UbongNkanta | Feedback Works
information about reactions to a product, a person’s performance of a task, etc. which is used as a basis for improvement.
The continuous change in customers’ needs and expectations is a clarion call on businesses – established, growing and startups to engage their customers satisfactorily. Businesses spend time to develop, review and evaluate their business strategy periodically, however, very little (if anything) is done to seek and review the feedback on the customers’ experience with their products and services. A best-in-class business strategy is incomplete without a clearly defined customer feedback plan.
A research conducted by Esteban Kolsky shows that 70% of companies that deliver best-in-class customer experience use customer feedback, versus industry average of 50%, and 29% for laggards.
Every business expectedly, is set up to operate optimally and be the ‘top mind’ brand for their customer at all times. However, as services are being rendered round the clock, customers’ feedback on their perception of the experience are not also gathered on the go. So many organizations do not have structured, clearly defined and effective customer feedback channels, thus they only get to know of their customers’ experience with their services when the customer has already gone public – the power of social media! Today, we all have access to media platforms through which we provide unsolicited feedback on a/an good, bad, ugly experience with brands at any time. This liberty for experience expression is also a very good, bad and ugly form of brand exposure, depending on the usage and for what purposes.
So many organizations are spending millions in protecting their brand from poor reputation resulting from bad publicity and some are trying to salvage theirs from one that has gone awry. This is the power of the Voice of Customer (VOC) at work. So many businesses make little or no effort in putting in place a structured, easy and convenient process to gather and listen to real-time feedback from their customers. Today’s customers do not wait or give you a second chance to improve on a poor service (if at all you know about it); they are at liberty to talk about their experiences in the public (virtual) space even while being served. This is a big dilemma for established businesses that move like cruise ships.
”Only 1 out of 26 unhappy customers complain. The rest churn. A lesson here is that companies should not view absence of feedback as a sign of satisfaction. The true enemy is indifference”. – Kolsky
In Customer Feedback management, the customer is in charge! So handling it must be from the customers’ perspective and not on perceived assumptions. Organizations, irrespective of market size must strategically develop and implement a seamless, effective, easy and accessible feedback process. It must be a deliberate act and the customers clearly informed. The feedback channels should serve all cadre of customers and must be available and managed at all times.
Most importantly, the organization should have an empowered team to listen to, engage personally and act real-time on the voices of their customers. Effective customer feedback process is a veritable tool for continuous improvement and a sure pathway for business growth.
Forrester found that 80% of companies say they deliver superior customer service. However, only 8% of people think these same companies deliver customer service worthy of a superior rating.
What kind of customer experience are you providing? Have you asked your customers? Have you asked your employees? Engaged customer-facing employees have a better idea of the customer experience than non-customer facing employees. Disengaged employees don’t care.
How do your customers define an acceptable, unacceptable, and outstanding customer experience? Ask them. That is the only way you will ever know.
Talk to your customers to let them know you care about what they think. They will be amazed that you care about them as individuals.
Recognize employees who provide an outstanding customer experience so other employees will know what you value – beyond revenue.
Today, so many organizations have improved on their product offerings and service models; increased their customer base, market share and profitability from customer feedback. This in turn enhances their customers’ experience, which today is the competitive battleground and marketplace differentiator.
The Federal Government recently announced a tax amnesty programme known as the Voluntary Assets and Income Declaration Scheme (VAIDS or “the Scheme). The Scheme is expected to run for nine months starting 1 July 2017 and is for all categories of taxpayers in default of taxes. An Executive Order for the administration of the Scheme has also been signed by the Acting President, Professor Yemi Osinbajo.
All entities are eligible to participate in the Scheme however in order to participate, business owners must have a full picture of the Scheme in order to take advantage of it. In this article, I have analysed things to know before, during and after participating in the Scheme.
1. If you have never registered for taxes or you have registered and paid taxes in some years but then stopped paying, or you have been paying less than you ought, this is your opportunity to pay your liabilities and walk away free from penalty, interest and prosecution. Those currently undergoing a tax audit and non-resident individuals and companies are also eligible to apply.
2. You must make full and frank disclosure of your tax liabilities. In this instance, if you are not aware of how much you have accumulate in tax debt, get your tax manager or a tax professional to assist with determining your liability. The tax authorities are also available to assist in this regard once you fill and submit your declaration form.
3. You can make declarations for any prior 6 years of assessment (i.e. 2010 to 2015 financial years) for any tax, as the Scheme covers all federal and state taxes including companies income tax, personal income tax, petroleum profits tax, capital gains tax, value added tax, stamp duties, tertiary education tax and NITDA levy.
4. There will be sensitization for professionals and taxpayers in general. About 7,500 Community Tax Liaison Officers (CTLO) are being recruited and trained for this purpose. Try to attend one of these sessions.
5. Read the FAQs section on the website, www.vaids.gov.ng to ensure that you are fully and completely aware of what is required of your business before participating.
1. You must make use of the declaration forms on the Scheme’s website at www.vaids.gov.ng to make your declaration. There are forms for companies and individual (i.e. sole proprietorship and partnership) respectively.
2. If you have never registered for taxes, simply walk into any tax office (state or federal) and obtain a Taxpayer Identification Number (TIN). Use this to fill out the declaration form and the relevant tax authority (RTA) will take it up from there. Please note that TIN is free. You do not have to pay to obtain one.
3. If your business is a business name, your declaration form should be submitted to the State Internal Revenue Service closest to where your business is located. For a company, your form should be submitted to the Federal Inland Revenue Service’s office closest to your business or your usual FIRS office for filing tax returns.
4. Taxpayer have the option to spread the payment of outstanding liabilities over a maximum period of three years subject to any agreement reached with the relevant tax authority. However, any default of an agreed payment plan may result in interest and penalty.
5. Information provided on the forms will be verified by the RTA and they may call for further document and information. There may also require you to submit an amended declaration form if the need arises. Therefore, you must ensure that you are ready to completely expose your business activities to the tax authorities as this is what will be required of you under the Scheme.
1. The Federal Government (FG) has stated that any eligible taxpayer who fails to take advantage of the opportunity provided by the Scheme, shall upon its expiration, be liable to pay in full, the principal tax liability due, penalty and interest thereon. The taxpayer may also be subject of a comprehensive tax audit exercise and prosecution.
2. Taxpayers are expected to be fully complaint after the Scheme or they may forfeit the benefits granted under the Scheme. Therefore, be sure that your business is ready to be tax complaint after the Scheme so that your latter is not worse than your former.
3. Be assured that all information provided by the taxpayer under the Scheme shall be treated with utmost confidentiality in accordance with the provisions of the relevant laws.
We encourage you to take advantage of the Scheme to regularize your tax record as this may be a once in a business lifetime opportunity.
You can attend the Annual Tax Seminar, organized by Covenant Capital, which is holding on Saturday, 29 July 2017 at The Covenant Place, Iganmu to discuss this and other tax matters. There would also be a tax clinic run by tax professionals to attend to tax matters on a one-on-one basis.
As a business owner, what will you consider most important to the survival and growth of your business especially in a tough economy. Is it sales, profit or cash in the bank? While sales is good, profit-making is the reason a lot of us are in business. However, without a steady positive cash flow, the business may close up sooner than it started.
So what’s the difference between sales, profit and cash flow and why should you care? See our differentiation below:
Therefore, a positive cash flow means that;
• you are receiving more money than you are paying out, which is good for your business;
• your business is healthy; and
• your business can deal with unexpected expenses or outgoings that may come up during a month, without the need to rely on credit from suppliers or borrowing.
A positive cash flow also means the business assets are increasing, workers can be paid, debts can be cleared, capital for growth is available and the business is equipped to weather future financial challenges.
There are some simple ways to help you maintain a positive cashflow in your business. We have analysed 3 of these ways below:
1. Improve your receivables
The following techniques will be helpful:
• Offer incentives to clients/customers for early payment.
• Send out your invoices promptly and follow up promptly if payments are slow coming.
• Ask for deposit when customers make orders.
• Encourage a repeat business by using incentives such as discounts and loyalty bonuses to keep your customers coming back.
• Have a C.O.D (cash on delivery) policy for slow-paying customers
• Sell off old or outdated inventory for whatever amount you can get
Mind you at this point, you may have to analyse your customers list and do away with customers that do more harm than good for your business. You must understand that you do not have to service everybody. Master the art of choosing your clients and not them choosing you.
2. Watch your payables
Keep your eyes on your expenses. Any time you see expenses growing faster than sales, examine costs carefully to find places to cut or control them. Here are some tips:
• Ask for credit terms and stay faithful to it. Don’t pay it early or late.
• If you must pay in advance, ask for early payment discount
• Don’t select your vendor solely on basis of lowest price. If you compromise on quality you might pay twice as much to repair the damage.
3. Achieve a balance
• Don’t pile up your bills, it may accumulate so fast and so high
• Pay your taxes promptly and negotiate instalment payments where you can
• Resist the urge to offer ‘unsustainable’ large discount
• Pay yourself first and don’t finance personal expenses from the business purse
• Maintain a culture of cash savings (You can choose to set aside 10% – 20% of cash profit as emergency reserve)
Remember, the objective is to pay out less cash than you collect. Getting this right isn’t easy, but it’s very simple. Get paid as soon as possible, only spend money you have, and only if it will be used to help you make more money.
One of the most interesting jokes that I have seen about the herculean task of software developers is illustrated in the above picture, yet the picture represents the dilemma of their work. That is why I have always emphasized that every software developer should take interest in learning the law (at least as it applies to them).
Are you a software developer and you are reading this piece? Below are 6 clauses that you must instruct your lawyer to note in preparing software agreements for your clients.
1. Do not give 100% guarantee that nothing would go wrong with your software. You probably will agree with me that something sometimes go wrong at some point. It is therefore important to have a balanced agreement with clauses that allows you and your client to share risk and responsibilities in a workable manner.
2. Correction of certain errors may take time, sometimes, you might need to deploy entirely new codes or even rewrite the software, so, do not agree to a fixed time within which to correct errors. The right thing to do is to provide in Agreement that your company will evaluate the extent of error and advice on the time frame within which the errors will be corrected.
3. Save yourself the headache of litigation by asking your lawyer to add problem solving clauses. Most times, we lawyers place emphasis on dispute resolution clause instead of problem solving clause by which parties to an agreement are made to work as a team in resolving problems. One of the beautiful things about working as a team to resolve problems is that you create a teaming bond with your client and avoid unnecessary confrontations which eventually may lead you and your client to the court room.
4. How would you feel, if your client identifies the staff that happened to be the brain behind the software and then lure him or her from your company? Terrible, I guess. Moreover, your team members may have access to the source code of the software- and that may be a top trade secret of your company. That is why you must have a clause against staff poaching by which your client agrees not to engage any of your staff for a period of time following the completion of the software.
5. Beware of the clients that are always changing their software specifications. One way to address such tendency is to insert a clause for software specification so that any proposed variation that amounts to an added task can be paid for.
6. When you have done all you can to keep a relationship and it seems that it has headed for the walls, your best bet will be to resort to third party intervention (mediation, arbitration, litigation etc.). Bearing in mind the technical nature of your profession, it is important that you opt for a dispute management mechanism by which the dispute settlers have considerable knowledge in your profession, and that necessarily means that you make court litigation your last option.
Other than the above suggested clauses, there are standard clauses which your agreement should have. In essence, the points listed in this article are not exhaustive and the peculiarity of each client’s specification may differ, it is therefore important that you seek advice from an experienced legal practitioner.
Three executive orders were signed by the Acting President of the Federal Republic of Nigeria on the 18th of May, 2017. The orders have a strong potential to positively impact the operation of businesses in Nigeria, in the sense that when fully integrated & effected, they would help to eliminate bureaucratic bottle necks in government parastatals and result in a heightened ease of doing business in Nigeria. These should in turn attract significant tangible investments, both local and foreign investors.
The three orders are:
1. Executive Order on the Promotion of Transparency and Efficiency in the Business Environment.
2. Executive Order on Support for Local Content in Public Procurement by the Federal Government.
3. Executive Order on Budgets.
Executive Order One (Promotion of transparency & efficiency of business environment)
a) All MDA have been directed within 21 days to publish on website and conspicuously paste within their premises, embassies, commission, etc, an up to date;
• list of requirement or conditions for obtaining products and services within the MDA’s scope of responsibility,
• processing fees and timeline
b) Acceptance and rejection of applications which must be communicated with at least two (2) modes, including emails and publication on the MDA website, before the expiration of the stipulated time. All rejections must be given with reasons and records of such duly kept.
c) In addition is “the one government directive”. Applicants are only expected to provide photocopy of documentation in a case where another MDA is in possession of the original copy of same. “Direct verification or certification of the document is the responsibility of the originating MDA”.
d) A tourist’s or investor’s visa application must be granted or rejected with reason, within 48 hours. Processing and issuance of visas on arrival must be transparent.
Touting, loitering and bribery by officials and non-official is banned and punishable as only staff on duty is allowed at the port. Only designated dignitaries, whose names are on a pre-approved list can be received by protocol officers. Within 30 days, all relevant MDAs must merge their respective departure and arrival interfaces into a single customer interface. Also, all agencies at the Nigerian ports must harmonize their operations into a single interface within 60 days and provide a weekly update to bureau of statistics.
There’s an order for every port to dedicate an export terminal for agriculture products within 30 days of this Order, and Apapa Port resuming a 24- hour operations within 30 days of the issuance of this Order.
e) All registration process at the CAC are ordered to be fully automated through its website, from start to completion of application, including the availability of an online payment platform.
Executive Order Two (Support for Local Content in Public Procurement by FGN)
f) All MDAs of the FGN are mandated to procure at least 40% of their requirement of some specific locally made goods and services.
g) All solicitation documents (invitation to tender) for the supply or provision of goods and services shall expressly indicate the preference for local manufacturers, contractors and service providers.
h) All Solicitation Documents shall require bidders to provide a verifiable statement on the local content of the goods or services to be provided.
i) All heads of MDAs are mandated within 90 days to;
a. assess the monitoring, enforcement, implementation, and compliance with this Executive Order
b. propose further strategies to optimize and enshrine the procurement and principal use of indigenous goods and service
c. submit the proposed to strategy to the Minister of Industry, Trade & Investment
j) Within 180 days of the date of this order, the Minister of Industry, Trade & Investment shall submit to the President, a report on the Made-in-Nigeria initiative.
Executive Order Three (Budgets)
This order focuses on preparation of adequate and detailed budgeting by all MDAs.
k) Budgets are to be prepared in addition with a three-year financial model in conformity with the national plan and the financial and budgetary regulations, and are to be submitted to the Minister of Finance and Minister of Budget and National Planning.
l) Heads of ministries, agencies and government owned companies must supervise the process of preparation, harmonisation and collation of budget and take must take full responsibility of any failure to comply with this order.
m) No payment shall be made in respect of any capital or recurrent liability of an Agency, other than payment of due salaries and allowances.
n) Any revenue or other funds of an Agency in excess of the amounts budgeted and duly expended shall accrue to the consolidated revenue fund of the Federal Government.
Each one of the orders is set to make things better, nonetheless there are chances that the order which focuses on improving transparency and efficiency in the Ministries Departments and Agencies (MDA) of the Federal Government will have a very significant impact.
The sheer ingenuity of how some people seem to be smiling to the bank in this recession while others seem to be falling into depression, compelled me to share these 4 tips that have helped me make money in the current economic condition in Nigeria. I hope that these tips help you also to make some big bucks in this recession.
1. Trim your expenses by trimming your personal staff
My Indian friend and I always make fun of how we live like queens in a third world country. However, at one point, I realised that I had several people in my house on my payroll, people who contributed to the reduction I noticed in my monthly income.
I had a security guard, a gardener, a house help, a nanny, a personal trainer and a driver. I soon discovered that not only were this people contributing nothing to my household income, they were in fact contributing to my weight gain. Therefore, I decided that I needed to review the functions and usefulness of my domestic staff.
So the first thing I did was to let my driver and personal trainer go. I started driving myself and spending more time playing with my children as a form of exercise. I downloaded Google map and joined a car pool. As a result, I was able to cut down my car expense by about 60%. My need to meet up activity time with my children made me realise that doing some activities added more value to my weight loss plan than the bi-weekly kick-boxing I spent my hard-earned money on. Therefore, up next was my house help and gardener. Thereafter, the security guard had to add gardening and car wash to his duties to remain on my payroll.Needless to say, I have not been this trim financially in years.
As a business, there are several things and people on your payroll that are not needed especially for a small business. Why would you have an office assistant as one position and a cleaner as another position? Why have an employee as a permanent staff that you only need at certain times in the month or year? It would save you a lot in staff costs if there is a review of your business payroll to determine who to retain and who to let go. In the end, your business will either sink or swim in a recession depending on the actions you take.
2. Put down the Internet
The cell phone has become a major expense for most people. The money you spend on airtime and data would make sense if it improved your business in some way. I as an individual decided that I would research and do mobile packages that gave me the best in terms of airtime and data at the lowest cost. Then I prepared a schedule of how I would spend my time on the phone. So I not only have more time to focus and to do things that brings me better return on my investment, I also save money.
For a business, all telephone service provider have a cheaper plan for businesses that you can take advantage of. Also, evaluate if you need a 30G monthly data for all members of staff in your company if you are not an e-commerce company. Would it perhaps be better to have individual Wi-Fi for each staff member? It may help to monitor how much data and airtime each person uses.
3. Say No to that equipment
Most start-ups in Nigeria start out by buying all sort of things they do not need. Such items like renting an office space, buying furniture and electronics. Why do you need an office space for a two-man company when you have a 3-bedroom apartment with only you as the occupant? Why does your company have an office car if your company is an IT company? Do you really need a 20kg packaging machine that costs thrice as much as the 5kg machine?
If you would just say “no” to the cravings of shiny new items at the start of your business and focus on growing the business, you will reap the benefits. Therefore, you should be focused on putting your profit back into your business at least for the first three years.
4. Backward integration cannot be over-emphasised
Backward integration is a business model whereby a company takes direct control of how its products are supplied. For example, a company may buy another company that previously supplied its raw material. That is, a butcher may own a ranch so that he does not have to buy slaughtered animals from an outside ranch. Another example is a bakery business having a wheat farm where it uses the wheat to make the flour for the products in the bakery.
Most businesses in Nigeria need to start exploring the possibilities of backward integration. There is so much cost savings potential here. For example, producing the raw materials you use in your business instead of importing them will save you import duties and the associated costs and also spare you the head ache of looking for foreign exchange. Patronising local producers in Nigeria is also another option to explore.
In summary, as a business you must be aware of your business operations and processes to enable you to spot opportunities for cost cutting in this recession. Also, recognise when to invest more money into your business and when to hold back. This would save you and your business a lot in the future.
Years ago, people suffered from the menace of high robbery incidence, but these days, theft of intellectual materials is more rampant. There is therefore a need for owners of creative works to know how they can protect their works from intellectual thieves (otherwise known as pirates).
Before more, let me establish one fact straight away- an idea is worthless until expressed in a tangible form. That is why this article focuses on what you should take cognizance of in the process of turning your idea to a finished worked.
I pitched on I.T. professionals in this article because theirs is the most difficult to handle. For one, the internet is the most unregulated society and that is where I.T. professionals showcase their works. Secondly, when those works get copied by pirates, millions are lost.
I do not guarantee that your work will not be pirated if you follow the suggestions in this article, but I assure that you will be placed in a better position to establish your ownership and defend your claims against any pirate.
Briefly stated below are seven things you can do to establish the ownership of your works and thereby prevent them from being pirated:
1. If you are a software developer or you are into programming and coding, embed your name in computer codes that you generate so that if you need to prove ownership, you are not left stammering.
2. Keep the master copy (initial design) of your work. If you have a lawyer, seek his or her counsel for safe custody.
3. If you have support team that is working with you on the task of creating the work, ensure that they sign an agreement which recognizes you or your company as the owner of the work to be invented. Truth be told, it is easier to get your support team to sign such agreement at an early stage than when your work starts to attract millions of hard currencies.
4. Ensure that your support team signs confidentiality agreement so that they are under legal obligation to keep your apparatus secret especially when they choose to move on.
5. When you launch your invented work, remember to mention that the work is your copyright. Simple way to do this is to use the symbol “©” with your name or that of your company and the year the work was invented. For example “©Eyitayo Ogunyemi 2017”.
6. Register your ownership of the work with relevant government agency. While this is not what primarily gives you ownership right, it gives a better assurance that the work is yours.
7. Imprint your trademark in the finished work. This makes it easier to establish your ownership in case of dispute. Remember however to first register your trademark with the relevant government agency.
After you have established your ownership of the work following the highlighted steps, you can give license to people to use the work in exchange for a token or even figure out other ways to generate money from the use of the work.
Most importantly, do not release your work to the public without first protecting your ownership of it one way or the other.
A news correspondent once asked a Somali nomad how much his house cost. The nomad found the question slightly baffling. He explained that he had built it himself, with materials he had on hand. The walls were made of sticks, woven together and curved into a dome. For protection against rain and sandstorms, he had laid animal hides over the top and lashed them down. He could not say how much the dwelling was worth, because it would never have occurred to him to sell it. When he moved away in search of better pasture, he simply dismantled his house, loaded it onto a camel’s back and took it with him.
Hernando de Soto (De Soto), a famous Peruvian economist known for his work on the informal economy, defined dead capital as “an asset that cannot easily be bought, sold, valued or used as an investment”. De Soto’s work showed that even those who live in slums possess far more capital than anyone realizes. These possessions, however, are not represented in such a way as to make them fungible assets i.e. exchangeable assets. These assets therefore cannot create value for the owners thus they are ‘dead capital’.
De Soto in his book titled “The Mystery of Capital” revealed that most people in third world countries are not as impoverished as portrayed. He found out that the total value of untitled real estate (land) held by the poor of third world and former communist nations is at least US$9.3 trillion. Furthermore, De Soto estimated that the total value of Africans’ informally owned houses and farmland in 1997 was roughly US$1 trillion. These assets are not captured in any land registry known to the legal or financial system in those countries. They are only in possession but not legally recognized to be owned by them. Therefore, these peasants are unable to exercise transferable (ownership) interests and rights in these assets as financial capital in the form of collateral/guarantee for loans, secured assets (asset securitization) or as capital contribution to a partnership.
In the same way, SMEs in Nigeria invest a lot of capital in the form of factors of production (land, labour, financial and intellectual capital) into their business, however they still do not generate as much value (profits) as the capital invested. This is because the capital employed in the business is dead and has not been activated. Some SMEs are afraid to approach a financial institution for a loan because they are not even aware of the capital they possess that they can exchange as collateral for the loan. Some entrepreneurs are selling their business/companies for far less than it is worth because they are not aware that the value of a business is not only the cash in the bank and the business premises. Client list, business name, softwares, equipments and even employees are all capital of a business that has value and can be sold. On the other hand, how can you sell what you do not know exist?
Recently, the Acting President Yemi Osinbajo signed into law, the Secured Transactions in Movable Assets Act, 2017 (otherwise known as Collateral Registry Act). The Act ensures that Micro, Small and Medium Enterprises (MSMEs) in Nigeria can register their movable assets such as motor vehicle, equipments and accounts receivable in the National Collateral Registry and use same as collaterals for accessing loans. This, in turn, will increase their chances at accessing finance and thereby tackle one of the major obstacles faced by MSMEs. However, the question remains – how many SMEs are ready to tap into this potential? That is, how many SMEs have properly documented capital to register at the Registry?
In order to ensure that you are generating value from your capital, you must ensure that it is formally or legally represented and traceable to a functional institution, department or agency recognizable at law. Dead Capital is any form of capital without formal or legal representation. Capital is given life only when it is represented in writing by a recognised authority established by law.
Some practical ways of ensuring your capital is titled or formally represented to enable your business have access to incentives and financial capital include the following:
1. Business name registration with the Corporate Affairs Commission;
2. Software/Intellectual property/Patent registration with the Trademarks, Patents And Designs Registry, Federal Ministry Of Industry, Trade and Investment;
3. Product registration with the National Agency for Food and Drug Administration Control (NAFDAC) and Standard Organization of Nigeria (SON) for product imported into Nigeria;
4. Certificate of Occupancy or registered Deed of Assignment with the Land Registries in all States;
5. Motor vehicle registration with the Federal Roads Safety Commission;
6. Equipment registration (with value above NGN 500,000) with the Industrial Inspectorate Division of the Federal Ministry Of Industry, Trade and Investment;
7. Preparation of a statement of affairs such as cash flow, profit or loss and statement of financial position; and
8. Bank Verification Number
Remember as faith without works is dead so also capital without legal ownership is dead. Therefore, in order to create that confidence in investors to invest in your business and financial institutions to make credit available to you, you must bring to life every capital in your business no matter the size or type.
Objective statistics shows that SMEs are over 90 per cent of the businesses in Nigeria and they contribute up to 45 per cent of GDP. This is despite being underfunded and unstructured.
When you consider that the current value being derived from SMEs is substantial despite the fact that most of them are subsistence/micro businesses, then you can begin to imagine how big this opportunity will become if they scaled up just one level.
The biggest challenge in terms of financing SMEs in the country is the fact that SMEs do not have the ability to scale to an extent where bank debt will make a meaningful impact. This prevails because of lack of proper financial education of SME operators, Lack of good corporate governance and business structure and Lack of access to equity – our markets for equity is not very developed.
A few SMEs recognize the challenge, whilst many of them believe that the banks should solve their problems, this is mostly because they do not understand that the nature of bank loans do not accommodate an appetite for funding start-ups or for giving loans that behave like equity. Despite increased attention and support for SMEs by banks and the CBN, most SMEs out there still have this perception that the banking industry is not favourably disposed to SMEs. In other to correct this impression, SMEs need constant education on how the economy runs. If the banks lower their appetite for risk and fund the businesses with poor structure and governance, the loans will go bad, shareholders’ funds will be eroded, and the cycle will hurt SMEs even more.
There are however alternative solutions for SMEs which can be facilitated by banks or any other stakeholder in SME ventures. SMEs can be assisted through business trainings/capacity building programs, business incubator can be set up to cater for handholding businesses, a mentoring platform can be created for entrepreneurs so as to open them up to business best practices as well as provide market access.
In addition to the above, there is however still a need to work at developing alternative sources of funding apart from commercial bank debts. Banks collaborating to set up various pockets of SME entrepreneurship funds might help meet the need for patient capital which commercial bank debts can then ride on.
In the interim, start-ups and SMEs in general can take advantage of intervention funds such as the You-Win initiative and other government driven funding opportunities.
Eyitayo Ogunyemi | @eyitayolaw
One of the questions that I usually ask my students during my training sessions for Entrepreneurs is for them to tell me what they understand by a Limited Liability Company and a Business Name, and why they will choose the business option that they are opting for.
Unfortunately, I usually do not receive an answer that captures the basic differences, and it is unfortunate too that many Investors have chosen their business option without proper guidance.
This article proffers keynote differences between a Business Name and a Limited Liability Company in Nigeria. The points stated below are not exhaustive, but they constitute some of the basic differences between a Limited Liability Company and a business name under the Nigerian Law:
DIFFERENCE NO 1:
DO YOU WANT YOUR BUSINESS TO BE YOU OR DIFFERENT FROM YOU?
Business Name: A Business Name is the name and style with which you trade; remember that it is just a “style”, and it is therefore not different from you. Being a mere style, the business does not assume a separate legal entity; cannot sue, nor be sued and properties cannot be purchased in the name of the business.
Another point that you can identify with the above is that, when the owner dies, the business also dies (since in the first place, it does not have a life of its own).
Company: The moment your Company is registered, it becomes a separate entity different from you (otherwise known in law as an “Artificial person”). The best way to understand this severance process is to consider pregnancy, and delivery process- once a child is born, the child has an independent life; can grow, stand alone (with time), and even die. The process of the growth of the child is not hinged, as such, on that of the mother.
By implication, ‘your company’ is considered to be different from you after registration; you can be broke while the company is rich, and the death of the founder does not necessarily mean the death of the company, because the company has a life of its own.
DIFFERENCE NO 2:
DO YOU WANT TO RUN A ONE MAN BUSINESS? ONLY A BUSINESS NAME WILL DO.
Company: If you intend registering a company, it takes two or more persons to form the company. The popular form of company is “Company Limited by Shares”, and at least two people must subscribe to being shareholders in the company.
Business Name: If you are interested in running a one man business where everything will revolve around you and you alone, registration of a Business Name may be suitable.
Note however that you can also register Business Name where you and any other person intend to operate as partners.
DIFFERENCE NO 3:
DO YOU WANT THE VALUE OF YOUR INVESTMENT TO BE STATED IN THE PUBLIC DOCUMENTS OF YOUR PROPOSED BUSINESS? A COMPANY MAY BE YOUR BEST OPTION
Company: If your level of ownership, stake, investment, or interest in your proposed business differs from that of your co-investors and you want this to be recorded publicly, you may choose to incorporate a company (i.e. Limited Company).
Business Name: If you register a Business Name, your level of ownership, stake, investment, or interest will not be publicly recorded. If for any reason you prefer to register a Business Name and you want the extent of your ownership, stake, investment, or interest to be clearly spelt out, you can do this preparing a Memorandum of Understanding between you and your partners. You may consult your choice Legal Consultant for further information.
DIFFERENCE NO 4:
DO YOU WANT AN EXISTING COMPANY TO OWN SHARES IN A BUSINESS THAT YOU ARE ABOUT TO START? ONLY A COMPANY REGISTRATION WILL BE SUITABLE
Company: If you operate a company that is registered, and you want that company to own shares in a business that you are about to register, or you are a foreign investor with a company already registered in your Country, you may choose to register the intended business as a Company and then purchase shares for the existing company from the allotted shares of the proposed company.
If the existing company is however undergoing a process of being wound up, it cannot join in the formation of the company to be incorporated.
In a like manner, if you already have a company in operation and what you intend to register is a Business Name but you want your existing company to have a stake in the Business to be registered, you can give instruction to your Legal Consultant to record the existing company as a partner in the new Business Name to be registered.
Business Name: You cannot use your Business Name (as an entity) to own shares in a company neither can you start a partnership in the name of your registered Business Name.
For non- Nigerians (aliens) and foreign companies seeking to do business in Nigeria, once you have complied with Nigerian laws regulating the rights and capacity of aliens who want to undertake or participate in trade or business in Nigeria, you will be allowed to join in forming company in Nigeria.
DIFFERENCE NO. 5:
IF YOU HAVE MORE THAN 20 PARTNERS, YOU MAY HAVE TO REGISTER A COMPANY
Company: Where a business is intended to be carried on as a partnership, and the partners are more than 20 people, the business can only be registered as a company but not as a business name.
Business Name: You can register these three businesses as a business name notwithstanding that the partners are more than 20 are;
a. Co-operative Societies registered under any law in Nigeria;
b. Partnership of more than 20 Lawyers each of whom is qualified to practice as a lawyer in Nigeria; or
c. Partnership of more than 20 Accountants each of whom is qualified to practice as an accountant.
DIFFERENCE NO. 6:
IF YOU HAVE MORE THAN 50 INDIVIDUAL INVESTORS, YOUR ONLY OPTION MAY BE TO START A PUBLIC COMPANY.
Company: Where the total number of persons who intend to own the shares of a proposed company is more than 50 people, the company can only be registered as a public company. In other words, a private company in Nigeria must not have more than 50 shareholders.
There are exceptions to this rule; for instance, where an employee becomes a member/shareholder upon his employment, or where the employee continues to be a shareholder during and upon the expiration of his employment; his tally may not be taken for the purpose of numbering the 50 members.
Consider the following illustrations:
1. If AZ Private Company has 50 shareholders and Bob was given a number of shares in AZ Private Company upon his employment, he is not going to be numbered as Number 51 shareholder; rather, the number of shareholders will still stand at 50 in the eye of the law.
2. In a similar vein, if Bob continues to hold shares as an employee until he stops working for AZ Private Company, and he continues to own the shares after his employment, he is not going to be numbered for the purpose of counting the 50 benchmark.
3. Two or more people, or even an Association or a Group can invest in a company jointly. They are treated as a single member for the purpose of numbering the members of the company. It is however important that your Association or group must have been registered under the appropriate law.
For further information under this heading, you may check my article titled: How to Register Your NGO, Church, Mosque, and Other Associations with Corporate Affairs Commission (C.A.C.)
DIFFERENCE NO. 7:
THE STATUS OF YOUR KEY INVESTORS DETERMINE THE KIND OF BUSINESS ARRANGEMENT
Company: In a company arrangement, your shareholders are considered as the joint owners of the company. The shareholders elect the Board of Directors who are responsible for the daily affairs of the company and also give periodic account of management to the shareholders.
Note however that a shareholder may also be a director or even the company secretary.
Business Name: In a Business Name arrangement, there is no clear-cut difference between the business holder and the director because in most cases, the director is the owner of the business.
This article has been designed for information purposes alone and is not intended to take the place of a legal advice. Readers are therefore advised to seek proper legal advice.