The gestation period to profitability in a typical Nigerian startup is long. That long gestation is also the reason why many startups or small businesses collapse after a few years of founding. Typically, one way to deal with this is to raise capital, ramp up market entry to grow fast enough to attain profitability. But in our extremely volatile economy, if the timing is off by weeks or months, the company can collapse. You just run out of cash.
Yes, your new problem in Nigeria is not just capital but the long gestation period required for profitability, affected by many factors at scale.
Those factors include the fact that every business is a local government since you provide your light (generator), water (borehole), security (guards), etc. It is based on this that I tell founders – Do Not Blitzscale in Nigeria because if one core metric misaligns, you will struggle.
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Blitzscaling within a stochastic system is an illusion and pure guesswork since the leverages cannot be put in order. Yes, the greatest entrepreneurs in Nigeria stay the course, go “slow”, and manage the state of our entropy. They look boring but there is a reason for that: you survive if you can find how to make profit rather than trying to go for dominance only to be tripped into oblivion.
Sure, this is not to say that you must not grow. I am saying that I want that growth to come from the BEST INVESTORS. And the best investors are CUSTOMERS. Until you can get them to invest in your business at scale, your mission has not been validated. As the world goes through a tough economic phase, find a path to profitability and that means making customers to invest in you by buying and patronizing your products and services!
Of course, there is a big lesson: do not begin scaling until you can retain customers. That retention is largely a validation that you have a product-market fit.
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Some entrepreneurs now do their own ‘cash out’ via founding businesses, it’s never meant to survive and thrive, rather an avenue to fundraise, then move on. It is customers that sustaine a business, and not investors, the latter will always walk away, because no one funds a loss making venture forever.