Originally published on August 18, 2016 @ 12:39 pm
Good afternoon everyone. My name is Gabriel Ogbechie, I am the Managing Director of Rainoil Limited. Rainoil Limited is a company playing in the downstream sector of Nigeria’s oil and gas industry. We’ve been in existence for about 19 years. The title of our lecture today is RUNNING A SUCCESSFUL BUSINESS IN NIGERIA: My Experience. So, essentially, we will be talking about running a business in this country from my own point of view. I am essentially going to share my own experience; it’s an experience that has worked, but I don’t want to delude myself by saying that is the only way through which it works. But let us learn from my own experience and see what we can get out of it.
I attended the University of Benin. I left the university in 1987. I took a degree in Engineering, I did my Youth Service in Kano, 1987-88. I worked briefly in Kano, then came to Lagos and joined the company called Pricewater House. I was in Pricewater House up until 1992, then I joined another oil company called Ascon Oil Limited. I was on a fixed salary of N30,000 a month. And I asked myself one very simple question: ‘Gabriel, what else can you do to make N30,000 a month?’ I asked myself that question as I believed then and I still believe today that anything you can do to make your salary can take the place of your job. If you are working in an organization; let’s say a bank and they are paying you N200,000 a month. Essentially, what they are saying is give us your time from 8-5, perform these duties and we will give you N200,000 at the end of the month. Anything you can do to make that N200,000 can take the place of your work. So, I asked myself that question: ‘Gabriel, what else can you do to make N30,000 a month?’ And I said if I could sell one truck of diesel, I will make one naira per litre and a truck of diesel is N30,000 litres. If I am to sell a truck of diesel and make one naira per litre margin, I will make N30,000, which was my salary. A truck of diesel, 92,93,94, was selling for N300,000. We were buying it for nine naira per litre and selling it for ten naira per litre making a one naira per litre margin. So, I said if I could sell a truck of diesel, I will make one naira per litre, which was N30,000. So, I set out to raise N300,000. But first things first, I needed to incorporate a company. So, 1994, I remember that my wife and I went to meet a friend who is a pastor and lawyer. We went to their house one evening and we started bandying names around. ‘Gabriel, why don’t you call it Gab Oil, why don’t you call it this oil, that oil and my friend said Gabriel, you know Rain stands for blessing, so why don’t we call it Rain Oil and I said you know what, you are right, but then instead of Rain Oil, we are going to merge the two together to make one word, Rainoil Limited, and that was how Rainoil Limited, was incorporated in November 1994. I got my certificate of incorporation, put it in the drawer and I called it step 1.
Remember, I had a hypothesis. The hypothesis was that if I could sell a truck of diesel in a month, I will make N30,000. So, I set out to raise N300,000. I didn’t have the money, I wrote proposals, I went to those who I knew had the money. I was so sure that it was going to work, but all I heard was come here today, come here tomorrow. Stories!
So, I learnt my first lesson: people rarely give money to those who don’t have. Do I have a witness in the house? (All: Yeah)
My office was in Isolo, Ire Akari Estate Road and I had a stockbroker who was on Bank Anthony Way in Ikeja. With as little as N2,000 in my pocket, I will drive from Isolo to Ikeja, meet my stock broker and say buy me 1000 units of First Bank; 1500, I will drive to Ikeja and tell him to buy me 800 units of Nigerian Breweries. By 1996, I was getting frustrated, I couldn’t raise the N300,000. One evening, I brought out my capital market file and I started itemizing all the stocks one by one: 1000 units of 7UP at 70k per share, N7000;, 2000 units of First Bank at N6 per share, N12,000; I itemized the stocks; it went into 2 pages. When I summed it up, I was surprised, it came to N497,000. I was shocked. Those were the days of shares certificates, not these days of CSCS. I gathered the shares certificates, took them back to the same stockbroker, he verified the ones he could verify, sold the ones he could sell and at the end of the day, I had my N300,000.
Now, recall that I had a hypothesis that if I sell a truck of diesel, I would have N30,000. So, I needed to go into the market place now to test this hypothesis. I went to a company in Ogba called First Aluminium. I had a classmate in the university who was working there. So, he introduced me to the purchasing manager, a man called Mr. Ojo. I was the sales man; I’m still a sales man. So, I had no much challenge. All I needed was for Mr. Ojo to give me an LPO to supply them 30,000 litres of diesel at N10 per litre, making 30,000. So, Mr. Ojo told me to come on this faithful Tuesday and pick my LPO. So, this day, I got to First Aluminium, very excited. ‘Ehn, Mr. Ojo, what’s up with the LPO?’ He said, ‘Gabriel, the LPO is not ready’. I said why? He said GM. I got up, he thought I was leaving. First Aluminium had a GM, his office was down the corridor, a man called… I didn’t know him as a person, but I knew him by reputation. So, I approached his office. He had a secretary who used to sit by the right side of his door. I knew that if I made the mistake of telling that secretary that I wanted to see the GM, that would have been the end of it. So, I approached the door. ‘Good afternoon ma’. Before she could raise her head to see who was greeting her, I had opened the door to the GM’s office. ‘Good morning sir, my name is Gabriel Ogbechie, my LPO is on your table. Please…’ He said from which company, ‘I said Rainoil’. He said, ‘Which one is Rainoil? We only buy from Mobil, Total and Unipetrol’. I did all the marketing I could do that day, he wasn’t ready to sign the LPO, Gabriel Ogbechie wasn’t ready to go anywhere. He was seated, I was standing. At some point, he got tired of me. He wanted to leave me in his office, so he got up. As he approached the door, I just used my body and blocked the door and said to him, ‘Help a young man who wants to grow, sign this LPO’. He looked at me long and hard, went back to his table, signed the LPO and said, ‘I don’t want to ever see you in my office again’. I said thank you very much sir.
I took this LPO, we made the supply. By the time we made the supply, price had moved; instead of N30,000, I made N45,000. I was so excited. We got the cheque December 1996, I cannot forget. It was an SGBN cheque. The cheque drawn on Societe Generale Bank, Oba Akran branch. You know when you start a business from the scratch, you remember some very minute details. By the time the cheque cleared, Christmas had come. 1996, we went on Christmas break, came back in January, did the second supply. This time, it was to Limca, on Abimbola Way, in Isolo. They paid cash, margin N60,000. It was working. The third supply was to one company called United Spinards, on Apapa-Oshodi Express Road. Margin N25,000. It was working. Meanwhile, I was still on my job. Warren Buffet, in one of his books, says if you want to test how deep a river is, you don’t go with your two legs. But by May 1997, it was clear that it was sustainable. So, I left my job to face the business squarely. From that singular seed of N300,000 in 1997, we’ve been able to grow the business to what it is today to the glory of God.
Today, Rainoil Limited, we own about 40 petrol stations spread across this country. We own a fleet of about 80 tank trucks which move petroleum products across the country. First thing first: a lot of people start their business because they want to be their own boss. Another reason why a lot of people start their own business is the economy; maybe the economy just thrusts entrepreneurship on you. In 2008/2009, when banks had a lot of problems that forced the consolidation, a lot of people lost their jobs, people who didn’t plan to do something for themselves suddenly found themselves on the streets. So, they had to do something for themselves.
Another reason of course is financial independence. If you run your own business, I mean, you have your own destiny in your own hands, your income is entirely up to you. My people say, When you are in paid employment, what Igbo man calls “money that is counted” (Ego aguu onu). When you are in paid employment, even if you earn N100 million per annum, which is huge, the salary is still a finite sum. Somebody still has to count it, to say this money is complete. But if you are running your own business, your income is entirely up to you. Another reason is freedom from 8-6 work. Another key reason people start their businesses is also to follow their passion. When I look around this hall, I see people like Zeb Ejiro, I can see Wunmi Obe. I mean, these are talented artistes. People who have followed their own passion. Then, in the 90’s, everybody used to tune their radios to listen to Larry Izamoje, and then I used to be confused if he lived in Lagos or Abeokuta. I mean, he could be commuting to and fro, Lagos to Abeokuta. All this is driven by passion. So, I am not surprised that he is successful and has gone ahead to build Brila FM, which is focused mainly on sports. He followed his passion.
Now, what kind of business should people go into? I tell people, the most important thing you need in any business you want to do is knowledge. A lot of people think it’s capital, but it is knowledge. When you put knowledge in front and capital is trailing knowledge, what tends to happen is that the knowledge acts as a protective shield over the capital. When you put capital in front and knowledge is trailing capital, what tends to happen is that you lose the capital to acquire the knowledge and what happens is we say you have learned the hard way. May it not be our portion to learn the hard way. (All: Amen).
You see, there is money in this country. I love this country. There is too much money; money begging to be made. You need to see it. You see, what we sit down here and can’t see, expatriates come from miles away to pick money on our streets. There is money. Many of us here are Christians. The Bible says whatsoever you lay your hands on shall prosper. The key thing is lay your hands on what you understand. I went into the oil business because I worked in an oil company for 5 years. I didn’t have money then, but I saw money being made, I had the knowledge, I knew that if I could lay my hands on that magical N300,000, I would find my way, I would be able to navigate my way.
Tony Okoroji is here. He is a musician, he has got the talent and what he is doing is about music. I see a lot of Nollywood artistes here. These are people, they have the talent, the knowledge, they are working around the movie industry because that is the knowledge they have.
The other thing I want to talk about is how you can raise capital. A lot of people say there is no money. I tell people, first things first. If you want to raise capital, raise capital from personal savings. I will ask you a very simple question: what is the difference between N50,000 and N40,000? A lot of people will say N10,000. The next question I will ask is the person who earns N50,000, at the end of the month, naturally, he is broke; the person who earns N40,000, at the end of the month, he is also broke. But he is not dead. If you are the guy who earns 40k, at the end of the month he is broke, but he is not dead, so why can’t the guy that earns N50,000 save N10,000? It’s consumption pattern. Too many people are eating both their fruit and their seed. You see, very pretty lady, I like that your bag. It’s a pretty bag. I hope you agree with me? They say it’s a Chanel bag. It’s 100k, the other lady is carrying a bag, they say it’s a DG bag, it’s 150k. What is the difference? They are all bags. Somebody is wearing a shirt, he says it is Tommy Hilfiger, another one is YSL. What is the difference? They are all shirts. People are eating their fruit and their seed. But you see, there is what I call the mango principle. Let’s take the mango fruit for example. When you eat a mango, you enjoy it, at some point, you see the seed. Are you supposed to eat the seed? No! You can’t eat the seed. You see, that seed, whether you consciously till the ground and plant it or you throw it away, as long as it touches sand, it germinates and when it germinates, it gives you another mango tree. That, not only gives a complete fruit of mango, but gives it to you year after year, in perpetuity. But what is happening is that too many people are eating both the fruit and the seed. If you earn 50k and can’t save 10k, if you earn N500,000, you can’t save N50,000, because as your income increases, so does your taste and your appetite expand to accommodate that extra income. So, you need to save. People think that banks don’t give loans, but banks give loans if you understand the banking industry. Banks are desperately looking for people to give money to because banks won’t make money except they give out loans. The only thing is that you start your business with equity. That word capital stands for owner’s equity. Banks don’t give you capital, banks bring debt into the business. You start your business with your own equity, as the business begins to expand, you gradually begin to introduce debt into the business, to help you grow the business. You know, when you go to the bank and the bank says go and give me your one year bank statement, what the banker wants to see is you’ve been trading with N5 million; what have you done with N5 million? So, for the past one year, what is your credit and debit in your account? You go to the bank and say I’ve been dealing with N5 million, but in the past one year, I have been able to make extra N5 million, then I now have N10 million; if only you can give me N10 million, I can make N30 million. You don’t just walk into the bank from day one and say give me loan, I want to start a business. It’s difficult.
Another one, of course, is investors. You can raise capital through investors. You can get people to come and invest in your business. If you have a wonderful business idea, you can sell it to investors, if you are able to convince them. Of course, they can put money in your business. Another one is family and friends. Typically, if you want to start a business, the first person you sell your business idea to is your wife or spouse or siblings. If you don’t get support from your immediate family, then you have a very long way to go. For the employee, money is for consumption; people who are in paid employment, once they collect their salaries, what comes to their mind is, I want to pay my rent…
I tell people, money, for me, means nothing. It’s just a figure. N100 million, N200 million. It’s nothing, it’s just a figure. You must be able to see money and keep your cool and you must have the right mindset about money. For the entrepreneur, money is for production, for the employees, money is for consumption. People who are in paid employment, once they earn their salaries, what comes to their mind is I need to pay my rent, I need to keep a little bit of savings here, spend money on this. The enterprenuer always thinks of the next project; what do I do next with this money? I will give you an example, just imagine, you have somebody who is into real estate. You are into real estate, you are trying to build an estate in Badore, you’ve been able to acquire the land with your own money, you’ve brought your surveyor, your QS, you’ve done the design, they’ve costed it, it’s going to cost N800 million to develop the estate and then you go to the bank and ask for your balance, they scribble it for you, N200 million, you have N200 million in the bank, the project you want to do is N800 million. Do you have money? (All: Yes).
What makes you think he has money? A man wants to do a project of N800 million and he has N200 million in the bank. That guy is so broke. You have no idea; he is broke to the tune of N600 million. He doesn’t have money, because he is thinking of the project he wants to do. So, you must have the mindset and truly, he doesn’t have money and you know the funny thing is that when he finishes that project, he begins to think of the next project to do. Businessmen always think of the next project. You always keep thinking, because that is the only way to grow the business. I tell people, you either grow or you die. There is no remaining static. The only way to grow is to keep investing in the business. You must keep regenerating the business. The next thing is that you must keep your earnings in the business. If you are running a business, as you make money, ensure you don’t consume all what you are making. Keep your earnings in the business.
Rainoil is a company that we have grown largely with internally retained earnings. We make money, we keep the money in the business and we keep expanding the business, from one petrol station to 2,3,4,5, to 6. I mean, I look at the business today and there was no day we went into the market and just acquired like four petrol stations at a go. No, it’s one by one. You see, the beauty of it is that when you have one contributing to the pool, then suddenly you have two contributing to the pool, by the time you have up to ten, you will find out that the rate with which you regenerate yourself becomes faster, because you have more contributing into the pool. Another thing I want to talk about is that you must expand the business. I recall in 1997, I was living in Egbeda, Christmas day 1997, we drove all the way from Egbeda to Allen. Where were we going to? We were going to Mr. Biggs. We got to Mr. Biggs, there was no chicken, no meat pie, no doughnut, it was all finished. Why? In 1997, Mr. Biggs was a big thing in this town. In year 2000, I remember when Tantalizers opened on Allen Avenue, Tantalizers was such a big deal that if you go to Tantalizers then, there was a camera man there just to take pictures that you came to Tantalizers to eat fried rice. How many of you here remember? (All: Yeah).
Oh, we must have a bit of history because if things unfold too fast before us, if we are not careful, we miss some of those little things. But you see, today, if you go to Allen, there is Mr. Biggs, there is Tantalizers, there is KFC; going further down to Opebi, there is TFC, Sweet Sensation, name it. Whatever location you find yourself, it’s only a matter of time, competition will catch up with you. Any business you are doing, any location you find yourself, it’s only a matter of time, competition will catch up with you, because as you are making money, people are watching. Ah! This guy has a fashion shop on Akin Adesola, that place is booming. Before you know it, fashion shops will come around you. I remember around year 2005, we opened a petrol station in Asaba. This petrol station was a hit, we were selling 45,000 litres of fuel a day. So much fuel, so much money. We were excited, but the moment we opened it, we moved to the next location. Today, that petrol station struggles to sell maybe 20% of what it was doing then. Why? Because if you go there today, there are three petrol stations to the left of it, another four to the right and maybe five opposite the petrol station. Why? Because as that petrol station was doing well, the market was taking notice. I remember in 2010, we went to a place called Oghara in Delta State to build a tank farm. Then, Oghara wasn’t well known. Today, if you mention Oghara, everybody knows where Oghara is on the petrol import map in this country. But then it was a novel location. I remember when I fly into Benin then, and I am driving to Oghara, I will be laughing.
I will say when will the industry realize this location? But in Oghara, at our gate in Oghara today, is a dual carriage way; at our backyard in Oghara is our own jetty, our own sea port. So, ships come all the way from abroad and anchor at my backyard in Oghara to discharge petroleum products. It’s a wonderful location. I will be laughing. Of course, when we commissioned the place in 2011, it was an instant hit, but you know what, we didn’t just sit down in Oghara and say this is where God has buttered our bread and this is where we will remain, even though it was an instant hit. We immediately started looking for another location. Within the next three years, we had gotten a location in Calabar, built another tank farm and moved on. Today, I go to Oghara; when we went to Oghara, we were practically the first and the only one. Today, there are eight tank farms already completed and functioning and maybe another five still under construction. But we don’t wait for competition to catch up with us. We have moved on. We’ve moved to Calabar. The one in Calabar, we have completed it and we have moved on. So, you must branch out. Don’t wait for competition to catch up with you. Then, of course, you also need to have what I call staying power. You know, as they say, hustle while you wait. Even when nothing seems to be happening, remain in the business. When you are in paid employment and you are on a fixed salary, they are paying you six million naira per annum, your income is N500,000 every month, it is fixed, it is certain like that every month. Companies don’t make money like that. When a company makes N120 million in a year, it may not make that next year. Some months, it may make N20 million, another month, it may lose N1 million, but at the end of the year, somehow, it adds up. So, it is staying power that keeps you going when you are running your business, keeps you going when nothing seems to be happening. Because you know, as they say, there is no going back to Egypt. You don’t put your hands on the plough and look back. Once you take that step of faith, that transition, leaving your paid employment to going to run your own business, you must keep looking forward. There is no going back.
On that note, I want to say thank you very much!