To improve success rate of Nigerian SMEs will require higher productivity

Nigeria, as with other parts of the world, has a high rate of failure in startup businesses, thus making entrepreneurship daunting challenges often only overcome by few. EKAETTE UMOH, also known as The Profitability Queen, is the lead consultant at Ekaville Consulting, and founding chief executive officer of Business Support Microfinance Bank. She is very interested in seeing businesses, especially SMEs, run profitably. In this interview with business a.m.’s NSE ANTHONY-UKO in Abuja, Nigeria’s capital city, she shares her insight on how to run a business profitably and highlights on her forthcoming conference, ‘ASPIRE 50’, which she hopes will contribute towards removing Nigeria as the world’s poverty capital.

Many SMEs don’t survive their first year of operation. In your experience what do you consider their major challenge?

IWOULD SAY PRODUCTIVITY. And productivity is a major issue in Nigeria. Most of those businesses that don’t survive also don’t have a proper business plan. Some of them just copy and paste and think that that’s it. Some of them don’t sit down to go through the business plans to understand them even if someone wrote it for them. Some people don’t know why they are going into business they just stumble on funds and they start a business without the due process of studying and learning to understand the business they are going into.

People also don’t look in front of them before they start and then when they start the productivity is so low that they can’t make returns on the money that have been invested. Some people are very comfortable where they are and they want to remain in their comfort zone and expect business to come and meet them. Some are not interested in marketing or accounting, they are not writing up their books. Some people tell me they don’t like maths. Look, anyone who wants to be successful in business must understand basic accounting, basic book keeping and be able to read the financials and it’s not difficult. But when I say this they say it’s because I am an accountant. But really, I didn’t study accounting in school. I went into ICAN because I felt it was such an interesting field to be in and it was also relevant to what I was doing in the banking sector. But if you are ready to learn you need to put down your head and do the work.

Productivity is extremely low. You can’t just throw out the corn and expect that it would bring you the corn fruit, you have to water it, before you throw it out you have to dig the ground and ensure the ground is loose enough for it and then you have to watch it grow, you have to nurture it. Some people don’t nurture their business; they think that once you put in the money it will grow. Because they see all these glamorous people who run their businesses, the glamour you see is just a tip of the iceberg. The real work is the productive work they do when the rest of the people are sleeping.

So productivity is extremely low and people don’t want to leave their comfort zone and if they don’t leave their comfort zones their businesses can’t survive.

Government has come up with many intervention plans for SMEs, both in the past and now. Why is the funding gap still so huge despite these efforts?

Well I think that the government is trying to be government. They are trying to provide funding. But sometimes their mechanisms for doing that have been faulty and that has led to these funds not reaching the people and not being very successful.

For instance, the CBN N220 billion MSMEs fund that was supposed to be disbursed through microfinance banks; at the time it was being disbursed I was on the national executive of the National Association of Microfinance Banks. I was the national treasurer. I remember that we had written to CBN to say that the conditions were too stringent for us. We are taking all the risks and when these people know that it is government money the chances of paying back are slim. Look at People’s Bank. If you want to intervene on the social level let it be clearly social and then you need the microfinance banks to ensure that these funds get to the right hands and they utilize the funds properly and give you some reports. But that didn’t happen.

And that intervention, I don’t know as at now, I mean I have left the system for about two years, I don’t know how much has been disbursed by now, but as at that time, the percentage was very small, because many microfinance banks were saying they are not ready to take the risk, since they may find it difficult to recover because when people see the money they believe it is government money.

Then Bank of Industry comes up with loads of layers of protocols before the money is accessed, and most of the people that need this money don’t have those things. So the protocols are too much and it takes some people two years to get it. Some businesses can’t wait. The rest of the world can’t wait for Nigeria because you want to have these long processes.

But also in fairness to these agencies, whether CBN, BOI or even microfinance banks or even the banks, our identity system is also a huge problem even though the BVN is helping now and the credit bureaus are also helping, because we caught a few people who were trying to be funny; but the credit bureaus just came up only a few years ago. So the identity system is also a problem and then the legal system hasn’t really helped because we know what we went through in the microfinance bank, and they are still going through, when you take someone to court and it takes so long. I remember we were in court with a customer and it took so long. It’s not even expedient. By the time you give somebody money and he does not repay, you go to court and it takes two years, what is the value of that money by the time you pay your lawyers and so on?

I think we should have a tribunal for things of this nature so that everything is speedily decided on. The legal system has not really helped because it’s very slow. It’s sure but at times it’s very uncomfortable and makes things very difficult for the sector.

You are planning a conference, ‘Aspire 50’. What is it all about?

Maybe the first question should be why do I intend to mark my 50th birthday this way? For me I am very interested in entrepreneurship development, people developing their businesses to become profitable. I headed a microfinance bank for eight years and in the process I have seen people’s businesses grow and some die and so I can tell why some grew and some died. I put all of these together to see how we can make an impact in terms of the businesses that are doing well and are profitable.

And then maybe what really inspired me to take it more seriously is because after l left the microfinance bank two years ago, I started a consulting firm, where I consult for businesses that want to grow and make profit, because surprisingly, it’s not every business that wants to make profit. Some people just want to be called business owners; they just go out and come back every day, doing the same thing today and the next day and nothing changes. They are not interested in expanding; they just want to occupy certain space. Those are not the people I am looking for, unless they have made up their minds to change and become profitable and start making an impact.

But when I first heard it last year that the world poverty index came out and Nigeria overtook India, for me it was a huge blow that Nigeria as a country has fallen into such extreme poverty to the extent of overtaking India with a population of one billion people. So it means that for every two or three people working in Nigeria, one is extremely poor and that is so sad.

So I said, “What can I do?” I mean, I can’t be dashing money to people because I don’t have that kind of money. But still in my area of interest, I said if we can have more people doing profitable businesses they are going to employ people and if they employ people they will reduce the level of poverty because they will pay the person and maybe the person can pay school fees for his children and the ripple effect that would create would mean something.

I said to myself, that’s the best I can do to help Nigeria out of extreme poverty. I know that this is a grand idea but if everybody contributes in their own area and in their own little way, maybe something will happen.

That’s why I started another thing last year, what I call, ‘Lunch and learn with the Profitability Queen.’ Just looking at how you can have profitable businesses. You can change your business from just being the normal, regular everyday going out and coming in thing to something that is strong and profitable in a short time if you know the systems and the processes to put in place and so that’s what instigated me to do that.

And so, as my birthday was approaching, I said to myself, okay, fantastic, there will be a party in the evening of that day, but just to solidify and show my interest in this space, I spoke to some of my friends who can afford to put money into businesses that want to grow and are ready to grow. I am not doing this alone, I also have a committee working together with me, a group of very professional and astute business people, entrepreneurs, working with me to ensure that we have a programme that is good enough to inspire, give advice and share knowledge.

There are people who are coming and they have money and are ready to invest. And so we have a Business Plan competition leading up to that day. As at today it is still open, people can go online and fill the form and this is open till 20th of February, and those who the committee will select as being the right people to advance to the next level will be interviewed and then the finalists will be pitched to the investors that we already have. About five people are ready to invest in businesses that come up on that day, depending on what the committee decides.

Also, we have successful business people in Abuja, who are coming to share their ideas. We also want Abuja to be a business hub, maybe not competing with Lagos, but something that people can recognise and say, “Okay, Abuja is not that cold in terms of business”. These are what led me to decide to do, ‘Aspire 50’ in that format that I am going to have it.

Who is eligible to apply for this business plan competition you spoke about?

It’s basically for people who already have a business. Back to my experience of running a microfinance bank, we didn’t use to fund people who were just starting a business. We want you to go and start. Risk something that is yours, not use my money to risk. So start with your money and risk it. A business plan is a fantastic guide but it’s still not reality. We need you to risk yourself, your money and sweat. When we see that you are serious about it we can add and support.

But if you have a fantastic idea and you think that the whole world or Nigeria will do well with it, nothing stops you from applying. The committee might decide to give it attention.

You mentioned three broad categories of interest, agriculture, fashion and technology. Are there specific kinds of businesses you are targeting under these?

First of all, these three sectors were decided by the investors individually. When the committee spoke to them individually they said these were the areas they were more interested in. But that does not mean they may not be interest in something fantastic from other areas.

But back to your question, for instance, agric has a long value chain and same goes for fashion and technology. So they are interested in any business within these value chains. Some of them said they have resources in these areas that the people they want to finance could leverage on if they have that understanding. So all areas in all part of the value chain under these categories are open to them. And ultimately as I said, they are the ones to decide where to put their money.

Beside the winners of the business plan competition, how will the programme benefit other participants?

It’s a conference, and so people are coming to listen to great speakers who have succeeded in businesses. When we contacted the speakers, we said to them come and tell us the real thing that happened. How you succeeded in business in this environment. And so they will come and share their experiences. If you learn from the right person your journey is cut short by several years. If you come and listen to these people your journey to success in business would be cut short. The speakers are carefully selected to impact real value and, of course, the investors are there to listen to and what they expect in businesses they can invest in. So, if you listen to these people and ask them questions you also go back with those questions for your business, so that maybe, next year, if there is the same thing you can qualify to pitch.

Part of the problem too that I noticed is that people are looking at their businesses in terms of exiting after a while. They are not interested in selling their businesses, they are not interested in long term. Someone said, “my business is like my baby” and I said, “Ah! No, it shouldn’t be. You put in all your effort but then you should run your business in such a way that you are looking at someone buying it at a good price. When you have that in mind you run your business efficiently. More efficiently than someone who says it’s my baby and so take care of it, maybe in such a careless manner or very cozy manner, that it is not productive. For me, I am just interested in profitability because ultimately I want more people employed so that we come down from that very dishonorable list of being the poverty capital of the world. That’s one of the most heartbreaking news I’ve ever heard about Nigeria. I don’t know how others took it but for me it touched me really personally and this is just part of what I hope, even if it is just a tiny pinch, at least for those you will benefit, that it would impact on their lives.

Are we looking at this Aspire 50 initiative becoming an annual programme?

Let me also say here that the name ASPIRE is from the book I wrote and it has made me very proud and it has gone places. So, as for the possibility of having the conference next year, yeah! It’s a huge expense to run and we don’t have sponsors. For some reasons we really didn’t go out to look for sponsors, but maybe by next year we would be able to invite people to sponsor so that it becomes a yearly thing. It’s something I have been asked before and my answer is let’s take it, one step at a time. We’ll build the foundation and if it works out the way we plan it and see it in our vision we should be able to have another one next year, by the grace of God.

Umoh