10 Reasons Why Businesses Fail in Nigeria
There are so many entrepreneurs and businesses in Nigeria. Meanwhile statistics has it that 4 out of every 5 businesses in Nigeria fails within the first 3 years of operation – that’s a whopping 80%! Sadly, many entrepreneurs never have considered it important to find the reasons why these businesses have failed and take some lessons from the failures of other while preventing the repeat of similar occurrences in their businesses. Anyone planning to start a business should do a thorough research of the business line, find out the people who are into it, their successes and failures and also know why they failed. Among numerous reasons why businesses in Nigeria fail, this article is going to address 10 top reasons.
1. Wrong mindset
Nigeria is a country filled with struggle and hustle and every individual is looking for possible means to make ends meet. While some people believe in working in corporate organizations, some see it as servitude and slavery and want to be their own boss. Becoming one’s boss should not be the primary reason for starting a business. You should rather start a business because you have seen a gap that you want to fill, or a problem to which you want to proffer solutions.
A similarly wrong mindset which is a major reason why many businesses fail is, starting a business solely because of money. Money should not be your only motivation for starting a business, value addition should be. What solution are you creating, and what impact is your product going to have on the lives of your customers?
2. Lack of strategy
You do not just go into a business without a laid-out plan. A strategy is simply a plan of action intended to accomplish a specific goal. A vision or passion isn’t enough to make a business successful, there has to be an actual plan, written out clearly. For example, if you want to run a boutique, how do you want to get your products, when and where? All these things should be stated out. Who will be in charge of getting the goods and marketing them? Don’t make the mistake of launching out without a definite plan.
So many entrepreneurs and SME’s just go ahead to start their business without a strategy and hence their business fail, many times before it even starts.
3. Poor Management
A business will definitely fail if it is badly and poorly managed. The business owner should possess some sound management skills to be able to control both human and material resources. Examples of the soft skills that are useful in doing this are communication skills, emotional Intelligence, human resource management, proper planning and execution skills, project management and so on.
4. Lack of Finances
Sadly, in Nigeria today, finance happens to be one of the top setbacks for small scale businesses in the country. Meanwhile, for a business to grow well, there is a need for appropriate and consistent funding. So many businesses are denied access to loans and even contracted jobs. If you are considering starting a business you should consider having a dependable source of funding so things don’t get tightened up along the way.
This is often overlooked by a lot of business owners or entrepreneurs. A business should be run like a separate entity from you. So, there should be a very high level of accountability. The cash flow should be properly documented and monitored. Many business owners make the mistake of mixing personal money with the business money and so the cash flow and business finances cannot be traced. This will inevitably and eventually lead to business failure.
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6. Inadequate market research
Businesses that fail these days were probably not properly researched before started. You must have details of your target market before starting a business. Conduct customer surveys, know what your potential buyers want to buy and how they want to buy it. This is will give you an idea of how your business should be properly structured.
7. Inconsistency/Lack of passion
So many businesses fail because the person who started them lacks resilience. The “Why” behind your business should be the very force that keep you going even in the midst of problems. Challenges and problems will definitely show up on your way to success but you need to build resistance against anything that may want to distract you and stop you from achieving your set goals. If you’re planning to start a business, it becomes very critical to pay attention to this point.
8. Lack of Focus
So many business owners want to do so many things at the same time. This will not work because when your attention is shifted from the main idea and your main goal, so many irrelevances will come in thereby depleting the energy that could have been used in pursuing your goals. Have a brand identity, choose your niche carefully and stay true to it. Although this might be a bit difficult when you see other business thriving, however you need to choose to be known for something specific.
9. Unfavorable Government policies
It is not a news that Nigeria government policies do not encourage small scale business and young startups. Many regulations and rules not only discourage businesses, they have succeeded in making a lot of businesses collapse. Sadly, some of these policies aren’t what most people in business can control, it is however important to be aware of them and plan ahead for them. Be aware of the policies guiding your specific type of business and factor such into your calculations.
10. Starting out bigger than you should.
A business that is built on comparison will definitely fail. So many entrepreneurs started bigger than they should and so incur expenses that is inappropriate at their level of business. Cut out your number of hires, run and start your business based on a reasonable budget. Do not go out of what you can afford, doing this is going to crash the business definitely. Once your business is generating more expenses than profit, it will run down because of a negative cash flow. Good and fast sales is not enough to sustain a business, positive cash flow is equally important.
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