Founding of Rainoil: Lessons for would-be entrepreneurs – Gabriel Ogbechie
The business world is arguably the best business school – away from the lecture halls of the formal business schools. It is where you learn, through practical application, what you may not learn in the classroom. Gabriel Ogbechie, the chief executive officer of Rainoil, one of Nigeria’s leading operators in the downstream sub-sector of the oil industry, will tell you this.
Ogbechie’s experience as an entrepreneur, growing a company from mustard seed to an oak, is a lesson worth learning, by anybody that wants to successfully navigate the turbulent waters of business. His story is a study in doggedness, determination and the unwillingness to take ‘No’ for an answer. It’s also about discipline, especially in money management, a major weakness that has seen the downfall of many an otherwise successful man.
He tells you that the best way to succeed in life is not to copy the consumption pattern of others, and draws analogy from two ladies who carry a handbag each, one, a N100, 000 Chanel, and the other, a DG that cost N150, 000, stressing the fact that both are handbags. Or two men who wear Tommy Hilfiger and YSL, wondering if both are not shirts.
He identifies the proclivity to eat both the fruit and the seed as the bane of the progress of many business men and women.
Ogbechie is not a teacher. He is a businessman. But he had opportunity to share his experience in a lecture titled, “Running a Successful Business in Nigeria: My Experience”, at the Fifth Annual Yes International magazine Lecture/Cocktail Party. The lecture turned out to be a hands-on approach to what you would get in some business schools as theories. His experience is a book of lessons for anybody desirous of learning the ropes in business.
A 1987 graduate of Production Engineering from the University of Benin, Ogbechie worked briefly as a factory engineer with Sharada Edible Oils Limited in Kano where he did his National Youth Service Corps programme before moving to Lagos to take up appointment with PriceWaterhosueCoopers. He later moved to Ascon Oil where he worked for five years before he began to think of an alternative to paid employment – the first lesson.
Seek a better alternative
Many are stuck in paid employment today not because they find fulfillment from their jobs, but due chiefly to the fear of the so-called ‘unknown’. To these people, therefore, the jobs they hold – boring and unrewarding as they may be – is the comfort zone that they can’t afford to leave.
Ogbechie does not belong in this category. He believes that anything one can do to fetch him the same income he earns as a worker can take the place of his work. That is one of the lessons he learnt on the way to starting his own business, and it is a major lesson he wants would-be business people to learn.
He had been working with Ascon Oil on a monthly salary of N30, 000, an income that was considered reasonable in 1992 for a young graduate who left the university barely five years earlier.
“So I asked myself, ‘Gabriel, what else can you do to make N30, 000 a month?’”, he recalls, when the idea to seek an alternative source of income came to him. The question came to mind because he believed then, as he does today, that anything people can do to make the same amount they earn as salary can take the place of their income.
“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 me your time from eight to five, perform these duties and we will give you N200, 000 at the end of the month’”, he said. “Anything you can do to make that N200, 000 can take the place of your work”.
He told himself that if he could sell one truck of diesel, he would make one naira per litre. And since a truck of diesel cost N30, 000 at that time, it meant he could earn N30, 000 from one truck, the same amount he earned as salary every month. He needed to take the first step by incorporating a company.
Ogbechie went to see a lawyer friend who was also a pastor, to help him in the search for a name for his company. The friend toyed with many names, including Gab Oil, using the first three letters of his first name, until he arrived at Rain Oil, with the explanation that rain symbolizes blessings. But rather than have Rain and Oil as separate names, they merged the two words to form Rainoil, which he incorporated in November, 1994.
Taking the first step
Having registered a company, the next step Ogbechie needed to take was raising capital for take-off. He set out to raise N300, 000 through loans, but met brick walls wherever he turned to. The responses were the same. “Come here today; come here tomorrow”. He learnt his first lesson: “People rarely give money to those who don’t have”.
Ogbechie commenced the effort to raise money by first buying the shares of some blue chip companies on the stock market, using the services of his stock broker. He bought 1,000 units of First Bank shares at N1, 500 and 800 units of Nigerian Breweries shares, as well as others. He still couldn’t raise the N300, 000 he needed.
After a long period when he was convinced he had enough stocks to sell, he dusted up his capital market file, calculated the worth of stocks he held in different companies, and was shocked when he found that they could fetch him N497, 000 – more than what he needed to hit the road and begin the journey towards entrepreneurship.
“Now, recall that I had a hypothesis that if I sold a truck of diesel, I would have N30, 000”, Ogbechie told his captive audience. “I needed to go into the market place to test this hypothesis”.
His first port of call was First Aluminum, at Ogba, Ikeja, Lagos, where his determination, never-say-die attitude and skills as a salesman were put to test. The company had been patronizing the big players like Mobil, Total and Unipetrol (now Oando), and did not see why it should consider an LPO from a company it had never heard of. The company’s general manager told him that much. That explanation fell on deaf ears.
“I did all the marketing I could do that day, but he wasn’t ready to sign the LPO”, Ogbechie said. “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’”.
The business fetched him N45, 000, not N30, 000 as he had initially anticipated, because by the time he did the supply, the price of diesel had gone up. The experience remains indelible in his mind, such that many years down the road, he still remembers such minute details as the bank on which the cheque was drawn – the then Societe Generale Bank – on Oba Akran, Ikeja.
Ogbechie did other supplies that bolstered his income and increased his savings towards ensuring a smooth take-off for Rainoil, while still working at Ascon Oil. His decision to resort to moonlighting was a practical application of the advice of Warren Buffet, the American billionaire retailer, who said the best way to test the depth of a river is to put one leg in it, not the two.
“By May, 1997, it was clear that it was sustainable, so I left my job to face the business squarely”, he Ogbechie said. “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”.
Ogbechies says the mistaken notion that capital for the take-off of a business must come from bank loans accounts largely for the inability of many potentially successful businessmen and women to make headway in their businesses. His advice is that personal savings should form the seed capital for any business venture.
“If you want to raise capital, raise capital from personal savings”, he says. “I will ask you a very personal question: What is the difference between N50, 000 and N40, 000? A lot of people will say N10, 000”.
He said two employees who earn N50, 000 and N40, 000, respectively, may be broke at the end of the month, but the latter would not die because of the difference of N10, 000. “So, why can’t the guy that earns N50, 000 save N10, 000”? The answer, he says, lies in consumption pattern.
Ogbechie gave an analogy from the mango fruit. “When you eat a mango, you enjoy it; at some point you see the seed”, he said. “Are you supposed to eat the seed? No. You can’t eat the seed. You see, that seed, when you consciously till the ground and plant it or you throw it away, as long as it touches sand and germinates, and when it germinates and grows, it gives you another mango tree. That not only gives you a complete fruit of mango, but gives it to you year after year, in perpetuity”.
He argues that if an employee that earns N50, 000 cannot save N10, 000, it will be difficult for him to save N50, 000 if he earns N500, 000, because as his income increases, so also will his taste and appetite expand to accommodate the extra income. He debunks the erroneous belief that banks don’t give loans, saying on the contrary, financial institutions give loans if the borrower understands the workings of the financial industry. “Banks are desperately looking for people to give money to, because banks won’t make money except they give out loans”.
Ogbechie advises startup businessmen and women to begin with equity. “The word capital stands for owner’s equity”, he says. “Banks don’t give you capital; banks bring debt into the business. You start your own business with equity. As the business begins to expand, you gradually begin to introduce debt into the business, to help you grow the business”.
He explains the intricacies of obtaining a bank loan, which accounts chiefly for people’s reluctance to approach banks for loans. In any case, what banks give out as loans are actually other people’s monies, which must be handled with as much security as possible.
“You know, when you go to the bank and the bank says ‘give me your one year bank statement’, what the banker wants to see, ‘you’ve been with five million naira, what have you done with five million naira’? So, for the past one year, what is your credit and debit in your account,? Ogbechie said. “You go to the bank and say ‘I’ve been dealing with five million, but in the past one year, I have been able to make extra five 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”.
Ogbechie identifies investors as another source for raising capital for a new business. He says it might be easy to get other people to invest in the business if the business idea is wonderful and attractive.
“Another one is family and friends”, he says. “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”.
Rainoil currently owns 40 petrol stations across Nigeria, serviced by 80 tank trucks that distribute petroleum products throughout the country and six ships that bring the products into the country. The company operates two tank farms in Oghara, Delta State and Calabar, Cross River State.
Ogbechie , the quintessential businessman with a vision, plans to build a refinery in the country. He believes that the demand for dollar for importation of petroleum products accounts for 30 per cent of the total dollar demand in the country.
A very compassionate man, Ogbechie believes that if one has been blessed by God and benefitted from the society, he owes a moral obligation to give back to the society in whatever way he can repay His kindness. “The more money you get, the less your personal needs, while the need grows to help others”, he says. It is the reason the company has a substantial annual budget that is earmarked for payment of school fees, hospital bills and sundry needs of the less privileged.
If there is any regret Ogebchie has in life, it is not having the opportunity to meet Nelson Mandela, the late South African president and international icon. He admires the symbol of anti-apartheid struggle for his large heartedness and un-African nature – for coming out of prison after 27 years of incarceration to forgive his traducers, and also for shunning the temptation to hold office for more than one term, even the country’s constitution guaranteed him that right.
A chance meeting with Mandela’s widow, Graca Machel, on a flight, offered him the opportunity to come close to realizing his dream of meeting the late sage, as he stood up from his seat and worked to where she sat to give her a handshake.
Ogbechie wishes he could be Barack Obama, the immediate president of the United States. His admiration for the first black American president stems from the latter’s ability to break several myths, due to his belief that ‘yes we can’.