8 MAJOR REASONS WHY NEW BUSINESSES FAIL IN NIGERIA
- Mismanagement of Capital
- Lack of Focus
- Failure to Brand
- Poor Customer Service
- Poor Online Presence
- Failure to Network
- Poor Marketing
- Failure to have Long Term Goals
Since the industrialization era, there has been a boom of businesses all around the world. Many companies have grown from just being a startup to being a global brand. In Nigeria, startups are emerging everywhere, with Abuja and Lagos being notable entrepreneurial hubs.
Though many businesses start up every day in Nigeria, not all rise up to become successful.
Many of these businesses fail due to certain decisions and mistakes. It’s vital to mention that most of the causes of business failure are things we ignore and do nothing about. It’s so serious that 80% of new businesses fail within the initial three years of starting. Most times, these businesses fail in such a way that the owner is unaware of the looming failure until it’s too late.
To help our esteemed readers know these causes of business failure and develop ways to counter them, we developed this piece on eight major reasons why new businesses fail in Nigeria.
Mismanagement of Capital
Raising capital to start a business in Nigeria is difficult because of the unavailability of required structures that’ll help small and medium scale businesses start up. This has made the proper management of capital a big reason why businesses fail.
Most business owners make the mistake of mixing personal and business funds thereby leading to inability to track gain or loss in the business. From another angle, some business owners allow sentiment to take over them, and they give too much credit to customers. When these sentimental behaviors set in, the business starts owing a lot of money. The higher the debt incurred by the business, the higher the chances of the business failing.
To tackle this, it’s vital business owners adopt proper money management systems like putting a credit limit for customers and segregating between the business and personal accounts. It’s also necessary to identify and state where business cash needs lie and when and how to use cash. With this, you’ll eliminate unnecessary expenses and deliver valuable products and services.
Lack of Focus
Focus is one of the critical determinants of the success or failure of your startup. Lack of focus is usually a challenge for new businesses. This is because the startup period is full of trials and errors and changes in priorities, all in a bid to discover the business model that works best. Most times, after nailing an excellent business model, startups get swayed by another brand’s model and loses focus.
We advise you to stick to a particular business model that works for you and build on it. You might get distracted by other businesses flourishing because of their model; ignore those distractions, invest and grow your business on your chosen model. This will enable you to direct your resources to one course and see it to the end.
Once you’ve become bigger, you can choose to expand and include other business areas and features to widen your avenues of income. Besides helping you direct your resources, Staying focused will also help your customers clearly understand what you do.
Failure to Brand
In some cases, Nigeria business owners fail to brand their business. Not only do they not brand, but they fail to understand the importance of business branding to a startup like theirs. Branding makes every business stand out and shows professionalism.
If you’re a startup owner who wishes to grow your business, it’s essential you brand your business from day one. It’s the core reason why a customer would want to have a deal with you.
Poor Customer Service
Excellent Customer service is one of the major things that gives you an edge over your competitors in an industry that’s full of competition. Not only does it give you an advantage, but it also gives your customers the impression that you value them. This alone will lead to your customers going over and above to preach your business as brand ambassadors.
You can do this in many ways, maybe with a smile, a welcome greeting, a good conversational attitude, etc. whatever you do, ensure your customers are satisfied and happy with the service they receive.
Poor Online Presence
Let’s face it; we’re in the era of technology, and one of the technologies that can affect your business most is the internet. You’re able to read this on our website because of our online presence.
Don’t you think so?
Today, more people are using the internet more than the last decade, and most of these internet users search for products and services online. Businesses that have leveraged the benefits of the internet are excelling while those that are yet to adopt the internet and build an online presence are becoming extinct.
You might think, “the people around me are not using the internet.” This may be through today, but with each passing day, more people in rural and developing areas will start using the internet. Won’t you want to be online waiting for them when they do?
You can grow your online presence by getting yourself a website and social media pages where you’ll interact and engage with your customers. Through this means, you’ll also give them an exceptional customer experience they’ll remember. You can hire a digital marketer to assist with these services.
Failure to Network
Networking is essential in the modern world. It’s the situation where you collaborate with partners to grow your business more than it would have been if it’s standalone. Although it’s an excellent factor, most people venture into businesses without understanding how network and collaboration can help their business.
For instance, let’s assume you have a startup bakery, you can collaborate with a local restaurant which has existing customers to help project your services.
How you market, your product plays a crucial role in the success of your startup. You may have the right product, but without the right marketing strategy, you may not succeed. In Nigeria, most founders and startups focus more on developing their products rather than finding a way to market it. Understanding your target audience and using the best strategies to market your product will help you convert your prospective customers to customers.
Yes, you need a great product, but having an effective marketing strategy is vital.
Failure to have Long Term Goals
Building and running a credible business is difficult, and it’s not something you achieve in a day or a short period. You need to stay persistent, committed and focused on your way to success. Make both short and long term goals and work towards them with zealousness.
Most entrepreneur startup because they want to join others, make quick money or avoid working under someone. Because there is no passion and goal they’re working to achieve, they quickly lose focus when they don’t realize their short terms goals of making fast money.
But with a long term goal, you’ll remain steadfast and work towards your goal.
Conclusively, there are other reasons why a startup may fail; from inadequate research to non-mentorship and many others. If your startup has survived for up to four years, you’ve achieved a feat many don’t achieve. Continue on the lane, and your success is assured.
If you’re about to decide on starting up a business, do well to enforce yourself and understand the reasons why you may fail as a startup. Take the necessary measures and excel in your business.
By Mr Christopher Iwundu Chinaza