Understanding the Nigerian Digital Consumer



This article aims to guide both local and foreign investors who are looking at investing in Nigeria’s digital economy. This provides a glance into the Nigerian digital maturity, consumer- demographics and psychographics; also empowers them to make the right business decision.

It serves to highlight the most common issues, giving the investor or entrepreneur a heads-up on challenges as well as recommended solutions. This will help them prepare adequately before venturing into the Nigerian digital business space.

Thoughts are based on personal experience, observation, discussions and interviews of key stakeholders in the ecosystem. I have been there, done that when it comes to digital entrepreneurship; albeit silently, as a side-preneur, which is typical of Nigerian context. Job security is a major issue so we cling to what we are sure of while trying other stuff. In my case I committed serious funds to what I believed in.

This is a narrative of all my struggles and lessons and what I feel we need to do to get things right. Of course, backed by actual facts and figures to justify my point of view.

Nigeria’s population is projected to grow from more than 186 million people in 2016 to 392 million in 2050, becoming the world’s fourth most populous country.[1]

With an annual population growth rate of 2.6%, and consistently growing, Nigerian needs to look beyond oil to boost economic development, reduce poverty and empower its young population. One way to go about this is to embrace digital transformation, by creating enabling infrastructure and policies to support the industry growth and empowering the citizens by way of capacity building and funding.


[1] https://www.cia.gov/library/publications/the-world-factbook/

Digital state of the Nigerian nation

Financial inclusion

A picture is worth a thousand words.

On Monday, 4th May, 2020, Nigeria partially eased the lock-down due to the Covid19 pandemic. And despite the apparent escalation of new infections, all hell broke loose in most major cities especially Lagos.

This is the Covid19 escalation pattern at that time.


Meanwhile, see how Lagosians are defying all the social distancing rules for Covid19 prevention, same day, May 4th, 2020.

Imagine this happening in a developed commercial hub like Lagos, what then would be happening in other parts of the country. And this logically means:

  • Digital financial inclusion is a far-cry from acceptable level of penetration in Nigeria.
  • A lot of banked customers do not have debit cards and internet banking access.

This could be as a result of different reasons ranging from:

  • Ignorance – a lot of people feel they will be prone to fraud once they get a debit card or internet banking access. They rather prefer to lodge and withdraw cash the traditional way. I have a few learned colleagues who do this as well so it’s not a literacy issue.
  • Cost of maintenance – Banks usually charge about $0.09 (NGN35) after the third transaction on an out-of-network ATM and $2.63 (NGN1,000) for card maintenance per annum. Most Nigerians are very price sensitive, also due to the high rate of poverty, the share of wallet tilt more to basic stuff like food, shelter, transportation etc. Every Kobo counts!

If these people don’t have debit cards, internet banking and other digital banking solutions, how would they eventually be able to embrace digital services much less paid digital services. How would they pay for such services? Buy digital content via bank deposit? You guess it is as good as mine.

Financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs –transactions, payments, savings, credit and insurance –delivered in a responsible and sustainable way (The World Bank).

Financial inclusion

It is evident that mainstream banking does not have the capacity to financially include a good size of the Nigerian population. Digital financial services (DSF) such as Mobile Money still have very low awareness and penetration (only 5.6%), especially among the unbanked. To achieve financial inclusion, it is obvious that we need a lot more of the Digital Financial Services and Agent Networks. Mainstream banking is too expensive to run and opening bank branches in every location is not sustainable especially in rural and semi-rural areas.

Financial exclusion could also have a direct link to poverty. Where the majority of the populace struggle to feed and provide basics (food, shelter and transportation), then it becomes difficult to have enough disposable income to engage in financial institutions.

According to a long-standing poverty statistic, the poverty rate in Nigeria’s south-west is 19.3%; south-south, 25.2%; north-east, 76.8%, and north-west, 81.1% (Nairametrics).[1] These figures also align with the Financial inclusion statistics, showing most inclusion in south-west and least up north.

Telcos to the rescue?

It’s long been touted in Nigeria that Telcos might be the missing link when it comes to providing ubiquitous Digital Financial Services. In 2018, the government issues Payment Service Bank licenses to. This license is available to Telcos as well as other mobile money operators and super agents. Although, none has successfully launched a PSB service, it’s expected to drive growth in this sector. But that remains to be seen. Perhaps we could draw breath from the Kenya success story, hoping we can replicate same success, albeit a tad late.


[1] https://nairametrics.com/2019/09/28/financial-inclusion-in-nigeria-data-and-hard-facts/


Though Nigeria is the most populous country in Africa, it is critically lagging behind in terms of Digital Financial inclusion. This grossly affects the country in the following ways:

  1. Limited opportunity for business growth – Consumers who are digital-financially unaware will not be predisposed to embrace digital products and services.
  2. Startups and entrepreneurs will have limited opportunities for growth.
  3. The economy of the country will have limited growth. Over dependence on Oil will not sustain the country any further given the recent technological innovations and diversification from oil-based economy by Nigeria’s oil export countries.

Internet penetration

The primary means to connect to the internet in Nigeria according to Nigerian Communications Commission (NCC) is via the mobile phone. This report shows 73m internet subscribers which represents an internet penetration of around 36%.

Devices as a factor for deeper internet penetration

This report indicates the total universe of internet users. It is also proven that 50% of this figures are made up of what is called the accidental users in local parlance, therefore, considering that a sizeable number of these subscribers use less than 5MB of data within 30 days (a benchmark for data-user definition by most of the Telcos in Nigeria), there is a lot of work still to be done to deepen internet penetration.

There is also the issue of low maturity level of Nigerian internet users who are currently struggling with basic internet access. For Digital services adoption to thrive, there is need to build the internet culture to a much higher penetration and maturity level whereby subscribers are able to consume video and other services and not just the basic internet browsing usage as is currently obtained.

There is also the issue of low maturity level of Nigerian internet users who are currently struggling with basic internet access. For Digital services adoption to thrive, there is need to build the internet culture to a much higher penetration and maturity level whereby subscribers are able to consume video and other services and not just the basic internet browsing usage as is currently obtained.

With oil accounting for about 90% of international export and the recent impact of Covid19 and apathy of investors towards Nigeria due to inherent risks emanating from unstable government policies and other mitigating factors, Nigeria’s outlook is quite vulnerable. This is illustrated further in detail below.

The average Nigerian would be most concerned about securing the basics such as food, shelter, transportation and security. The share of wallet for luxury items like Smartphones and data plans would further shrink as the economic gloom bites harder.

Device Financing to the rescue?

The lack of a consolidated data base of the citizens is also a failing by the government drastically affecting some of these service offerings. Corporate bodies now take it upon themselves to provide all the end to end infrastructure required, this comes at a cost often escalated down to the customer.

  • Device financing interest rate averaging 30% is quite high given the poverty rate and other mitigating factors.

Back in November, 2018, amid pomp and pageantry, with a good representation from the Press and general public, MTN partnered with Sterling bank and PayJoy (provider of device lock solution) on Device Financing scheme (DFS).

As widely reported by local news prints, this scheme was meant to enable customers to purchase smartphones and pay by equal installments for up to 6months.

Under the DFS, the smartphones ranging from N25, 000–N400, 000 can be purchased by any customer at its current purchase price plus a 20 percent interest with the Device Financing Scheme.[1] Though further investigation revealed 24% interest rate because of insurance cover, lock and other sundry costs.

On checking performance with the parties 12 months down the line, it was revealed that the scheme had performed woefully with less than 100 of the low range devices sold over the same period. It was clear, either a few things went wrong or may be Nigerians have not accepted Device Financing. Also looking at the Nigerian lending sector, with the few Startups who have ventured into the sector struggling to stay afloat, it could be expressed that most likely, Nigerians do not yet have a credit culture. The culture of Cash and Carry is more predominant where people only save to buy what they need at every point in time.

However, checks revealed some direct causes of the scheme failure as thus:

  • KYC – Customers were meant to submit some minimum Know Your Customer information such as Proof of Address, Bank Verification Number (BVN), government approved identity card (Driver’s license, International passport or National identity card (NIMC). It was discovered that over 90% of the customers failed to provide at least a complete valid KYC.
  • Financial inclusion issue – to show earning capacity and ability to repay the device loan, customers were required to provide a 3-month bank statement from any Bank where they have their account domiciled. It was discovered that most customers had incomes below the expected limit and most even had zero balance for most months.
  • Credit history – Customers were also expected to checkout on the credit bureau data base with a good It was discovered that most had no credit history. These customers were then tagged as risky because they had no credit history to benchmark their behaviour when trusted with the device loan.
  • Open market structure – Devices are primarily sold in Nigeria at the open market. This is a fragmented model where just anyone can start trading on devices. This becomes difficult as Telcos do not control the device sales value chain. It was also very difficult to penetrate the open market channels with this device financing offer massively limiting the reach as only MTN owned stores provided the service.

This clearly paints the picture of the current Nigeria’s devices financing ecosystem; it is still a bit too early to conclude that Device Financing is not the solution to unlock the affordability issue. We need to try out a few other models by new vendors with fresh ideas.

The lack of a consolidated data base of the citizens is also a failing by the government drastically affecting some of these service offerings. Corporate bodies now take it upon themselves to provide all the end to end infrastructure required, this comes at a cost often escalated down to the customer.

Device financing interest rate averaging 30% is quite high given the poverty rate and other mitigating factors.


[1] https://www.vanguardngr.com/2018/11/mtn-partners-sterling-bank-on-smartphone-device-financing-scheme/


Data cost and QoS as factors limiting internet penetration

So, this morning, I woke up a bit early to continue writing this book. I was already in that good writing mood since last night, having gone to been by 1am the night before, not a hindrance in any way, and boom, no internet service.

If I received a dollar each time I have received this message in the past 6months, I would be very rich.

This took a punch out of my morale and now I am trying to figure out which part of the story I could write without much reference to online data. I quickly checked the WhatsApp group for the Internet provider customer service and immediately without scrolling much, it hit me. They had had just another technical issue; as they usually call it. This has become a daily occurrence, oftentimes occurring several times in a day, every day is basically the same and no day passes without an incident. Despite having Fibre to Home service, I only enjoyed the service within the first few months, both speed and quality were spot on. However, it just went downhill suddenly a few months after and has remained epileptic since then. Low quality when available and oftentimes offline.

This is more or less the general picture when it comes to quality of service in Nigeria and it cuts across both the fixed and mobile services.

It is a huge relief however, to note that data cost is not among Nigeria’s numerous problems. According to research by Cable, Nigeria is ranked 11th cheapest data cost in Africa and 58th in the world with an average of $1.39 per 1GB data plan.[1]


[1] https://www.cable.co.uk/mobiles/worldwide-data-pricing/#regions

Impact of Transsion group and cheap smartphones; the implication in cost and durability

There has always been a lagging question of quality and durability hanging on these cheap Transsion devices.

The Chinese Transsion group has completely dominated the smartphone sales market in Nigeria for the last 5 years now. Their three sister brands (Tecno, Infinix and Itel) have completely decimated every competition with their aggressive sales channel roll out and launch of a smartphone model practically every month. They have a cumulative 51% market share at April 2020 despite the impact of Covid19 pandemic that has halted production for a few months.

However, there has always been a lagging question of quality and durability hanging on these cheap Transsion devices. Startups like Uber, and the likes, who need to rely on their app for daily ride hailing activities and driver management have had teething issues with some of these phones as it was reported that the maps didn’t work well and were prone to errors and abuse by fraudulent drivers. They had in the past discouraged their drivers from using such devices as they could not control the stability of their map app on the devices.

The Nigerian Consumer’s persona


I will pull call-outs from different sections of this write up to make up this part. This way, it truly reflects a complete view, which is the objective of this book.

  • Most Nigerians want free stuff! The concept that it takes money to make money eludes most Nigerians.

There is a need for Nigerian consumers to show more empathy to local products especially in the digital sector. This will fuel the growth much needed in the sector. Buy Naija to grow Naija. The issue here could also be related to the fact that most Nigerians love trends and are mostly outward facing. Copying fashion and trends from the western world. And generally, regard local stuff as inferior. They are very aspirational and showy.


There is also the issue of low maturity level of Nigerian internet users who are currently struggling with basic internet access. For Digital services adoption to thrive, there is need to build the internet culture to a much higher penetration and maturity level whereby subscribers are able to consume video and other services and not just the basic internet browsing usage as is currently obtained.

Nigerians seem to turn off intangible stuff like knowledge-based services as opposed to basics (food, shelter, transport, security), show-offs (wears, cars), fun (parties, music shows, luxury cars, drinks, clubs) et. They appreciate brick and mortar business a lot more, and online business also has to mirror the physical process and products being transacted.

Current business case for building local digital platforms


This section will serve to highlight how some Startups in the digital space have fared and how the current ones are performing.

Public opinion

Some public opinions will also be shown to buttress some points on the general digital culture and what most Nigerians prioritize the most in their daily lives.

I recently came across a no-holds-barred candid conversation on Instagram and I could relate with all the comments, having experienced most of the issues mentioned in the course of my entrepreneurship journey. I will share some of the comments here…

It all started with this post

This cannot be stated any better. Nigerians need local platforms that can remit earnings without much hassles. It should also be focused on serving Nigerians (besides the international market). The marketing tools and content packaging should reflect this.


Nigerians need local platforms that can remit earnings without much hassles. It should also be focused on serving Nigerians (besides the international market). The marketing tools and content packaging should reflect this.

 I have experienced the bitter side of this in the course of trying to find a place to monetize my apps, games, books and video course. More on this story in the next chapter.

Then the comments started pouring in. Let me just highlight a few that hit the nail on the head as far as Nigerian digital situation is concerned.

Sad reality; most Nigerians want free stuff! The concept that it takes money to make money eludes most Nigerians.

My personal experience as a Content Creator

Mobile Apps and Games – developer experience

I ventured into mobile apps development back in the early days of mobile apps and games in 2012. Google Play and Apple Appstore had just swung into full operations and out of curiosity and my software programming background, I could not resist the lure.

I came up with a few ideas, bounced them off my wife, friends at the office and settled for a few.

Next, I started looking for a good development team to help me put my burning ideas into shiny apps and games. The search led me to rentacoder.com (now freelancer.com). I posted my ideas and within a couple of days I had a few guys propose to develop for me. I quickly settled for an Indian guy, who eventually became a close friend from then on, though we never met physically till date.

We partnered (shared cost and shared products). I provided half the cost of development, while he hired a team to do the development. Then, there were no app developers in Nigeria (I could be 100% certain of this).

I was so enthused with the whole idea of making forex off Google Play and Apple Appstore, this, especially fueled by all the novella stories of how young guys made fortunes on some games or apps drove me to the extent I was practically blinded to all the issues that were going to affect me in the course of this journey. I never thought everything through. Then came the issues, but good enough as it seemed now with hindsight, I was at a point of no return!

Stringent registration and KYC.

Being a Nigerian, or to a large extent, an African, comes with a few challenges. One is documentation. At that point, I had close to no documentation besides by work ID card. I didn’t even have an international passport (just because I had no need for it then, a young man relatively just arrived Lagos and starting a career).

Like I said, I was already too pumped with enthusiasm to let any challenge stop me, so I quickly registered a limited liability company and registered on the app platforms as a business entity rather than an individual. I had to go through the grueling but eye-opening process of company registration, Tax registration, opening a corporate bank account, including a domiciliary account.

The rest of the process went pretty easy but took weeks. I even had a few calls (about 3 times) with Apple and I was quite elated to be dealing with almighty Apple. It was a very cool feeling! Good enough, Apple accepted to transfer my earnings to my local bank, which was a huge sigh of relief. However, from the stories I heard then, Google Play was the cash cow, not so stringent, and where to make the most revenue. So, I was more excited by Google Play than Apple Appstore.

Payment remittance

My excitement for Google Play never lasted, I discovered my first shocker quite early. I could not get my earnings from my Google Merchant account (for InApp products) transferred to my local Nigerian banks. Google had a list of supported countries and I remember agonizingly checking that list everyday for months. Hoping for a miracle that never came, as at then. The other stream of income (which I realized later was even the bigger chunk) was from mobile ads. Because the best monetization model then was Freemium – i.e. make the app or game free to download and play, sell InApp products such as power boost, gems, bigger guns etc. while serving ads on the overall game real-estate. If a user purchases any InApp product, the ad serving is stopped.

Payment remittance is an issue that still persists till date. Most western digital platforms out there are developed and optimized to serve the western market.


I resolved to surmount this new challenge by all means – like I said, I was beyond return and I couldn’t see myself failing on this. So, I set out to research and do the leg work as well. I noticed they had the US and UK as top of the list (obviously) and I decided to get bank accounts in any of those countries. I contacted a few friends in the US but no luck, I couldn’t get any help, besides, I wouldn’t have really liked to use someone’s bank account for this, given it’s a long-time business I envisioned would make me very rich. Didn’t want to stress or have issues with anyone.

To cut the story short, I went to different banks in Nigeria, all the ones claiming to have branches abroad, I was rejected at all. The most embarrassing was a first-generation bank that had a “foreign” branch in Osborne estate, I called and went there early in the morning. The lady couldn’t hide his disappointment and disgust for my line of business (I think maybe she considered it fraudulent). I had to explain what coding, mobile apps and games, how much I expect to make, what others are doing, Google Play, Apple Appstore were about. I also think, because apps and games were really new then. She was not nice at all, she told me off, that I should just go, that they only seek clients with up to $50k earnings per month (I’m sure she just made that up to piss me off). But then, given the stories I had heard, I was sure I was going to make a lot more than that.  I was aiming for a million dollars actually.

Eventually, after a long search, meanwhile I kept on developing the apps and games, I stumbled on GTBank UK branch (Ajose branch) and that was my saving grace. I rushed there, went through very massive KYC, and strung some funds together to get the GBP5,000 minimum deposit for the saving account and that was it. I had a fresh UK account. Google Play here I come!


Payment remittance is an issue that still persists till date. Most western digital platforms out there are developed and optimized to serve the western market.

My experience as a writer

Below is my experience with trying to sell my first book – Marketing and Sales strategy for Startups

  • Uploaded on Shopify account
  • Pros:
    • I could use my personal domain (http://paulonu.com)
    • quickly set up and accepted Paystack as a payment gateway which directly connected to my local bank.
    • Also, could receive payment in USD.
  • Cons:
    • No DRM, consumer will download my content completely (complete pdf file). This could be freely shared afterwards.
    • There is a subscription fee for the shop (USD 29) monthly for the least package. This becomes difficult to sustain if you are not making sales.
  • Podium, Gumroad, Teachable, ThinkFic and more… – they only accept PayPal and Stripe as payment gateways. PayPal for merchants is not allowed in Nigeria and Stripe too doesn’t work down here.


  • Amazon Kindle
    • I eventually settled for this. They are free to sign up and revenue share on earnings. They also do print copy and deliver. Take off the cost of printing and logistics and share revenue on the balance. Which is perfect for me.
  • Udemy
    • for my video course. Similar model to Amazon and I was able to register on Payoneer payment gateway which I then used for the remittance.

Worthy of mention also is that these platforms (Google Play, Apple Appstore, Amazon Kindle, Rakuten Kobo, Udemy) are all very congested. Your app, game or book would be ranking sub 2m. meaning discovery would be a major challenge. Also given the cost of advertising is astronomical, especially given the hit on Naira over time resulting in constant devaluation.

For my apps journey, well I could say I made about US$30,000 (AdSense revenue contributing 95%. Ads monetizing is the winning model for most mobile games). I also invested about US$20,000 (cost of development and ads).

The average lifecycle of mobile apps is quite short, after 6months, then they become high maintenance and low proceed. Consumers usually move on to other new shiny toys.

Current state of my apps and games – suffice to state here that average lifecycle of mobile apps is quite short, after 6months, then they become high maintenance and low proceed. Consumers usually move on to other new shiny toys. This made me put a break to this line of business since 2015, while I pursue other ventures.

And for context, my games were well crafted and designed, at least to the extent of our technical ability and resources, with good store rating. So, it’s never a quality issue.

These platforms (Google Play, Apple Appstore, Amazon Kindle, Rakuten Kobo, Udemy) are all very congested. Your app, game or book would be ranking sub 2m. meaning discovery would be a major challenge. Also given the cost of advertising is astronomical, especially given the hit on Naira over time resulting in constant devaluation.

And decent download and review count/rating (4.4/5) – this means you could have million downloads but not a corresponding revenue. App monetization is a completely different business from development and upload. It entails understanding customer behaviour with your games, targeting the best audience, improving customer journey, optimizing your ads real estate to minimize nuisance, constant aggressive promotions, understating the drop off points etc. as well as loyalty and reward schemes both online (free gems, power boosts, stronger guns for as rewards for positive behaviour) to offline – proper on-ground activation for your mobile apps and games (merchandising items and branding, events and sponsorships etc.).

I would say I understood these clearly then and I tried as much as my shallow-pocket could allow me.

Experience with Nigerian Mobile Gamers

I was naïve, for every time I ran Facebook or Google Admob ads, I picked Nigeria as no 1 country to advertise to. This was a wrong move and with hindsight, I could have saved some hard-earned USD. Nigerian consumers play with ads a lot, just like some Asian countries – India, Philippines, Malaysia etc. however, the Click Through Rate (CTR), i.e. clicking on a link and allowing it to load so you can interact with the ad end point (my app or game) was abysmally low for Nigerians. So, I ended up losing money on those ad costs. I am not sure I remember sighting Nigeria as a country on my InApp billing or AdSense billing. This shows that they are poor quality users. Quite unlike US, UK, Canada, where you have less users messing with your ads and a lot more revenue in both InApp and ads

I stopped developing new games and updating since 2015 – I had a decent run from 2013 to 2015, making a total of £20, 635.91 (Notice the Pound sterling sign, yeah, I was still using my UK bank account. Eventually, almost when I stopped caring and checking, Google enabled Nigeria developers to receive earing to their local Nigerian banks. But then the developer needed to create a new Google account and start a fresh upload. I eventually did this post 2015, though I had slowed down on Games and Apps.


Also note the revenue for the 6-year period is just $2k. Meaning, you needed to hand-hold your Mobile Apps and Games business. Once you stop updating and promotions, the product is gone. Unless you are comfortable making $20 monthly for an average $14k development investment per game or app.

Key performance indicators (KPIs) you should be tracking in Marketing and why.

One of the biggest challenges for marketers today is measuring the success and profitability of their marketing initiatives. In an increasingly data-driven industry, marketing strategies need to prove their worth and this only happens when you can attribute their success to the key metrics and KPIs that matter.

Marketing KPIs (Key Performance Indicators) are specific, numerical marketing metrics that organizations track in order to measure their progress towards a defined goal within your marketing channels.


The first thing you need to know about any marketing campaign is how much you’re making and how much you’re spending. This is all that matters and everything else simply helps you improve these numbers.

  1. Profit

Your profit represents the amount of money you make on top of all expenses.

I.e. Total Revenue – Total Cost = Profit

If the result is negative, then you have made a loss of that amount!

  • Profit Margin

Profit margin is the percentage of total revenue that is profit. So, if 48% of your total revenue was spent on marketing, your profit margin would be 52%.

  • Return on investment

Return on investment (ROI) is a measure of your profit over costs. It’s also measured in a percentage but – unlike profit margin – ROI can be more than 100%. Your return on investment is calculated like this:

ROI = (Revenue – cost) / cost

So, if you spend £1 and make £1 back, your ROI is 0%. If you spend £1 and make £2, then your ROI is 100% and £3 revenue would make your ROI 200%.

ROI is a good way to quickly gauge and compare the profitability of marketing campaigns. Just keep time frames vs investment amounts in mind, as these can obscure results.

  • Cost per acquisition

Cost per acquisition calculates how much you pay to convert each customer. Essentially, it’s your total marketing spend divided by the number of customers you campaign generates. This is an important metric for setting budgets and refining your marketing spend over time.

  • Revenue growth

This tells you how much your marketing strategies have increased revenue. In other words, this proves how much value your efforts have added to the business.

Knowing the overall profitability of your marketing strategies tells you how effectively they’re working but they don’t really give you any clues about how to improve performance.


  • Customer retention rate

Customer retention rate is simply the percentage of customers who continue to buy from you after the first purchase. However, the way you measure customer retention rate depends on the nature of your products and what you’re selling.

For example, a SaaS firm based on monthly subscriptions will need to measure their retention rate on an ongoing monthly basis for each customer. While a bike repair shop will probably want to measure retention rate on an annual basis.

  • Customer churn rate

At the opposite end of the spectrum we have customer churn rate, which is the number of customers you lose over a certain time frame. Again, this is a vital metric for SaaS or subscription-based service (e.g.: Sky TV) but every business should be tracking customer churn rate on an annual basis to make sure customer numbers are moving in the right direction.

  • Lifetime value per customer

When customers keep coming back for more, it’s important you’re able to attribute a calculated lifetime value to each of them. This gives you a better idea of how valuable each closed lead will be for your business and also helps you set budgets for your customer retention efforts (e.g.: customer service, coupons, etc.).

Calculating a lifetime value per customer isn’t exactly straightforward but many analytics tools will be able to calculate an average figure for you over time.

  •  Cost per lead

Cost per lead is often associated with paid advertising (or cost per click) but it’s important to understand the cost of leads from all of your marketing strategies. This is more difficult with strategies like SEO and content marketing but it’s vital you know how much you’re spending on these strategies if you want to prove their worth.

Once you have a figure for the cost of leads from each of your marketing strategies, you next need to calculate an ROI for each of them. This will highlight their effectiveness and pinpoint areas for improvement.

  1. Lead to customer ratio

Your lead to customer ratio tells you how many leads you need to generate to meet your customer and revenue targets. It also gives you an idea of how effective your marketing strategies are at generating quality leads and how well your sales team is doing at turning them into deals.

A low lead to customer ratio suggests you need to improve the quality of your leads and/or the sale process that follows them.

  1. Conversion rate

Conversion rate should be a familiar term by now. Strictly speaking, your conversion rate will be the percentage of users who convert after landing on any page with a conversion goal.

This is a favorite metric with marketers.

As with all metrics, though, conversion rate can be problematic if you focus on it too heavily. For example, it can’t differentiate between a user who sees your call to action (CTA) and one that doesn’t. Which means using conversion rate at a page level to gauge the effectiveness of your CTA can be misleading.

Start with the right KPIs and metrics

These days, most marketers are swimming in more data than they can handle. The problem is data without context means nothing and prioritizing the right KPIs and metrics is a vital start to measuring your marketing efforts with accuracy.

First, define your goals and then assign the right KPIs that enable you to measure success. Next, identify the metrics that provide the data your KPIs need and filter out anything else. Don’t get bogged down in data that’s irrelevant to the core goals of your campaigns. Everything but the essential data is a distraction.

Adapted from ventureharbour.com

Startup Funding explained – comments on key terms and concepts

Funding is a key element to every startup venture. Often times, a lot of innovative ideas do not come to fruition once the Startup is stifled of needed funds. In order to prepare very well for this Entrepreneurial journey, it’s good to arm yourself with good knowledge of possible sources of funding for your business.

#1: Bootstrap

Okay, I realize this isn’t actually “fundraising,” but sometimes the best funding option is not to seek funding at all, but rather to cut corners wherever you can and work on building your company from your personal savings. Besides saving you money, bootstrapping also helps you to focus on execution and build traction without outside interference. It’s also a means for avoiding dilution and yielding larger profit margins.

#2: Equity Funding

Equity funding is an umbrella term that refers to any means of financing your company in which you receive money in exchange for issuing shares of your stock. There are multiple methods for raising equity capital, but, depending on how you raise this money, you could be giving up anywhere from 1-100% of your business.

Equity rounds include:

  • Seed. Seed financing, as the name implies, is the relatively small amount of money a business needs early on to get started. Usually businesses seeking a seed round are still in the concept stage and need just a small capital infusion to cover expenses until they can start earning revenue. Seed money can also be a helpful tool for attracting future money from bigger investors. Because seed capital is smaller and more of a high-risk investment, it generally will come from friends and family or smaller angel investors.

While borrowing from family and friends can be appealing since it’s less formal than borrowing from a professional investor, it also holds personal as well as professional risks. If you are going to go this route, make sure you formalize the process and are a transparent as possible about the risks of investment.

It can be easier to raise seed rounds from a smaller angel investor, as opposed to going for the brass ring of VC investment. With an angel investor, you will usually pay less of a premium in the amount of the stock or percentage of your company you give up because angel investors have other means of making money and may not be looking for as specific a level of return as venture capitalists might be.

There are downsides to working with angel investors. Often you will need to find multiple investors to give you the kind of capital you need (as opposed to working with just one VC); this can lead to “herding cat syndrome,” wherein you find yourself facing the challenge of managing multiple people and relationships. But, for seed money, your angel investors are still generally going to be a good first bet.

  • Series A. Series A refers to the first round of stock offered to investors during early-stage rounds. Typical Series A rounds fall in the range of $2-5M, offer options for 20-40% of the company, and are intended to support a company through the early stages of building a business, from product development to hiring to marketing. Because the Series A round is for more significant cash, investors are usually professional angel investors or boutique VC firms who specialize in this first round of financing.
  • Series B. Series B refers to second-stage financing. Series B usually happens after the company has already achieved certain business milestones and thus proven its potential viability as a company. This series is also sometimes called a venture round since it is at this point that venture capitalists usually get involved. Venture capitalists don’t just offer a greater capital investment for a given round; there’s also a greater possibility for going back to this same well for future rounds. Also, experienced VCs can offer the kind of networking opportunities and mentorship that unconnected smaller angel investors may not.
  • Series C. As companies grow, they might continue to seek additional funds to meet future milestones. Each successive venture round follows alphabetically down the line (e.g. C, D, E…). VCs and private equity investors support these financing rounds as well as future funding rounds that more established companies may have to look forward to such as bridge financing, expansion capital, late-stage capital, and leveraged buyout.

#3: Debt Funding

Debt funding is also a viable funding option. With debt funding, you borrow cash that you will have to pay back, regardless of whether or not your company is making a profit. While you may choose to incur debt (i.e. borrow cash) from friends and family, there are other kinds of debt funding you could also pursue. The most common are:

  • Venture debt. In some ways this kind of debt feels a lot like equity—at least in the short term. The difference comes in the long term: at some point, you will have to repay this debt, regardless of company performance. For term loans, typically repayment terms are multi-year (with three years being the most common). Non-formula lines of credit usually have a shorter term of just one year.
  • AR line (accounts receivable-based credit lines). If your company has accounts receivable (in other words, you are already generating revenue), this can be a great funding option—cheaper and less risky than other forms of venture debt. There are many lenders who are willing to finance accounts receivable. If you are experiencing a working capital gap between the time it takes to collect payments and make payments, you can leverage your billed accounts receivable at a significantly discounted rate. In other words, you’re essentially taking out a loan on payments yet to be paid.
  • Asset loan. This is essentially a loan that is collateralized by equipment. If you need a significant amount of capital equipment, you can finance these purchases. This kind of loan doesn’t always require that the equipment you are purchasing is specifically tied to the funding you receive. Sometimes you can even use this loan to fund growth in other areas. This kind of debt is pretty hard to get so we don’t see it too often, but it’s worth seeking out if you have equipment needs.
  • SBA loan. These are bank loans guaranteed by the Small Business Administration (SBA), usually with a lower interest rate than that of loans not guaranteed by the SBA. This guarantee doesn’t mean that you are off the hook if your business fails; in the case that your business goes south, you still need to pay back the loan. The main advantage to this type of loan is access: with the backing of the SBA, you might be approved for loans that you wouldn’t have received otherwise. Though none of our clients have received SBA loans, it’s still worth looking into if you’re a new startup in need of funds.

Now that you have a basic understanding of the most common funding types, you’re ready to take your company to the next level. First outline exactly what that “next level” looks like—specifically, what milestones do you hope to achieve? Then use these milestones to create financial projections that you can use to calculate how much funding you will need and what funding type is the best bet for your company.

Managing funds in Startup business

If an Airplane overshoots the runway in an attempt to land, it most likely crashes! Same way with Startup management. If your Startup Overshoots the Runway, it crashes and out of funds means automatic death for any business.

So, you really need to keep a keen eye on your Runway!

I had a related conversation with a good friend of mine two weeks ago. I had received a worrisome email from him a few weeks earlier but I didn’t respond, so he followed up with a call. They had retrenched the whole team in my region (they are a Fintech startup in about 10 countries across 3 continents) and when I enquired, he brushed me off a bit and said it was due to Covid19 impact on their business. I queried further and he said it was decided above, that management felt they needed to protect their Runway to make sure it extends to at least till 2022. They had just raised over $40million and it would be impossible to go back to funds market, besides that would also look back on shareholders view.

Then I decided to make this small note, just a refresher especially for some young and exuberant Startup Founders.


Cash at hand Cash inflow Cash outflow 

This simply means your bank balance.


o   Inflow from revenue

o   Inflow from investors

o   Inflow from self-contribution


o   Operational cost: daily expenses in the course of running the business.

o   Capital cost:  major capital expenses such as purchase of tools, procurement of software and hardware as well as other assets.



Simply means money spent on expenditures.

Burn = Cash inflow – Cash outflow.


Monthly income = $2,000

Monthly expense = $1,500

Monthly Burn = $2,000 – $1,500 = $500/month.

To survive as a Startup in a lean operation mode, burn rate must be kept at minimal as much as possible.

Only spend on relevant things. Focus on decisions that give you scale especially in areas of hiring staff (do more with less resources (automation is a good way to achieve scale with minimal resources).


Runway is how long your company can survive if your current income and expenses were to stay constant. The longer this period, the better the chances of survival for your startup business. Though in reality, income and expenses never remain constant.

E.g. let’s use a Burn value of $5,000/month. Assuming am a new startup and I have not started making any income, though I have a sum of $100k dollars in my bank account.

Runway   =      Cash at hand / Average Burn. Then my Runway = $100,000/$5,000 = 20 months.

To manage and elongate this period, companies usually raise money at different stages of the business.

Growth rate

This is another factor to keep your eyes on. It simply shows whether the startup is growing or regressing. To measure growth rate, see formula below.

Growth rate (%) =       Revenue in month 2 – Revenue in month 1 / Revenue in month1

September revenue = $2,000

August revenue = $1,500

Growth rate = 2,000 – 1,500 /1,500   =   33%