchise contract, licenses and registration are put in place as this also contributes to the success of a franchise relationship.

Just as with hiring employees, choosing franchisees can have a huge impact on the success or failure of a small business. It is harder to manage franchise owners because they have invested their own money and want to run their own show. So, choosing wisely is key by making sure that the franchisee candidates have a passion for the business, the necessary financial and business savvy to do the job and that the franchisee can maintain the high standards of the business.

In conclusion, for every franchising agreement, it is very pertinent that the franchisor stays in close touch with the franchisee even after the familiarization period so that growth of the brand can be achieved alongside the success of the overall organization.

Author – Gbolahan Owoeye

7 Tips To Help You Network Profitably As An SME

I hope that since receiving our letter on The Nigerian Exporter, you have begun to make moves towards enlarging your market by taking advantage of the export opportunities we exposed you to. Whichever way this goes, trust that we in Wema Bank are rooting for you. Feel free to share your success stories and challenges (if any) with us at smehelpdesk@wemabank.com

This month, we will be addressing another important aspect of business growth, one that most small entrepreneurs tend to take for granted: Networking. 

We bet you have heard these sayings, “Your network is your net-worth,” and, “It’s not what you know, it’s whom you know.” All these are true, especially in our ever-competitive business world. Having a healthy network of business contacts can be one of your greatest assets as a business owner.

So how do you build this healthy business network? Ride with us let’s take you through.

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What is Networking?

Meeting and interacting with people are an essential part of human nature. Hardly a day goes by without humans interacting with each other virtually, or in person. It is so commonplace that we often overlook the sheer force of power that this random act wields. It is this random act of interaction that the “pros” perfect and build a strategy around to propel them into becoming business tycoons.

Simply put, networking is making deliberate efforts to build connections with people whom you believe would contribute to the growth of your business.

For some people, networking comes easy. But for others, it can be a nightmare. The good news is that networking, just like any skill, can be learnt. So, if you are an introvert and would rather not be bothered about networking; or if you are one of those whose schedules are so tight that you can hardly make room for lunch, let alone networking, do not fret. With just a little commitment to the tips I will be sharing today, you will find yourself shining through.

Why you Should Care About Networking

If you are going to be spending time building a skill, especially one as daunting as networking, it’s only fair that you’re convinced of its worth. I have itemized some of the most compelling reasons why you should care about building a strong and healthy business network below. I hope you find them convincing.

  • To increase your inter-personal connections: People do business with people that they know, like and find dependable. Company decisions are made by people. Actual human beings. Being connected to someone who is in the room when important decisions that may be beneficial to your business are being made, gives you an edge.
  • To help with lead generation: Taking part in networking activities opens you up to meeting potential business partners and clients. You never know where or from whom your big break will come, but the wider your business network, the better your chances of catching a break.

 

 

  • To help with brand visibility: The more you network, the more people get to know about you and your business. The more known your brand, the more trustworthy it becomes, and the easier it is for existing connections to refer new clients/businesses.
  • To stay up to date: The business world is ever-changing. Networking with local business people can keep you up to date with the latest news or trends.
  • Friendship: Your connections might grow to become friends or even family. This is not emphasized enough, but it is very important because at the end of the day, what truly matters is whom we have in our tight corner.

How Can You Network Effectively?

Now that you know why networking is so important, I’m sure you are eager to get started. The tips below will be very helpful in your quest to building a formidable business network:

  1. Decide on a purpose: Do not fall into the trap of approaching networking in an ad-hoc way. It is a strategic business decision and should be treated as such. Decide on what you are looking for in a network (customers, contracts, fresh ideas, etc.) This will help you draw up a plan and show you where to focus your efforts.
  2. Use good networking etiquette: Upon meeting people, do not launch straight into speaking on end about your business. This is very off-putting. Rather, strive to make personal connections and build relationships of mutual benefit by listening to other people’s opinions, challenges and needs.
  3. Leverage social media: Social media can be a great place to start. You can join conversations and groups on LinkedIn or Facebook or whatever your preferred social media platform. However, keep in mind that physical meetings are very important in building long-lasting relationships. Work to achieve a balance between the virtual and physical aspects of maintaining relationships.
  • To help with brand visibility: The more you network, the more people get to know about you and your business. The more known your brand, the more trustworthy it becomes, and the easier it is for existing connections to refer new clients/businesses.
  • To stay up to date: The business world is ever-changing. Networking with local business people can keep you up to date with the latest news or trends.
  • Friendship: Your connections might grow to become friends or even family. This is not emphasized enough, but it is very important because at the end of the day, what truly matters is whom we have in our tight corner.

 

 

 

Do not limit yourself to the above list. Get creative about other ways that you believe will help you build and grow a professional network. Whatever strategies you apply, always remember the following when attending networking events:

  • Go with your business cards
  • Take care with your appearance—it matters
  • Do not spend all your time with people you already know. The idea is to meet new people, keep that in mind
  • Prepare a brief speech with which to introduce yourself and your business
  • Focus on what you can do for others, and not what they can do for you
  • Show genuine interest in what others do. Listen and ask questions
  • Always leave a conversation with an open opportunity to reconnect

Conclusion

People are the real wealth. This is as true of individuals as it is of nations. Networking allows you to maximize this wealth. Never pass it up.

Author – Ndianabasi Udondian