Many people believe they need a lot of money to start a business, and because they cannot find the money, they give up on their business ideas and seek paid employment, which is difficult to find and usually end up under-employed and poorly paid.
This idea of seeking money first is one of the most suboptimal ways to go about starting a business. Indeed, for decades, statistics have revealed that the failure rate of funded start-ups has been as high as 75-80 per cent, and in recent years the rate has increased to 90 per cent.
These start- ups had money and yet they failed! This high rate of failure shows that funding is not the key to business success, especially for start-ups.
The first and most important ingredient for business success is to create value that is relevant to a target market. Value is easily created when you identify a problem you can solve or a need that you can meet.
A problem implies people are looking for a solution and so, if you can provide an effective solution that is priced right for your target market, you have a ready market.
For instance, portable water is not readily available in many parts of Nigeria. Whoever develops a solution to this problem, will have a ready market. Many solutions exist today, but are quite expensive and un-affordable to the low-income masses who are the most affected by this problem.
Therefore, whoever develops a cost-effective solution will earn the patronage of the masses who need this badly. Similarly, erratic power supply has been a challenge for decades in Nigeria.
Existing solutions like generators, inverters and solar solutions tend to be too expensive and beyond the reach of a large proportion of the Nigerian population. There is therefore a business opportunity for whoever can come up with an affordable solution to this problem.
Today, there is a lot of talk about renewable energy, which entails recycling or producing energy from waste. Anyone who can convert the waste disposal problem in Lagos to a source of power to deliver stable electricity supply, will be a champion.
On one hand, because he will be keeping the environment clean, and on the other hand because he will be supplying the much needed steady electricity.
We experienced a similar transformation when GSM delivered Nigerians from the communication strangle-hold we suffered under NITEL. The institution, which was responsible for delivering land lines to paid customers, did so in the most inefficient way imaginable, delaying service in many instances for years, no matter how much one paid.
Consequently, as soon as the GSM licenses were released, the providers were so awash with patronage that in spite of the high operating costs, they still creamed off massive profits.
This is what happens when you provide a solution to a big problem or meet a real need, that affects many people.
The richest man in China, Jack Ma, puts it very succinctly, saying, “If you want to remain small, solve small problems. If you want to be big, solve big problems”.
This quote goes to show that the traditional dichotomy between social impact and profit making, is wrong.
It has created in many, a mindset that impact is meant for non-profits, NGOs, governments and charities, while businesses that wish to be profitable should focus solely on making money.
However, a close look at the richest entrepreneurs in the world reveals that they are all solution providers.
They make a lot of money, because the solutions they provide are globally relevant and therefore enjoy global patronage. If you want to be both profitable and sustainable in business, you need to have a problem-solving mindset that leads you to deliver solutions people want.
For instance, the fact that many people have diabetes, could lead one to make food products like Pap sweetened with dates.
This automatically make one different from the competition and gives diabetics a reason to seek and purchase your product.
Similarly, the unhealthy fizzy drinks children consume can be replaced by healthier zobo juice, packaged like pure-water sachets for N15 (considering that pure water is sold for N10).
This will compete favourably against soft drinks that cost a minimum of N50, while providing a healthier alternative as Zobo is very rich in vitamin C.
Unfortunately, this is not the mindset of many who go into business. Many people see business only as a means to make money and are totally ignorant of the fact that the way to make good money consistently, is by creating value that is relevant to your market.
Going into business, thinking only of making money for yourself, leads to an exploitative mindset that seeks only personal gain and not value for the customer. This leads to creating poor quality products, which the market eventually rejects, leading to the end of the business.
This is one of the reasons why some entrepreneurs are more successful than others. Successful entrepreneurs are problem-driven. They have a mind-set that seeks to solve problems or improve a situation, and so when they develop a solution, they immediately enjoy patronage that continues to grow, as there are a large number of people, who find their solutions useful.
This is the secret behind the wealth of the most successful entrepreneurs in the world like Jeff Bezos, the founder of Amazon, Bill gates the founder of Microsoft, and Aliko Dangote, founder of the Dangote Group of companies.
No matter how much the economy goes into a recession, people will continue to need and buy the solutions provided by these entrepreneurs because they meet the basic needs of humanity.
Indeed, Richard Branson, a British billionaire states, “the core of entrepreneurship is value creation by providing solutions to problems and needs of humanity”. If people understand business from this perspective, they are more likely to succeed.
Of course there are other aspects that should be taken into consideration, such as ensuring efficient operations, appropriate pricing, marketing and distribution. All these contribute to making a great problem-solving idea, a business success.
Onwuegbuzie is a globally certified Management Consultant and a Senior lecturer at the Lagos Business School. She will be a weekly columnist on Entrepreneurship in The Guardian.
First published in Guardian Newspapers.