According to a report by Weetracker’s The Better Africa, 61% of small businesses failed in Nigeria from 2010 to 2018. Despite the significant role these businesses play in modern-day poverty reduction, economic emancipation, and overall well-being, some inevitably shut down during the first five years of existence.
It was found that owners of these failed businesses did not do due diligence before starting the businesses, coupled with other factors. Here are seven reasons some small businesses fail in Nigeria.
Duplicating Other Businesses
Duplicating what is in existence with nothing to make your business unique is tantamount to failure. Some businesses in Nigeria failed as a result of this. They compete against companies that have a market presence and a brand name. Attempting to emulate other firms without first consulting or making your market research may sometimes result in more harm than good, especially if the goal is to succeed or increase sales.
Customer Service/Support is abysmal
Customer service is keen for a business to survive. Customers who are poorly treated or not appreciated usually give the business negative reviews that reduce the value of the business and patronise others. Such a business, with time, will die a natural death as a result of the loss of many clients and prospects. Customers that feel unimportant to a company will seek out another company that will appreciate and care for them.
Misappropriation of Funds
Lack of accountability and management of business finances has seen the end of some businesses in Nigeria. Some companies don’t keep track of their sales or how they spend their money. Some utilise their profits to meet personal or family necessities. Failure is inevitable when corporate funds are diverted to non-commercial purposes.
Inability to Manage Growth-Induced Changes
Some small businesses developed at a very alarming rate that tends to make them fail in Nigeria. This is because the expansion and changes bring about obstacles that inadvertently affect businesses. These obstacles include funding, billing, resource usage, technology, among others. For instance, GoMyWay and Efritin folded up after growing quickly and could not earn the funds needed to continue operations after 16 months.
Failure to Recognize and Appreciate Market and Customers
Nigeria’s market is complicated, and to conduct business in it, you must first comprehend its competitive market and people’s purchasing patterns. Some small businesses fail because of a lack of understanding of the markets and consumers. They are oblivious to who their consumers are and how much they are ready to spend on a product.
Inability to Communicate Value
The inability to identify value propositions is one of the reasons small businesses fail in Nigeria. They cannot comprehend and effectively explain their products or services to customers. Without synergy between the value and what the market requires, these enterprises failed.
Lack of Focus
Investing in many things at once is not a good idea for a business. Multitasking is good but know your limit. Your focus should be on product quality, delivery, and follow-up to provide excellent service to your consumers.
Division of focus made some business owners start initiatives that were not part of their business plans. This has led to the doom of some businesses. Some small enterprises, in this case, ran out of capital and became unprofitable. To focus on quality rather than quantity, it’s sometimes essential to say no to some ideas.