Your First Investor: Why Unit Economics Beats External Funding (for Nigerian Businesses)

Hello and welcome to the show. Today's recording is from my desk and I'm I'm home with the kids because holidays are on. So I expect to have some interruptions in the background if this is your first time of tuning in. The goal of this show is free business education. So hang on. We are going to be on for an educational ride. And by the time we're done with the podcast, if you feel like you got enough value from it, then please share, promote and talk about the show so that your friends and your family members in Nigeria and abroad can benefit from the questions that we tackle over here.

If you have any sales and marketing questions by the time you're done with the episode, then call SMS or WhatsApp me on 08064662140. The country code is +234 for those of you who are not Nigerian. Now today on the podcast, I want us to on the share another question that I handled on my radio show, which happens live on Radio Maria. That's 91.3 FM every Tuesday, 7:00 PM to 8:00 PM. You can only catch it live. So stream it from the from Radio Maria's website, but it's only live, no replays.

But anyway, apart from Emmanuel who called in on the show, I don't expect that all of you subscribed over here on the podcast also listen to the radio show. So that's the reason why once in a while, if there's something really interesting that we discuss over on the radio show, I'll come over here and share that as well. Now, there's a caller that called in her name is Peace in Abuja who has a restaurant in Zone 3. She is a caterer and she was worried about how to get finance for her business.

And yes, for those of you who've been listening to the podcast religiously, you will know that I've tackled a couple of these in the past. But anyway, I answered a question and our I hope I was able to bring a new twist to it. So that's the reason why I'm here today making this recording. Now for those of you who are long time members of the community, I say community in the loose sense because I don't really have a community like that.

Like, no WhatsApp, no whatever community. So we've spoken about how you can finance your business either by bootstrapping, by getting a loan, by getting a grant, or by getting an equity partner. So I repeat, to finance your business, we either bootstrap, get a loan, get a grant or get an equity partner. Now, of course, bootstrapping means that you're going to be throwing back profits from the business into it, you know,

reinvesting, also starting up with your personal savings and then also talking to friends, family members and, you know, some kind of associates because sometimes that is a source of easy funding that we can use that doesn't carry, you know, too many obligations. And we know how we can be now in this part of the world. You raise some cash, you know, from Mumsy and Popsy to start your business later on. The business seems to be doing good.

You call mom, so you say, mommy, I want to pay shoes. How? Not my son, Don't worry, it's my duty to support you. And then, you know, they just feed the thing. I'm not saying that when you go and collect money from Mumsy and Popsy that you should, you know, insist only being free. I'm just saying that it happens. So there's the Bank of friends, family and associates, as somebody put it when I was talking to them, I think like 2

weeks back. OK. Now the thing that I forgot to mention, or rather that it hadn't struck me yet was how you, you know, how we Niger people now, we have branches everywhere. So you're here in Niger listening to this podcast. But then, you know, like your big C's, your cousin, your younger brother, you know, somebody's in UK, somebody's in Switzerland, another person is in America, you know, that kind of thing. There are some people who have been taking advantage of these global personal networks, also raised financial business back here.

So picture this, let's say moms, he's back here doing the farm maybe in Nassau. And then you're the one who is here like supporting moms here on this thing when I'm big Bros in the UK and maybe younger sisters in the US now because of the nature of their jobs and nature of the economy. If you sit down and you run the math, you'll see that the interest rates will be cheaper raising money from them abroad. And of course, it will be easier for them to pay back over, you know, a 15 month period, A2 year period, a 2 1/2 year period, you know, something like that.

So those also things can work. So there are people who have been taking advantage of those sorts of things like this example that I just gave moms easier running the farm in Nassau. You, you're the baby of the house, you haven't checked yet. So you're the one that is managing the whole thing. It's possible they can get two of your siblings in the UK to put up like 7500 lbs. They secure the loans based on their salaries and you know they're paying back maybe over two or three years or something.

Maybe the way they see, that's their contribution to the family business at home. And at the time I made the radio show, I ran the math 7500 lbs was 15.3 million naira at the time. So you can see that apart from the interest rates being favourable and apart from the interest rates being favourable, you know with this all forex thing, when our people raise coins in America and in the UK, it often translates into good money, hefty money when the thing enters into Niger.

Now imagine if your people are doing OK and they can even raise maybe like £15,000 to send back here. But of course, I gave a warning for people who are trying to do these sorts of things to make sure that the unit economics of your business are tight. Unit economics just means for every single unit that you sell, for every single thing. In this case, peace Since your kid, she's a caterer on every single buff, buff on every single meat pie, on every single plate of rice, on every single grilled chicken, on every single grilled meat.

Are you making a profit? Because if your unit economics are off and you're losing money on the Bush meat, losing money on the grilled chicken, losing money on the rice, losing money on the buff buff, then raising this kind of money just means you're taking good money and throwing it after bad money and then wasting it. So you need to make sure that your unique economics are OK. If you're going to take advantage of these options of friends, family and associates who are part of your global network abroad and they feel like, you know, let me support you.

All right, so that was one thing that I hadn't stressed in the past. And I figured, let me just come and stress it here, then let's see. OK, loans, we're ready. Everybody knows about loans. Loans, you get the money from banks. Banks have high interest rates. So I've always been talking about microfinance banks because of their lower interest rates. Then of course, another person called to find out about non interest banking or Islamic banking as we call it in this part of the world.

And so, yeah, we had that conversation. But since I got on the radio, you know, my directors, you know, told me I shouldn't be calling a particular bank names. So it doesn't seem as if I'm endorsing any bank in particular. So I guess it's enough that if you're interested in this sort of thing, you can just go and do your research. Another caller called in to give an example about how non interest banking, Islamic banking can work.

Pretty much the same thing, like I said, but in their own particular scenario, it was a work to the bank. They were needed to buy fertilizer, so the bank did not give them cash. The bank said you go and identify the buyer, we will pay for the fertilizer, we'll give the fertilizer to you and then you will now pay us back. Which was similar to my own experience when I went to go and find out about non interest banking or Islamic banking.

It was with a particular bank in Nigeria that has an Islamic banking. So I went in, spoke to customer service, sorry, sales and marketing people. And that's where I got the four on one that yes, they would be able to finance equipment and purchase, you know, so cameras, lighting, this sort of thing, but they would buy it. It would belong to the bank. I would be using it sort of like on 1/2 purchase basis. But eventually when I pay everything off, then the equipment will become mine.

So yes, those options are available as well. Then grants, OK, no grants. I always recommend grants because grants is more or less free money. However, you have to meet the eligibility requirements because people who give grants are concerned about certain kinds of things. You know, maybe they're trying to promote women owned business or they're trying to get girls into tech, or maybe they're trying to get, I don't know,

farmers into modern farming techniques or something. So you have to meet the eligibility eligibility criteria. So the ones that I shared on the airwaves in the past were all women for women owned businesses of a certain age. So since I'm a man of a certain age, of course I'm not going to meet the eligibility criteria. Then next is the reporting obligations, because people who give grants, they want to be sure that the money goes where they're supposed to go.

So back to this thing now about getting farmers into modern farming techniques. If I go and win one of those grants, I have to be doing reporting obligations, whether it's physical visits, whether it's photo, whether it's video, whether it's e-mail, whatever it is that we agreed to according to terms of the grant. Because the grant owner wants to be sure that I won't take that cash and I'll go and use it and marry 4 wives.

They want to know that the money has gone to its intended purpose. So even though a grant, yeah, technically it's free money because you won't pay back, you won't pay interest. You don't have an equity partner. But you know, still they expect it to be used for certain purposes and you will have to show that you are true to the terms of the grant. Then there is equity. Equity is I just described it as a long term business marriage,

somebody dropping some, some Ms. on you and they say, look, we're going to run this name 5050. The person will expect to have a say in the business and you can't turn around and say it's unreasonable because it's kind of how equity works. If you have somebody who just drops by and then the person leaves you alone, then oh, OK, good. Glory be to God. But The thing is, it's something you have to discuss explicitly from the beginning because once you've collected the money, you didn't discuss that explicitly.

And the person is trying to say no, no, no, you can't decide this kind of thing without me. You know, quarter has entered, especially if you're not in the position to say is it just cause of 15,000,000 or I take your 15,000,000, you know, they go leave me, I don't want your money. If you're not in that position, then it's going to be a very, very messy situation. So let me see what else. OK, so that's just pretty much what I, that was how I tackled the situation for Peace, who is a catrot in Abuja in Zone 3.

Now my goal was to have gone to her restaurant, of course, Incognito 'cause I was tempted on it to get a very physical look. Like, let me see the whole set of like, what's it like the location? What's it like? Because sometimes you go see a place, you know, you sit down, you now start getting some ideas about how you can move this business forward. Because I'm always thinking about how we can run this bootstrapping thing because raising funds, you know, it's hard work is almost as hard as selling.

So I think sometimes might as well just put some effort into trying to move our own market and grow the business organically. So that's always my first all I say my first suspicion or the first thing that I want to try. Now, I wasn't able to get to that restaurant. So what I did was before the show, I just went on and I just checked Google sharply just to see what's up. And then from doing a brief Recon on Google, I found out that on her St. there is a guest, a guest inn that is there.

And in Abuja, there's this thing that's happening now with lots of short let's apartments or guestings where people come and stay, but they only give, they only give, you know, bed, TV, furniture, that sort of thing, but no food. So at all peace. I think it's a good idea to just stroll because our restaurant is at #19 and then the guest thing is at #51 So I forgot, it's not a big deal. Now one day, just stroll, go ask to speak to the manager or whoever.

You might be able to hook up something. Now look, this is me. This is where my restaurant is. This is the kind of cuisine that Ioffer for the people who stay here. I'd appreciate if you send business my way or we can partner like this or can I drop some Flyers or can I have access to your e-mail database? So I can say, I mean like, you never know. Should I just go in and just start the conversation? You never know. There's also a furniture store that's not far from my restaurant furniture store.

Of course, the employees will be there. There's a supermarket that has employees, there's a DHL ADHL. Well, I said DHL office not far from her. So I told her that, you know, you can also go there, talk to some of the employees. You know, I'm here, there's my restaurant, you know, here at the flat, you know, take some Flyers. These are my rates, you know, blah, blah, blah. You know, you see how you can start prospecting small, small looking for business.

Prospecting just means who's interested in my product or my service. So you can start doing these things small, small, small, small, small and make some good progress. Then her restaurant is also close to the customs headquarters. That's Customs and immigrations, you know, people who give us passport in Niger. So I told her, yeah, you can also like you never know, just go try, maybe you can talk to facilities manager or somebody.

Your restaurant has been there for a while. I'm sure that some staff people also know you can drop Flyers. Yes, they may be staff canteen, but you know, this is Nigeria. We know how things can be. No staff canteen, definitely the person's prices will be, you know, higher so they can milk their contract. So there's some people who probably need to know that a restaurant is nearby. So I told her customs headquarters try.

Funny enough, she's also close to Civil Service Commission. So I also said you can also do the same thing, stroll over at the Civil Service Commission. You never know, they might allow you to drop Flyers just strolling to promote your business. You never know. Funny enough, she's also close to Foreign Affairs office and is also close to NIN office. That's Niger, also called national identity number. So these are also some opportunities.

So now it's just part of my advice from looking at our situation. So I think sometimes we rush too much to think about loans and grants and equity. Like where can I get outside money? And we don't pay too much enough attention to this whole bootstrapping of a thing like is my business profitable? Are the unit economics correct? OK, the unit economics makes sense. How can I now double down on what it is I'm doing? So if the unit economic makes sense on the Bush meat, you're making maybe one or five profit on the Bush meat and then maybe on each plate of rice you're making like a 500 profit or something.

You know, the goal now will become OK, how much Bush meat can I sell? So if that particular customs HQ office maybe is mostly Middle belt people that are there, you know, tea people and plateau people and stuff like that, OK, maybe that's like the Bush meat eating kind. I mean, who knows, maybe you might go and present some nice Flyers there that emphasize your Bush meat cuisine or your grilled catfish or whatever. I mean, you never know.

That's our sales is, you know, we sit down, come up with some very common sense simple ideas and then start running it. See the one that works, the one that works, double down on it. So bootstrapping option, especially reinvesting profits by trying to grow your sales, I think that's something that we do not do enough of. So let me see, let me check my notes. I think that was a pretty much about peace and financing for our business and fundraising.

So that's why I made today's episode because I think it's a slightly different emphasis from what I did the last time, because I think the last time I strongly emphasized this thing of grants and I came up with specific grants. I'm at home and abroad for women based women run businesses in Nigeria. So that's all for today folks. If you have any questions that are sales and marketing related, then call SMS or WhatsApp me on 08064662140.

Again 08064662140 the country code is +234. So thanks for your time and attention. I'll catch you guys at the next episode.