The devastating impact of Covid-19 on commercial activities is a jolting reminder that the best intentions in the world amount to nothing in the face of a business that fails to adapt to changes in its operating environment. A business that aspires to survive and thrive amidst the challenges of these times must re-think and re-energise its business model.
What is a business model? Your business model drives how it delivers value to its customers, and how it makes money. If your business is not making the kind of money it is capable of making, it is time to tune up your money machine, so that it can start making money again. Here are nine elements that can move the needle and determine the financial success of your business:
- Customer Segments: The customer segmentation process divides customers into groups according to characteristics that are common to each group. This enables the business to appropriately and effectively market and sell its products or services to each group.
Segmentation allows a business to create and communicate targeted marketing messages to specific groups of customers, and select the best communication channel for each segment. This requires the business to gather, analyse and act on specific customer information through face-to-face or telephone interviews, surveys, focus groups, published sources, etc.
- Value Propositions: The essence of a value proposition is to offer a product or service that solves a problem and satisfies a need for customers of the business. It cites the unique value of the product or service, and makes the case for why a customer should pick it instead of its competitors.
The elements of a value proposition could be newness (a hitherto unknown technology), price (cheaper than existing options), safety (peace of mind), performance (lasting longer than similar offerings), customised (built to fit end-user), design (superior make) or branding (confers status). The range is wide as each offering seeks to make a product or a service more appealing to its customers.
- Channels: A business must adopt marketing, distribution and sales channels for reaching and offering its value proposition to its target customer segment. For example, a distribution channel can be direct, by selling directly to customers, or indirect, through intermediaries that represent it.
A business may combine both channels. In so doing, the business must consider its customer segments or market size, level of investment required, whether product or service is standardised or customised, control needed to make it work and relationship with channel partners.
- Customer Relationships: A business must create demand by establishing and maintaining relationships with its customer segments. The growth of the customer base of a business, and its ability to retain the loyalty of its customers, are boosts to its ultimate profitability.
- Revenue Streams: A business only makes money when there is a surplus after it subtracts its costs of operation from the revenue it generates from its customers. The revenue streams of a business must be clearly defined. Beyond listing the various revenue streams of the business, it is equally important to evaluate if it is profitable for the business to opt for a revenue stream.
- Key Activities: These are tasks that are critical to implementing the business model. These activities directly relate to delivering its value proposition, reaching its customers, maintaining customer relations and creating sustainable revenue streams.
- Key Resources: These are inputs that the business needs to provide value, satisfy customers and deliver its product or service. These could be physical and tangible assets like buildings, equipment, inventory, buildings and distribution networks that enable the business to function. They could be intangible and non-physical resources like patents or copyrights. They could be such human resources as engineers or sales representatives. They could also be financial resources like cash and loans.
- Key Partnerships: A business partnership comes to life when two or more commercial entities form an alliance that empowers the parties to make their key activities possible. Partnerships can be beneficial to a business.
In the search for efficiency, a business may seek key partners to help it achieve its goal, especially when the business does not have the resources to conduct all key activities in-house. Partnerships leave room for the sharing of resources and outsourcing of selected activities to more cost-effective options. The resulting strategic alliance frees the business to focus on areas where it can create the highest value.
Whether a partnership is with a business or an individual, the relationship must be based on the right agreement. Each party must understand its rights and duties under the partnership. This must be put in writing and executed by the parties under the guidance of a legal counsel.
- Cost Structure: Each business model implies a cost structure for creating and delivering the proposed value, generating revenue and acquiring customers.
Business incur costs that remain fixed regardless of volumes of products or services. Some costs vary with production volumes. There are also operational costs associated with the daily activities of the business. Economies of scale equally dictate that higher volume lead to lower overall cost per unit, which reduce variable costs arising from synergies and increased efficiency.
In essence, to improve the performance of a business, there must be a re-think of the assumptions underlying how the business makes money. This re-thinking process involves re-engineering each of the nine keys of your business model. The leadership team must vigorously debate how to tweak any one or a combination of these keys, and create a new model of how the business makes or intends to make money, failing which the business may become another statistic of failed enterprises.
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In history, very often, the coming of a man of uncommon drive and vision to a human setup usually leaves an indelible footprint that people refer to long after they have gone. That is why people still talk about NAFDAC under the late Dr. Dora Akunyili, Petroleum Trust Fund (PTF) under General Muhmmadu Buhari (Rtd) and FCT administration under Mallam Nasir el-Rufai. Of course, there had been many CEOs before and after the aforementioned, but these names also crop up whenever it comes to gauging high standards of public service. Federal Inland Revenue Service (FIRS) under the leadership of its Executive Chairman, Mr. Muhammad Nami, just about six months old, is already showing signs of great promise, probity and courage like the examples above. I wish to underscore from the onset the obvious fact that the present management of the FIRS under Nami, especially at this critical period of national economic crisis orchestrated by COVID-19, conspicuously bears the landmark of professional competence, commitment and patriotic service to the nation. It is on record that in less than six months of assumption of office, Nami has introduced plausible transformational policies that have seen a new face of FIRS in terms of technology-enhanced tax collection, expansion of tax net in the formal and informal sectors that have continued to receive commendations from critical stakeholders. This has been no small feat towards enhancing the present administration’s policy measures for ease of doing business. As soon as Nami took over, it became crystal clear to all that, at last, the nation’s revenue house has a new vibrant leadership and management that is driving creative and result- oriented reforms with desirable outcomes much to the ovation of industry players, as well as staff members of the FIRS. One of the success stories of Nami at the FIRS is that under his leadership, revenue collection and taxation processes have become easier and hassle-free. The modernisation of revenue collection through introduction and reinforcements of cutting edge ICT has eliminated the hitherto outmoded system that made revenue collection cumbersome and made some revenue officers susceptible to sharp practices and corruption. Branded shops, super stores, general supermarkets, standard restaurants and eateries are among the organisations affected. Under Nami, processing and collection of tax clearance certificate (TCC) has become easy and fast. Same thing with collection of value added tax (VAT) and Stamp Duty largely due to digitisation, a situation that helped to free the system of time-wasting and suffocating bottlenecks. This system allows deduction of stamp duty, withholding tax and Company Income Tax (CIT) from their contractors at the point of payment after which they are to send immediately same to the FIRS. As the executive chairman noted, the significance of this process cannot be over emphasised. According to him, “This is better for everybody as we would all have to do less reconciliation and enforcement activities, and we can, therefore, use the saved time to expand the tax net,” he said. Besides, the FIRS boss has taken one of the most anticipated moves in Nigeria’s tax administration which goes to show that his vision at the revenue house reflects a comprehensive aggregation of public and private players in line with national interest. This step has not only been missing but it has increased the revenue drive of the President Muhammadu Buhari government, a loophole which Nami is determined to close in order to shore up revenue collection drive. This move is the strategy to capture thousands of persons and corporate entities in the tax net, especially with special focus on multinational companies that have been defaulting and evading paying Company Income Tax (CIT) close to 10 years now. The FIRS boss has taken the bull by the horns to see that all tax defaulters and evaders are brought into the tax net. According to him, “A number of multinational companies operating in Lagos State have not paid CIT since 2011 as they appeared to have perfected the illicit act of profit shifting to escape paying tax.” The disclosure by the executive chairman of FIRS in this regard is eye-popping. It shows how many corporate organisations had been denying the country the needed revenue through deliberate act of economic sabotage by evading or defaulting in the payment of CIT. It is sad that several multinational companies failed consistently to remit their tax to the FIRS by covering up their pioneer status in order to get tax exemption for a period of five years instead of three years as required by law, and they were allowed to have their way. It is instructive that only Nami-led management has demonstrated requisite courage and patriotism to go after such criminal defaulters. This is a huge plus to the Buhari administration’s efforts to enforce financial transparency and ease of doing business in the country.
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Zenith Bank Plc and the International Finance Corporation (IFC), a member of the World Bank Group, have announced an investment of $100 million to help increase support to clients and Companies, whose cash flows have been disrupted by the COVID-19 pandemic. The IFC’s loan to Zenith Bank is its first investment in Africa through its COVID-19 fast-track financing support package.
IFC says the funding would help Zenith Bank overcome challenges resulting from ongoing limited access to foreign currency, working capital, and trade funding. The bank will use the funds to support dozens of businesses in Nigeria’s health, pharmaceuticals, food, and trading sectors, allowing them to strengthen operations, maintain employment, and access critical imports of goods, commodities, and raw materials during these challenging economic times.
Ebenezer Onyeagwu, Group Managing Director, Zenith Bank, says: “IFC’s support is essential and will help us respond to challenges resulting from the COVID-19 pandemic. It will allow us to support compelling export initiatives and trade financing for critical goods and materials, especially for the medical and pharmaceuticals sectors. Our partnership with IFC is strong and we are committed to its environmental, social, and governance (ESG) requirements.
“IFC’s loan to Zenith is part of its $8 billion global fast-track financing package, announced in March to support business activity and preserve jobs in the face of COVID-19. Close to 300 clients have requested support globally. The closure of borders, shutting of businesses, and reduced global trade-related to COVID-19 are affecting Nigeria’s economy and others across Africa, with the World Bank predicting Africa’s first recession in 25 years.”
Eme Essien Lore, IFC Country Manager in Nigeria, adds: “IFC’s support for Nigeria’s banking sector will help keep the wheels of Nigeria’s economy turning at a time when it is facing a major challenge from COVID-19. Our experience from past shocks, including the global financial crisis in 2008, has taught us that keeping companies solvent is key to saving jobs and limiting economic damage.”
Shareholders of African Export-Import Bank (Afreximbank) have voted to re-appoint Prof. Benedict Oramah as President of the Pan-African multilateral financial institution for a second five-year term. He was first appointed in 2015.
The decision was announced June 14, 2020 in Cairo following Afreximbank’s 27th Annual General Meeting of Shareholders held by circulation of resolutions due to the COVID-19 pandemic situation.
In an acceptance statement released shortly thereafter, President Oramah told Shareholders that the Bank’s ultimate goal under his second term of office is the realisation of Africa’s strategic ambition to create an integrated market.
Says Pof. Oramah: “We want an Africa where the foundations of the African Continental Free Trade Agreement (AfCFTA) are laid expeditiously so that the 84,000 kilometres of borders that have divided us for ages can begin to come down.”
Prof. Oramah adds that AfCFTA would “drive the industrialisation of Africa, support the emergence of regional value chains, turn Africa’s creative and cultural assets into engines of growth, grow jobs for the continent’s youth, convey respect to Africans wherever they may be and better prepare the continent to compete more effectively in the global markets.”
Prof. Oramah recalls that between 2015 and 2019, Afreximbank disbursed more than US$30 billion in support of African trade with over US$15 billion channeled towards the financing and promotion of intra-African trade, adding: “We will aim to double intra-African trade financing so that by the end of my term, it will constitute no less than 40% of the Bank’s total assets, with aggregate disbursements, on a revolving basis, over the 5 years exceeding US$30 billion.”
A resolution proposing the re-election of Mr. Stefan-Luis Francois Nalletamby as a Director representing Class “A” Shareholders and Mr. Kee Chong Li Kwong Wing as a Director representing Class “B” Shareholders was equally approved by the meeting.
The 2019 audited accounts and the proposal to raise an additional US$500 million in equity within Afreximbank’s current Strategic Plan dubbed “IMPACT 2021-Africa transformed” were also approved. The approval to raise additional equity is in recognition that an amount of US$1 billion earlier authorised to be mobilised had almost been fully raised.
President Oramah assures the Bank’s Shareholders, saying: “I make a commitment that with your support, the Bank will remain well capitalised throughout my term of office and beyond. We will continue our efforts to diversify sources of equity to include the markets while ensuring that the Bank’s development focus remains unchanged.”