Let
us recap from my last post. We were examining how unlisted non-Nigerian
businesses thrive for decades in our country while their Nigerian counterparts,
which began operations at the same period, are long forgotten or remain runts with
lack-luster performance. A friend who read the last post called me and said I
trivialized it with the examples I gave. He then began his own catalogue of
comparisons I should have used: DSTV and HiTV; Sumal Foods Ltd and Okin Biscuit
Ltd; Dana Air and Air Nigeria etc. It must be said that each of the moribund
companies have their peculiarities for closing down and would require a
thorough investigation to unearth them.
One
of the factors I believe to be responsible for the abiku syndrome is how early entrepreneurs lose their hunger for
more.
Because
it’s a business in its infancy, a start-up isn't much different from a baby. We
know that soon after babies are born, they start breastfeeding. Many mothers
are surprised by the frequency of their need for breast milk and often wonder
where all the food has gone. However, as days turn into weeks and weeks into
months, the baby’s voraciousness is vindicated. Its limbs get longer, its bones
stronger and it’s mentally smarter. But, let’s consider a scenario where the
baby lost its appetite a few weeks after birth and never regained it; not only
will it not stop growing, it will start dying. This is the fate of many
Nigerian businesses where the entrepreneur quickly loses his taste for risk and
adventure.
In
management classes, we are taught that the business cycle begins with the start-up
phase, then the growth phase, expansion phase, maturity/established phase and
finally the decline phase. But, when an entrepreneur loses appetite and relaxes the moment his start-up has taken off, he can’t progress through the other phases. Instead,
he immediately leapfrogs to the decline phase. When businesses start, they are
often small and there is nothing wrong with starting small. But, a problem arises
when the business stays small. Remaining small implies a lack of growth, and a
lack of growth is a sign of dying which is often the result of waning entrepreneurial
passion.
Take
for instance, my barber whom I’ve been patronizing since 2006. By 2008, he stopped
working for his employer and opened his own business. He didn't have to labour
to get new customers because most of us just followed him to his new shop. It was
such that in a matter of months he had established himself as the biggest
barber shop in the neighbourhood. Then he began getting apprentices who were
diligent and very professional; and many continued with him after the training
period. One day, I suggested that since his role was now more managerial and
less ‘operational’, he should open another shop in another neighbourhood. Evidently,
the idea had never struck him as he told me he will consider it. But five years
on, he is still considering it!
If
he makes x profit from running a shop, he can make 2x profit if he opens
another shop; especially since he has delegated the shop operations to his
workers. Regrettably, I was there last Saturday to cut my hair and I found him
sleeping on a chair while two of the ‘graduate apprentices’ were working for
him. As I looked at him taking a snooze, a nasty thought crossed my mind: All it
takes is for one of the apprentices to dare and open a shop in the
neighbourhood. In a matter of months, just like his former employer, my barber
will be out of work and his business declared dead. Like many Nigerian entrepreneurs
he finds it hard to transition from the ‘self-employed’ business model to the business
chain/franchise model.
There
is a lot of hard work and sacrifice that will be required to grow and expand. But,
the benefits far outweigh the cost of remaining small. One of the benefits is
economies of scale. In the areas of procurement and advertising, having three
or four barber shops will reduce the effective cost to the business, compared to having only one shop. It’s for this reason we read about the merger of two
businesses or the takeover of one by the other, both of which are very rare in
the Nigerian business landscape. The last time we heard about mergers and
takeovers in Nigeria, was during the crazy scramble of banks to meet up with capitalization
policy of the Central bank.
Entrepreneurs must learn to keep their appetite for
risk and greater profit constantly whetted. Risk is to start-ups what breast milk is to
babies; you lose it and you find yourself nursing an abiku business.
In
my next post, we examine another factor responsible for the abiku business.
Great article brother
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