Nobody wants to fail, whether in business or at anything. But sometimes, our actions or inactions inevitably lead us on the path of failure. Business failure is something an entrepreneur will probably experience more than once.
In Nigeria, if you have been running your business for the past five years, it means you have achieved what 80% of startup founders couldn’t do.
The failure rate for startups in Nigeria, Africa’s biggest economy, has averaged 61 per cent from 2010 to 2018, according to The Better Africa report, by Weetracker.
The top 10 countries that experienced the highest failure rates among startups were Ethiopia (75%), Rwanda (75%), Ghana (73.91%), Zimbabwe (66.7%), The Democratic Republic of the Congo (66.7%), Tanzania (62.50%), Nigeria (61.05%), Senegal (58.3%), Somalia (60.0%), and Kenya (58.7%).
What then could have been the causes of business failure in Nigeria? Business Elite Africa highlights 7 traits or mistakes that can guarantee failure in business.
1. Poor market survey/feasibility study
Market surveys are crucial to understanding where to test new products or services. Market surveys provide marketers with insights to analyse the scope of success of upcoming products and make changes accordingly.
You have to find an opening or unmet need within a market and meet it rather than join the bandwagon. It’s a lot easier to fill a market gap instead of struggling in a saturated market or attempting to invent a new demand for your product.
2. Too little financing/poor budget management
It is no news that we cannot take away the importance of funding in starting or keeping a business. The lack of funds and poor management of the available funds has also contributed to business failure in Nigeria.
According to Practical business skills, a business advisory platform, creating a budget is an essential pillar of your overall success and security. It allows you to oversee and better understand whether your business has enough revenue to pay its expenses.
Using a budget can help you make more informed financial decisions. If you have started a company and things aren’t working out, and you have little capital and a struggling business, you’re not in a good position to ask for another loan.
If you’re realistic at the beginning, you can plan to start with enough money that will last you to the point where your business is up and running and cash is flowing in.
3. Lack of plan for the business
Whether you’re starting a small business or exploring ways to expand an existing one, a business plan is an important tool to help guide your decisions.
Think of it as a roadmap to success, providing greater clarity on all aspects of your business, from marketing and finance to operations and product or service details.
Businesses that plan grow 30% faster than those that don’t. For existing small businesses, a business plan should be updated annually as a way to guide growth and navigate the expansion into new markets.
Studies also show that nearly 71% of the fastest-growing businesses have business plans, indicating that even existing businesses can benefit from updating their plans.
4. Lack of business flexibility
Tayo Adekunle, a startup owner, said one of the many mistakes he made when starting was not being flexible and adjusting to trends in his industry.
“In 2018, when I started my business, I had my plans and was ready to run with it but I failed to update my plans with industry-standard,” he said
“Instead, to focus on the changes in customer needs and wants, I was more concerned with what I have planned out.
“That lasted for 2 years until the light came for me, and I started to understand that customers need changes and even though I need not to necessarily change my business, but update it with the latest technology to serve them better.”
Being rigid is indeed a business killer. You need to monitor the market and know when you may need to alter your business plan.
5. Government policies
Sadly, this is one thing that is out of any business owner’s control. It is no news that Africans are not so lucky in terms of political leadership.
The moment your business starts to show signs of success, one government policy could crash it all down.
The Lagos state government was quick to congratulate Flutterwave after the company’s latest funding. But the question is, what role did the state government play in this success?
Let’s talk about how the same state government killed about three to four startups with just one policy. It’s a familiar story.
The Lagos state government shocked everyone when it banned motorcycles from plying most Lagos roads. This meant about 3 to 4 startups (Gokada, Max. ng, Oride) were forced to innovate or shut down.
6. Expanding too fast
If you’re expanding the scope and focus of your business, make sure you understand your new product, service, market and intended consumer as much as possible.
When a business expands too fast and doesn’t painstakingly conduct a market research and deploy the right strategy or plan well, the business is more than likely going to fail.
7. Black tax
Black tax is a term used in South Africa for money that a Black (or other people of colour) professional provides to their family every month outside of their living expenses. It’s usually out of obligation. It is caused by continued economic imbalance that can be traced back to apartheid and slavery.
Family members tend to depend on the few people who “make it”. And when this “successful” family member has a business to thank for his success, such business may ultimately hit the rock if the business owner doesn’t draw the line between his business money and personal finance.
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