Gabriel Ogbechie is the MD/CEO of Rainoil Ltd. A few weeks ago, he delivered a business lecture at the 5th Annual YES INTERNATIONAL! Magazine Lecture/Cocktail Party. The title was: RUNNING A SUCCESSFUL BUSINESS IN NIGERIA: MY EXPERIENCE. In this lecture, he revealed how he started and grew his company to the success it has become today. He also spoke on some interesting things like choosing the right business, raising money for your business, and basically everything an aspiring entrepreneur should know about starting a business in Nigeria.
You don’t want to miss a word of this lecture. It is not everyday a multi-billionaire reveals all his secrets free of charge. People write these stuff in a book and sell them. You are getting this one free courtesy of Yes International Magazine. The following are excerpts of the lecture. I should warn you, it is very long (2700+ words). The original lecture is even longer (4,500+ words). But it is packed to the brim with timeless, priceless gems of wisdom. Enjoy it!
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 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 would make one naira per litre and a truck of diesel is 30,000 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. 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.
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.
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 would drive from Isolo to Ikeja, meet my stock broker and say buy me 1000 units of First Bank; 1500, I would 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.
“The Bible says whatsoever you lay your hands on shall prosper. The key thing is to lay your hands on what you understand. I went into the oil business because I worked in an oil company for 5 years.”
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 sold a truck of diesel, I would have N30,000. I needed to go into the market place now to test this hypothesis. I went to a company in Ogba called First Aluminum. I had a classmate in the university who was working there. 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 30,000 litres of diesel at N10 per litre, making 30,000.
Mr. Ojo told me to come on this faithful Tuesday and pick my LPO. So, this day, I got to First Aluminum, 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 Aluminum had a GM, his office was down the corridor. I didn’t know him in person, but I knew him by reputation. So, I approached his office. He had a secretary who sat by the right side of his door. I knew if I made the mistake of telling that secretary 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 asked 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 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 agulu 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.
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 is 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.
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 to 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.
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.
“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.”
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 woman, ‘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.
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 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…