Thread by @greaterbayo

Earlier today, I got a question from a budding entrepreneur on a post where we were rubbing minds together on some developments within the poultry space.
This is a thread

I have taken the liberty to reproduce the question and my response (I have expanded my response- and made it more applicable to several businesses and investments- and spiced it with some personal examples in the hope that someone will have a few take-aways).

Question: "if a young entrepreneur like me has one million naira...an advice is coming to invest into transport by buying Volkswagen 14seater bus and the return weekly will be between 25,000 to 30,000 which makes up about 100,000 t0 120,000 monthly.

and another advice is to invest into farming(birds,piggery and livestock), which is more profitable  in our this our present economy ?"

My Response: I won't categorically tell you the business or enterprise you should venture into. Our risk appetite differs and then our passion, skills and time must come into play. You need to do feasibility studies on both areas and then consider critically some salient points:

1. How much of that business do you know? Do you have the requisite skills? 

Investigate before you invest. Don't allow any noise about how profitable a sector is to be your prime motivation. Do your own research.

Never be emotional about putting your money into a business or investment. If something sounds too good to be true, more often than not, it is too good to be true. I was once approached by a friend to invest in cotton business in the north.

I do not doubt my friend's integrity but I turned down the opportunity because I don't do what I don't know. That's why I don't do bitcoin or any cryptocurrency. I don't understand them.

2. Are you going to run it yourself or will your success depend on another person?

You must answer this question before you proceed. The greatest resource any business needs is not financial but human.

I'm not downplaying the place of capital but if you have the greatest capital and you have poor human resource, a poor human resource will make nonsense of that capital. A good human resource will maximize little capital.

Consider carefully if you have to commit funds to another person's care- especially if you want to invest in someone's business.

I have been burnt a few times in this regards. I once invested in a plantain chips business. The business model looked great- our strategy was to sell on third mainland bridge. It was purely a cash and carry business-

the boys selling pay before taking their packs of chips for sale. Well, let's just say I was stupid. I trusted this ex-colleague who asked for me to be a partner. We signed an agreement. She even started attending our church at a point. As soon as I disbursed, she disappeared.

She doesn't pick my calls again. I'm still trying to get my investment back. Karen, I know you will read this.

3. Do you have a market for that business?

Many people push out products before they start looking for a market. Poor strategy. You must develop your market before you push out your product or service. Last December, I sold some broilers I raised

There were chickens everywhere. I had to bring some home and displayed outside my home to sell- with some incentives to my security guard. I gave out quite a few as Christmas presents- I could just not continue to feed them. I remember around July this year when I raised another

batch. I went to some WhatsApp group to advertise my chickens. A few people asked for pictures but never got back. Thankfully, I stumbled on an off taker who now takes everything I raise. 

So, do you have an off taker? Market comes before products and not vice versa.

Otherwise, you'll consume what you produce.

4. How much of a setback are you able to cope with or handle?

Each business has it's own challenges. Businesses also have different phases: incubation, infancy, growth, etc. A business needs to be nurtured and groomed just like a seed that is planted. It won't bloom overnight

I started a yam and pineapple farm with a friend. We even planted and harvested tomatoes as a form of mixed crop farming. Our first yam harvest was good. The pineapples were very sweet. I was eager to plant again after the first harvest.

Until my attention was called to the theft going on. Thieves were harvesting my yam overnight- heaps upon heaps. My investment was going down the drain. Eventually, we caught some of the thieves and I was alerted that they were at a police station. Guess who they were?

Residents of the village where the farm is. One of them worked on the farm and I paid him. There was one whose child attends the public school in that village that I adopted. His son wears the uniform I bought for him yet he stole from me.

The whole village came to beg me, including the Baale (traditional ruler). I asked the police to leave them. Later that evening, the Baale called me to inform me they were not able to pay for the bail amount demanded by the police at N5,000 per suspect

There were 2 suspects. He pleaded with me to rescue them. I called the policeman and transferred N10,000 to him. They stole from me yet I paid for their bail. You know what I did? I've abandoned the farm until I can secure it properly.

I started an online marketplace business with some younger friends a while back. They sold me the idea and I decided to fund it. It started beautifully and we were already aspiring to be the next Jumia or Konga. We sold a variety of items across selected cities in Nigeria

We signed contracts with a few delivery firms- it was before the proliferation of courier firms. Every Sunday, I sat down with the team to review our sales. The numbers looked good. But then three things occurred- we had a lot of returned items

(quality control issues mainly) and the other guys took on a corper against my advice. We were paying the corper's expenses and wages from our little capital.

But the third was the main one- all of us still held our daily jobs so there was very little supervision and low commitment. I only had time on Sunday. Well, it died and down the drain went my investment. I bore all the brunt as all the capital was mine.

I learnt a big lesson- even in partnership, everyone must have skin in the game. Otherwise, you'll be skinned. 
Prepare for shocks. It can come from unexpected expenses or circumstances. Someone I know got a tax bill of N4m from a state government and almost gave up.

5. What's the potential for growth for that business?

This is important. What does the future look like for that business? We call it future outlook. If there is no future, you're just marking time. Also consider if there are value chain opportunities.

Are there a set of activities that surround that product? Which one can you also handle? Can you process rather than sell in a raw state? Can you do value- addition? Rather than sell live goat, can you set up an 'asun' joint? There is more money to be made when value is added.

6. If this business is not immediately profitable, are you still willing to commit to it? Are you willing to run a marathon?

Success is not overnight, it is overtime. If you're in it just for the quick bucks, you're in for a long thing

You must be willing to wait while you do the work. Delayed gratification is the mindset here. Wait while it grows. If you can't wait, you can't grow. A good business will achieve stability in about 5 years. That's my personal experience.

Let me share specifically about transportation business. I have my fair share of experience here also.

1. Are you going to drive it or you will look for a driver?

I once had a car that I bought specifically for use as a cab. It was a Nissan brand. I got a driver who was to deliver N700 to me on a daily basis. He picked the car before 6am and returned it after 10pm most days.

Well, I think he turned in the required amount only once. Then the complaints came- the car broke down, police caught him, Road safety arrested him, tyre had a problem- all sorts. He had a new story for each day.

The guy will make a good script writer any day with his fertile imagination. Rather than deliver to me, I deliver to him. It was that bad. I changed one driver after the other. They were as useless as they could come. I had to sell off the Nissan.

Then I decided to do the cab business myself. I still had my Volvo 340 DL. I closed from work and resumed as a cabbie- from 6pm till about 10pm. First night, I made about N700. Second night, it was N1,200. There were nights I made N1,500 just for a few hours.

2. If you look for a driver, are you MAD enough to slap him or beat him up if he fails to deliver? Can you fight? If you can't fight, maybe you should stop at this point.

It takes great courage to do transport business. You must be mad to deal with mad people. If you can't fight, don't enter the ring. Transport business is real ijakadi. You need to be able to harass your driver. If you're timid, I pity you. Those guys have no mercy.

I wasn't mad enough so I left the business. 
I have one rule in business and finance. If I respect you too much, I can't do business with you or lend you money. That's why I can't do business with my Pastor or lend him money. That's why I can't do business with family.

3. Are you buying a new bus or fairly used? If fairly used, do you have the usage history? Repairs is a major expense.
Always know the history of the vehicle you're buying. Or take a good auto-mechanic along when you're about to make a purchase decision.

4. Cashflow is not the same as profit.

From your anticipated N25,000 to N30,000 weekly, make provision for repairs, arrest by Road Safety, disturbance by policemen, tyres, etc. There are so many permits to be obtained- Hackney, local government,  inter-state, etc.

There will be wear and tear on the vehicle. Never assume that cashflow is the same as profit. Remove your expenses and even labour. Think about transport business well, especially if that is where all your savings will go into. If you don't have any other income, think well.

Hope you learnt a few things.

The end.