Welcome to Kanselor University. Today, we will be sharing some key insights with you from the unbelievable but true death of Etisalat Nigeria so that others can learn from it.
A few months back, we woke up and heard that Some banks wanted to take over Etisalat Nigeria. Nobody believed it including the staff of Etisalat Nigeria but today, the last memory of Etisalat Nigeria has been wiped off the slate of Nigeria telecommunication sphere. So, what lessons can we learn from this.
These are some lessons that you can pick and apply to your business from this experience.
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1. KNOW THE WORST THAT CAN HAPPEN AND PREPARE FOR IT- Etisalat Nigeria failed to ask itself what was the worst thing that could happen to its business. They took a loan at outrageous terms during an economic bubble and believed that things will remain rossy in Nigeria. Their miscalculation resulted into a debt of over a billion US dollars
LESSON: KNOW THE WORST THAT CAN HAPPEN TO YOUR BUSINESS AND TAKE EVASIVE ACTIONS TO AVOID THEM. I repeatedly ask our students this question. There was a student that I discussed this with a few years back and we came up with two things that can destroy his business. After that I called him repeated to do something about them. A few days ago, he came to me sweating profusely. One of the worst thing we discussed that could destroy his business had happened and he had not planned for it. Today he is spending millions trying to resolve a matter that would not have cost him up to few hundred thousand. I have to admit that I am guilty of this too. There are two factors that I just realised can destroy one of my businesses and for months I have done nothing about it. Today, I have decided to start doing something about them
2. LEARN FROM EXPERIENCE OF OTHERS AND NOT YOUR OWN EXPERIENCE - Warren Buffet was once asked what was the secret to his massive business success. His answer was that he studied the mistakes of big organisations that killed or almost killed them and makes sure he avoided any situation no matter how attractive that may lead him to experience the same fate that the companies that made the mistake experienced. There are thousands of cases of companies that were killed because they borrowed massively during a bubble and could not service the load when the economic bubble burst. Etisalat Nigeria had enough evidence that the financial line it was towing was a very dangerous though lucrative one. They chose to follow the dangerous path. Today, they are paying the supreme price
LESSON: DO NOT PLAY RUSSIAN ROULETTE WITH YOUR BUSINESS- Make sure when you are considering the huge benefit that a business transact will yield, make sure that the risk no matter how remote it may look, is not what can destroy you. Warren buffet said its better to play in the middle of the football field because the chances of you kicking the ball out will reduce unlike when you always play by the touchline.
3. YOUR BANKER IS NOT YOUR FRIEND - I know that by now, the former owners of Etisalat Nigeria will be shocked by their experience with their bankers. They would have assumed that their bankers will understand that the economic situation that made them default was way beyond their control. But the bankers were focused on their money. Never make the mistake of assuming that your bankers will come to your aid when something terrible happens to your business. Etisalat Nigeria made the mistake of making this deadly assumption
LESSON: Understand that something terrible can happen to your best laid plan so never over expose YOURSELF to a degree that the live and death of your company is in the hands of another person especially your banker. I recently was presented with a list of properties that Nigerian banks wanted to auction. These were properties that some Nigerians used to take loans to import products that they could not sell off to meet their obligation. No matter how friendly your banker may appear, THEY ARE NOT YOUR FRIENDS.
4. ITS NOT ALWAYS THE BEST TO TRY TO BEAT YOUR COMPETITOR - One of the worst mistakes of Etisalat Nigeria was their goal to become the industry leader. This made them borrow massively to fund their massive expansion. The irony of it is that they were doing well in there position as telecom company in Nigeria. Funny enough, there is enough evidence where big companies in Nigeria died because they wanted to beat their competitors. For instance, Skye bank Nigeria WAS DOING VERY WELL UNTIL IT DECIDED TO BECOME A TOP TIER BANK. It borrowed massively to acquire MAINSTREET BANK then the recession hit Nigeria and they collapsed. It took the CBN to rescue the bank. Bank PHB was not so luck when it borrowed to acquire spring bank and that debt killed it.
LESSON - Dont compare yourself to an industry leader and strive beyond your capacity to overtake a leader. Sometimes, its safer to stay behind a leader and live than to try to become bigger and die.