12 ways to NOT run mad while building a business in Lagos

If you own a business in Lagos, or are trying to set one up, the chances are that someone has already told you that you are mad. I am here to confirm what you were told: yes you are mad. You are either currently mad, or will be in the future. This is what running a business in Lagos does to you.

Surely there has to be a better way? Yes! You could postpone your Estimated Touch Day (ETD — the day your head finally touches and you go coocoo), or reduce the effects of an already messed up mental condition. Either way, your family needs you, so it’s important to learn how to stay sane in Lagos, while building your business.

Find and maintain cashflow

This is the king of all business advices — but especially in Lagos. Credit is super expensive, so it’s very important to maintain some liquidity for the sake of your sanity. Put away a part of your receivables to form a rainy day fund for the business. Your rainy day fund should be about the amount needed to fund one or two payroll cycles.

Jide Kosoko, Simi, Owambe — Jide Kosoko in the Owambe Video

Nobody is your friend

Not the government, not the tax man, not the auditor, not the client. The guys listed are only the official ones — your success or failures might depend on ensuring some people who have never been mentioned in a business book are happy. Think of all these guys whenever you’re running your numbers. That’s how you ensure none of them stiffs you. Actually, you’ll only manage damage limitation, because they will stiff you.

In my last job, I used to oversee imports and distribution, and every time our containers came in, we had to pay off police, area boys, guys on the street, local chiefs etc. Every Christmas, the chief of the area boys would come over, sit with my boss for drinks, while we put together a Christmas package for him.

Request a pre-payment for everything

Running a business in Nigeria is special — there is literally no credit system that works for small/medium sized businesses. Please don’t mention the banks. Or the government run funds — they’re not scalable to meet the needs of businesses. Your clients will owe you. A lot! So always request prepayment. You may have to fight, especially with the big corporates who have 30–60 day payment lead times.

Yes, big corporates owe a lot. I’ve seen a guy practically go out of business because a big telco owed over N200 million, and he’d borrowed to finance the deals they were owning on. I’ve seen 60 days become 360 days, and a contract signed at N160/$1 become N300/$1. A pre-payment helps you hedge against some of these things.

There’s the other one — people you know, owing for goods and services. That’s the one that hurts. The friend that owes you a few million, but just bought a new Mercedes (true story) is very real. It’s best to have a no-debt policy with friends, but if you can’t, collect that 60% pre-payment. Easier to cut your losses from that position.

Document everything

This one goes without saying, but still needs to be said. Document everything because you’ll likely need receipts later. Even when a process is documented centrally, you need to keep your own records, because you could start adding word of mouth updates to the agreements midway, and you’ll be stiffed on that later on.

I once advanced money into a multi-player deal that was supposed to be refunded as soon as all players got their cashflow in order. Because the deal was based on a gentleman’s agreement, I lost the entire thing when the deal went south. Which brings me to the next point…

Know a few military boys. Or Area Boys. Or both

This point is one that brings a lot of moral conflict, but Lagos is like a hyper-catalyzed rainforest — lots of predators and prey. There’s always someone trying to eat you, or take advantage of you. Eventually, someone is going to succeed, and take advantage of you.

Like the guy you paid to deliver a service, and he comes back with the story that he invested the money in some scheme that promised huge returns, but was duped, and he’s his mother’s only child, so he begs in the name of Jesus (even though he’s Muslim) and that you should forgive and forget like you’re not talking about a few million Naira.

This is where knowing certain people has value. No, you’re not going have them beaten up, subtly letting your guy know these people exist to your benefit could help resolve things faster than courts, I’ve come to learn.

Don’t let appearances deceive you

Lagos is built on appearances. Most Lagosians are just trying to pepper dem, or showing off their best side, so don’t let the fancy car deceive you into giving unsecured credit.

Don’t cheat on hiring

You always need to think about the opportunity cost of hiring poorly. The low wage staff you hire could and likely will cost you.

Or find a habit

Everyone has heard drinking is the only way to stay sane in Lagos. This is not a myth. Think of it as a race through a jungle — if you survive, what do you do? Of course not everyone is open to poisoning themselves, so an alternative advice would be to to find a healthy habit as an out.

If you can, don’t work with friends

I should just say don’t work with friends, but exceptions exist. But most times, working with friends end in tears, both on the business and client side. We just haven’t quite learned to work with our friends. Doing business with your friends often makes it difficult to compartmentalize the two relationships. Best avoided if possible.

Learn to say no

Saying no is hard. If you are worried about how people will feel if you turned them down, remember it’s always worse when you disappoint them. I had to learn this the hard way, ruining a perfectly good relationship along the way.

Take care of yourself

Everything is out to kill you. If you need someone to tell you to invest in the things that bring you happiness, then you probably deserve to die. Seriously, take care of yourself. If you did indeed die, the world would move on. In fact, this being Lagos, ‘they’ could even host an owambe at your funeral.