Starting a POS business is not as simple as many think, as proper procedures and safety measures need to be put in place to gain steady transactions for success.
How can you really start a POS business? POS businesses need practical knowledge and deep understanding gotten from experienced peers or people who are in or were in business.
The POS business has a lot of risks and disadvantages that one needs to be aware of before indulging in the business.
Risks such as scams and other security issues are common in the industry.
I recently wrote a very comprehensive article on these risks and you should check it out before you decide to embark on starting a POS business in Nigeria.
If this interests you, here is the link to check it out → Risk POS business faces in Nigeria.
Having seen that, let’s then proceed to discuss what a POS business
entails, how to start, as well as growing in the business until you have
different operating locations.
POS Business In Nigeria: What does it entail?
A POS business involves providing financial transaction services to customers, such as cash withdrawals, money transfers, and bill payments, through the use of a P.O.S terminal.
This terminal is typically a handheld device that processes transactions by connecting to the bank network.
In addition to withdrawals, P.O.S operators can facilitate other transactions such as balance inquiries, fund transfers, and bill payments.
Simple Guide To Start Your POS Business In Nigeria
Market Research
Market research is the foundation of your business success, as it helps you make informed decisions about where and how to operate. Here’s how to go about it:
Start by analyzing the demand for POS services in your intended location. For instance, if you’re planning to set up your POS business in a semi-urban or rural area, the demand is likely to be high due to limited access to traditional banking services.
On the other hand, in urban areas with a higher concentration of banks and ATMs, the demand might be lower. However, certain urban neighborhoods, particularly those with high foot traffic, markets, or busy motor parks, may still present lucrative opportunities.
Visit potential locations physically and observe the daily activities. Are there already many POS operators in the area? If so, how busy are they? You can simply count the number of transactions they handle within an hour or two.
This will give you an idea of the demand and competition. For instance, if a competitor has a steady stream of customers but still experiences queues, it could indicate that there’s room for another POS business.
Engage with potential customers directly. Don’t be afraid to ask people in the community about their current options for withdrawing cash, making payments, or transferring money. For example, you might approach market traders or shop owners and ask how they usually manage their transactions.
Do they have to walk a long distance to find a bank or ATM? Are they satisfied with the services provided by existing POS operators, or do they feel there’s a gap that could be filled? These conversations will help you understand the specific needs of your target customers.
Choose a Reliable POS Provider
The success of your POS business heavily depends on the reliability of the POS terminal provider. In Nigeria, there are several options available, including Paga, Moniepoint, BaxiBox, and FlutterWave.
Each of these providers offers different features, transaction fees, and levels of customer support, so it’s important to choose one that aligns with your specific business goals and operational needs.
Start by evaluating the features each provider offers. For instance, some may offer additional services like bill payments, airtime top-ups, and money transfers. These extra features can help diversify your revenue streams, making your business more profitable.
If you plan to offer a wide range of services, Moniepoint or FlutterWave might be ideal because they support multiple transaction types.
Next, assess the transaction fees associated with each provider. Transaction fees can significantly affect your profit margins, so it’s crucial to understand how these fees will impact your overall earnings.
For instance, one provider may charge lower fees for cash withdrawals but have higher fees for transfers or bill payments. If you conduct 100 transactions daily, even a small difference in fees can add up to a significant amount over time.
Customer support is another critical factor to consider. A reliable POS provider should offer excellent customer support to help you quickly resolve any issues that arise. Imagine your POS terminal stops working during a busy period, and you’re unable to process transactions—every minute lost could mean lost revenue.
Providers like Paga and Moniepoint are known for their strong customer support, offering multiple channels for assistance, including phone, email, and live chat.
It’s worth testing the responsiveness of their support teams before committing to a provider. Look for reviews and testimonials from other POS operators who have used their services.
Secure Your Initial Capital
Securing your initial capital is crucial when starting a POS business. You’ll need funds to purchase the necessary equipment and cover operational costs. Typically, a minimum of ₦50,000 is advisable to get started.
This amount should be sufficient to acquire a POS terminal, which is the core tool of your business. If you need to rent a space, consider this in your budget as well. Additionally, you’ll need some working capital to handle customer transactions, especially during the early stages when cash flow might be tight.
It’s important to ensure that you have enough capital not just to start but to sustain your business in the initial months. Consider all possible expenses, including any security measures, marketing efforts, and the possibility of unforeseen costs.
If possible, try to secure more than the minimum required amount to provide a financial cushion, allowing you to handle unexpected situations without jeopardizing your operations.
Registration and Licensing
To operate legally, you need to register your business with the Corporate Affairs Commission (CAC) in Nigeria. To make the process of registration and licensing as smooth and stress-free as possible, start by focusing on the essentials by getting your business officially registered and ensuring you have the right licenses.
First, you’ll need to register your business with the Corporate Affairs Commission (CAC) in Nigeria. This might sound daunting, but it can be straightforward if you follow the right steps. You can either do this online through the CAC’s website or visit their office if you prefer face-to-face assistance.
The online process is relatively simple as all you have to do is choose a unique business name, fill out the required forms, and pay the registration fee.
If you’re unsure about any part of the process, there are numerous guides and resources available online, or you can hire a business consultant to handle the paperwork for you. This way, you ensure that everything is done correctly and efficiently.
Once your business is registered, the next step is to obtain any necessary licenses or permits from the Central Bank of Nigeria (CBN) or other relevant authorities. This is crucial because operating without the proper licenses can lead to fines or even having your business shut down.
The CBN usually has clear guidelines on what is required for POS operators, including documentation and application processes.
Again, you might consider hiring a professional who is familiar with CBN regulations to assist you, especially if you find the legal jargon overwhelming. This can save you time and reduce the risk of making costly mistakes.
Additionally, ensure you’re compliant with any local government regulations, which might vary depending on your location. Some states or municipalities may have additional requirements for businesses operating in their jurisdiction. Checking with local authorities early on can prevent unexpected issues later.
Set Up Your Business Location
Ensure that your location is secure and easily accessible to your target audience. If renting a space is not feasible, consider operating from a small kiosk or mobile setup. The key is to choose a strategic spot where you can attract a steady stream of customers.
Start by identifying areas with high foot traffic, such as busy markets, motor parks, or shopping centers. These locations are ideal because they naturally attract a large number of people who are likely to need quick access to financial services like cash withdrawals or bill payments.
Observing these areas during different times of the day can give you a sense of peak activity periods and help you choose the best spot.
Security is also a top priority when selecting your location. Ensure that the area is safe for both you and your customers, as this will encourage repeat business. If possible, opt for a spot that is well-lit and close to other businesses or security personnel. In busy urban areas, being near other businesses can also help create a safer environment.
Accessibility is another important factor. Your location should be easy to find and convenient for your target audience to access. For example, if your customers are primarily market traders, setting up close to the market entrance or in a central spot within the market would be ideal.
If you’re targeting commuters, positioning your business near a motor park or a bus stop would be more effective.
If renting a space isn’t within your budget, consider starting small with a kiosk or a mobile setup. A kiosk can be placed in a strategic spot without the need for a full shop rental, keeping costs low while still giving you visibility.
Alternatively, a mobile POS operation allows you to move to different locations throughout the day, bringing your services directly to where they’re needed most. This flexibility can be particularly advantageous in areas where foot traffic fluctuates during the day.
Marketing Your POS Business
Promote your POS services to attract customers. Word-of-mouth marketing, flyers, banners, and online advertising can help you reach a wider audience. Offering promotions or discounts on certain transactions can also draw in more customers, especially during the early stages of your business.
Marketing your POS business is essential for attracting customers and establishing a strong presence. Start by leveraging word-of-mouth marketing—provide excellent service so satisfied customers naturally recommend you to others. Encourage referrals by offering small incentives like discounts on future transactions.
Distribute flyers and set up banners in high-traffic areas such as markets and motor parks. Design these materials to clearly communicate your services, location, and any special offers.
Flyers can be handed out directly to potential customers, while banners increase visibility and draw attention to your business.
Online advertising is another effective strategy. Use social media platforms like Facebook, Instagram, and WhatsApp to promote your services. Create engaging posts about your offerings and special promotions, and consider running targeted ads to reach a broader audience in your area.
To attract customers, especially when starting out, offer promotions or discounts. For example, provide reduced transaction fees for the first month or run limited-time offers such as “No Fee Wednesdays.” These promotions can entice new customers to try your services and encourage repeat business.
Build Good Relationships with Banks
Engage with your bank’s relationship manager to discuss your business needs. Establishing a good rapport with them can be beneficial when you need quick access to cash or face issues with your POS terminal.
A positive relationship means you’re more likely to receive prompt support and favorable terms.
Ensure regular communication with your bank to stay informed about any updates or changes in banking services that could affect your business. Maintaining open lines of communication also helps in resolving any issues swiftly and efficiently.
By fostering a strong and proactive relationship with your bank, you ensure a reliable supply of cash and efficient resolution of any operational challenges, which contributes to the smooth running of your POS business.
Expand and Grow Your Business
Once your POS business is established and generating a steady income, it’s time to think about expanding and growing your operations. Expansion can take various forms, and each approach can help you increase your revenue and customer base.
Consider opening additional kiosks in different high-traffic areas. Look for locations that have similar characteristics to your initial site—places with significant foot traffic and a demand for financial services. This could include new markets, shopping centers, or busy transit points.
Each new location should be chosen based on thorough market research to ensure it meets your business criteria and has a strong potential customer base.
In addition to physical kiosks, think about offering mobile POS services. A mobile setup allows you to reach customers in various locations, providing flexibility and the ability to tap into different markets. Mobile POS services can be especially effective in areas where establishing a fixed location might be challenging or costly.
For example, you could set up a mobile unit that travels to local events, trade fairs, or community gatherings, bringing your services directly to where people need them.
Diversifying your service offerings can also significantly boost your revenue. Expand beyond basic cash withdrawals to include additional services such as utility bill payments, airtime top-ups, and money transfers.
These services cater to a broader range of customer needs and can attract a more diverse clientele. Offering bill payments and money transfers, for instance, can appeal to customers looking for convenient ways to handle various transactions without having to visit a bank or utility office.
Monitor the performance of each new kiosk or service addition to ensure it meets your business goals. Use data analytics to track transaction volumes, customer preferences, and revenue from each location or service.
Track and Monitor Your Business Performance
Regularly monitor your business performance by tracking transactions, expenses, and profits. This will help you identify areas where you can improve efficiency and profitability. Additionally, staying informed about industry trends and customer preferences will allow you to adapt and stay competitive.
Tracking and monitoring your business performance is essential for maintaining and improving the efficiency and profitability of your POS business. Start by regularly reviewing your transaction data to assess the volume and types of transactions being processed. This will help you understand customer behavior and identify popular services.
Keep a detailed record of your expenses, including operational costs, equipment maintenance, and any other overheads. Regularly reviewing these expenses helps you spot areas where you can cut costs or improve your financial management.
If you notice an increase in maintenance costs for POS terminals, it might be worth evaluating if a different provider or more robust equipment could offer better long-term value.
Monitoring your profits is crucial for assessing the overall health of your business. Compare your income against your expenses to calculate your profit margins.
Regular profit analysis helps you understand which services are the most profitable and where you might need to adjust pricing or promotional strategies.
Conclusion
Starting a POS business in Nigeria is a viable entrepreneurial venture, especially in areas with limited access to banking services. However, like any business, it requires careful planning, capital investment, and ongoing management to succeed.
Frequently Asked Questions (FAQs) About Starting a POS Business in Nigeria
Is POS a profitable business in Nigeria?
Yes, POS is a profitable business in Nigeria, particularly in areas with limited access to banking services. With the right location, customer base, and proper management, POS operators can earn a steady income through transaction fees. However, profitability also depends on factors such as competition, operating costs, and transaction volumes.
Can I start a POS business with ₦50,000?
Yes, you can start a POS business with ₦50,000, but this may limit your options. This amount is often enough to acquire a basic POS terminal and cover initial setup costs. However, having additional capital can help you secure a better location, invest in security measures, and manage operational expenses more effectively.
How much do POS operators make in Nigeria?
Earnings for POS operators vary based on location, transaction volume, and the range of services offered. On average, operators can earn between ₦5,000 to ₦15,000 daily in busy areas. In less busy areas, the earnings may be lower. Monthly earnings can range from ₦150,000 to ₦450,000, depending on the factors mentioned.
How to calculate profit in a POS business?
Profit in a POS business is calculated by subtracting your total expenses (including rent, salaries, transaction fees, and security costs) from your total revenue (the fees earned from each transaction).
It’s essential to keep accurate records of all transactions and expenses to determine your profitability accurately.
What are the types of POS businesses in Nigeria?
There are several types of POS businesses in Nigeria, including:
- Standalone POS terminals: Operated in fixed locations such as kiosks or shops.
- Mobile POS terminals: Carried around by agents who offer services on the go.
- Integrated POS services: Offered as part of a larger business, such as a retail store or petrol station.
Can I start a POS business with ₦20,000?
Starting a POS business with ₦20,000 may be challenging, as this amount is usually insufficient to cover the cost of a POS terminal and other necessary startup expenses. However, you could start with a very basic setup and gradually reinvest your earnings to grow the business.
How to start a POS business with Moniepoint?
To start a POS business with Moniepoint, you’ll need to register as an agent on their platform. This involves filling out an application form, providing necessary documentation, and purchasing a Moniepoint POS terminal. Once approved, you can start offering POS services using Moniepoint’s network.
Which bank is best for a POS business in Nigeria?
Several banks in Nigeria offer POS services, each with different features and benefits. Some popular options include First Bank, Zenith Bank, Access Bank, and GTBank. The best bank for your POS business depends on factors like transaction fees, customer support, and the availability of terminals. It’s advisable to compare the offerings of different banks before making a decision.
What are the requirements for starting a POS business in Nigeria?
The basic requirements for starting a POS business in Nigeria include:
- A registered business name: Obtain this through the Corporate Affairs Commission (CAC).
- A valid means of identification: Such as a National ID, Voter’s card, or Driver’s license.
- Bank account: Preferably with the bank you intend to partner with for POS services.
- Initial capital: For purchasing the POS terminal and covering operational costs.
- A secure and strategic location: To attract and serve customers effectively.
