Top 15 reasons why small business fails in Nigeria
Have you ever wondered why there are so many failed businesses around you?
Do you perceive there could be relative causes linking all those failed businesses you know of?
Do you wish to have a categorical understanding of possible causes for the failed Businesses around, just so you too can learn plenty from their mistakes and avoid a debilitating effect for your own business?
Well, here… This article is for you. Let’s discuss top 15 reasons why small business fails in Nigeria, and how these factors are likely to affect other existing businesses that haven’t given them proper thought and consideration.
1. Poor Leadership Skills
The failure of most small businesses is being caused by the possession of poor leadership skills by the business owner, who is regarded as the fountainhead of a company.
Poor management skills usually lead to misconduct amongst the leader and the team members which will result in crippling a company within a given period of time.
As a leader, you need to have the necessary skills that are being needed to ensure free and fair decision making, and strategic planning within your organization.
Solution: Some of the possible ways to improve your leadership skills is to learn from your mentor, hire a business coach (they mustn’t be doing the same nature of business as you are, provided they have a good number of years of business experience), read & study business books, and enroll in business training/seminar program.
Not everyone is born naturally as an entrepreneur, I had to get trained to become one- Robert Kiyosaki
2. Geographical Positions
Forbes has estimated that 7 out of 10 every business is most likely to fail during their 1-5 years in business. This is a serious cause for worry.
How does geography affect business sustainability? Well, by way of example, what do you think might be the outcome of a stationeries dealer or business dealer who sets up a stationeries enterprise in a location saturated by fashion designers instead of an area teeming with educational activities?
Inasmuch as he doesn’t have competitors to drag attention with, he is most likely going to experience breakdown because sales wouldn’t be propelled but expenses such as hiring rent and personal spending would still be made, all these draining him gradually and bankruptcy becomes the net end when he has gradually burnt up his capital by spending from the insignificant every day or weekly sales.
Now it is easier to see how geographical positioning contributes to business failure.
Solution: Before situating your business in any desired location of your choice, make sure your product or service is being targeted at the right customers. This is a good reason why market segmentation is a very good approach before launching your business!
3. Customer Experience
Clienteles are like flame fueling factors, how you treat them matters to a very great extent because whether you’re investing a million-dollar into your start-up or you’re investing millions, without the right customers there are sure to be no effective returns.
Stagnation and frozen funds would be your ugly experience. Sadly, some entrepreneurs do not take care to treat their clients accordingly and this has led to the downfall of so many of such business empires and its likes are still sure to follow through.
Sincere owners of failed businesses would tell you when asked of customer relationships that they erred greatly, while ex or past clients of such failed businesses would attest to the fact that customer experience was nothing to write home about.
Solution: In order to avoid such repetitions, young entrepreneurs who wish to learn from such mistakes take time to give their customers the best feelings and satisfaction whenever they come around.
And once you are able to achieve these, you are likely to get more referrals to your business through your existing customers.
The experiences of your unhappy clients become your advantage when you use them to improve your business-Dan Lok
4. Mismanagement
Mismanagement comes into play in many ways. Firstly it relates to how business funds are managed at any point in time.
Mismanagement has crippled so many businesses in Nigeria today and the world at large.
Failed businesses have a characteristic of their owners not knowing how to cut clear between business and luxury, they spend excessively on luxury and extreme comfortability with business funds, and of course such business can never thrive.
The second aspect of mismanagement which is also a major mistake most have made is managing business with family.
Inasmuch as this gives some level of financial security and guarantee, it has great consequences because relations usually do not take care to work as though they were working for executive companies; so many things are taken for granted in terms of the company’s policy and work ethics.
This in effect, accommodates such vices as laziness, petty theft, and embezzlement as well as deplorable working relationships with other employees.
Most times businesses start off well, but poor management leads to early failure- Tony O. Elumelu
Solution: The most crucial aspect that will result in a company’s downfall or going into extinction is mismanagement of business.
The best possible ways to manage your business for maximum potential growth is that you should be able to monitor your company’s cash flow (very important), good leadership skills, better product or service improvement, staying current to business trends related to your industry, team management, improving customer service experience, etc.
5. Failure to Listen
Customer relationships are supposed to enhance business processes, expose owners to business areas needing work or lacking behind as well as help entrepreneurs view their businesses from the customer’s perspective.
Unfortunately, so many entrepreneurs are guilty of not giving heed to customer complaints.
A good customer relationship requires that you listen to customers and make needed adjustments right away.
Not all customers complain, some would rather walk away and never return, and when they do, getting them back may require “extreme efforts”.
So many businesses have been dragged to the mud this way because customers as previously noted are skeletal to business success.
Deep attention ought to be given to both subtle and major customer complaints.
Solution: Feedbacks are actually good for businesses because it helps you to strategize, innovate and improve your product or service in a way that will satisfy your customers.
So whenever you get bad reviews about your product or service, that shouldn’t make you feel bad as an entrepreneur rather it will create room for more improvement.
Your most unhappy customers are your greatest source of learning- Bill Gates
6. No Business Model
A business model is a basic requirement for every intending successful business structure.
Any business running without a business plan or business model is standing few miles away from colossal dissolution.
A critical observation shows that failed businesses usually lacked or operated without effective business models.
Solution: Buttressing further, the importance of a Business Plan for every business then can never be overemphasized because there’s no magic that can be used to run and sustain a business without clearly defined objectives for too long, even if they exist, they would always and always experience technical difficulties in operative methods and unbalanced arrangements. So there’s a dire need for a Business Model.
7. Lack of Value Proposition
If you have a great product or service that is in high demand and your business is still failing, maybe you need to re-strategize, or probably your business lacks a strong value proposition.
Solution: As an entrepreneur or business owner, what is unique about your business offering (product or service)? And how does your business sets itself apart from your competitors? Is it in terms of price, branding, customer service, or innovation? If you can answer this perfectly, then you have found your value proposition.
A good example of a value proposition is that of FedEx’s, they are best known to give their customers peace of mind and confidence by delivering the package where you need it and when you need it (quick delivery).
This is one of the most competitive advantages FedEx has over most courier delivery companies.
8. Low Adaptation
Business failure is mostly caused by not adapting to new market changes in terms of not looking for possible ways to improve your product or service to be suitable for new and existing customers.
One of the world’s most famous companies that failed due to not being adaptive is Blockbuster and how did they fail? The emerge of Netflix and on-demand streaming meant that Blockbuster needed to have their business model changed, but unfortunately, they didn’t. Blockbuster failed to change with time by adopting a business trend which resulted in their company’s downfall. Their were not dynamics in business!
‘If Blockbuster had launched their own streaming service some years earlier, Netflix may never happen’- Reed Hastings (CEO of Netflix)
Solution: What can actually separate you from the rest of the pack is by being adaptive. Keeping up-to-date with industry trends is one of the best ways to avoid business failure.
You need to change your business model with respect to time. Fortunately, this is one of the traits a good entrepreneur should possess. Adaptability.
9. Not being competitive
No matter how innovative your product or service is, if your business doesn’t have any competitive edge or advantage over a similar business that offers the same product or service as you are, maintaining a large and loyal clientele base will be more difficult for you as a business owner or an entrepreneur.
“Don’t kill the competition. Competition is healthy for businesses. It keeps you the entrepreneur on your toes”- Aliko Dangote
10. Leaving out branding
Branding is not just about how beautiful or attractive your business logo, design, packaging, etc is, but the perception of how your customers feel about your product or service after they have patronized you. Is it a good or bad perception? Were they able to get the right satisfaction that they actually needed from using your product or service?
Solution: As an entrepreneur, having a strong brand should be among your top priorities. If you want to build a brand that will last for years.
Some possible ways to achieve that is creating a good impression, customer care, implementation of social media marketing, understand your brand has a magnetic influence, and a few others.
With formidable branding techniques being utilized, you are sure of distinguishing yourself from the competitors and give a better clarification on what makes your business offering a better choice for customers.
Why is Apple Inc regarded as one of the best brands in the world? Reasons because they have the ability to keep their branding simple, and aesthetically pleasing.
If you want to build a long-lasting business, focus more on branding.
11. Low Financing
I could remember vividly during 2014 when I started my first blog, I was still a teenager back then with no enough financial support to help accelerate my blogging business the way I wanted it to be, but my plans and dreams were cut short due to low initial capital. My first ever online business failed!
In most business cases like mine, poor financing can crumble a business within a blink of an eye.
This is one of the reasons why most business owners and entrepreneurs will get discouraged and decide to close down their businesses after a few years.
‘According to Bloomberg: Lack of money/cash flow kills 8 out of 10 businesses within their first two years of starting’
Solution: There are many business funding opportunities out there such as loans and grants that will help fund your existing business provided you have a viable and scalable business.
Aside from this, seek business funding from an investor or a venture capitalist tell them about your business idea and if they find out that it is worth the investment, they are most likely to fund your business.
If you want to apply for loans, just make sure your business is already in the growth stage (When a business is financially stable and ready to scale impact and it needs more money for expansion). The reason this has been said is that you will be given some period of time to pay back with some interest (in most cases).
Other ways you can look for more business funding are Friends & Family, Bootstrap, Crowdfunding, Accelerators, and Grants.
12. Unfavorable Government Policy
Most reasons why small businesses fail in Nigeria are due to unfavorable government policy in terms of the high rate of taxation, and the ban of some raw materials needed to manufacture a product.
Solution: A good government policy-making process should be made more favorable for small business owners in Nigeria.
13. Imitating other businesses
Copying other businesses similar business models, marketing strategies, branding techniques, etc would only decrease your relevance in the industry because when customers come to realize that there is another product that is very much similar to yours with little to no difference and the said business is already been in existence before yours, chances are you will lose patronage and attention would be diverted somewhere else.
Solution: Nothing beats being more creative in business. It helps inspires and challenges you as an entrepreneur to find innovative solutions and create more opportunities out of already existing problems.
14. Poor Marketing Strategy
In most cases being recorded, one of the reasons, why businesses tend to fail, is that they are making use of outdated and inappropriate marketing strategies.
This alone can negatively have an impact on the sales of products or services as well as the reputation of the overall business and disrupting a company’s goal.
Solution: If you really want to stay at the top of your game and be known in your industry, these are some of the effective marketing strategies you can adopt:
-Online Advertisements (social media networks, forums, Google Adwords, etc)
-Posters
-Billboards
-Flyers
-Networking
-Influencer marketing
-Referrals from customers
15. Incompetent Team
One of the major causes of business failures usually results to the incompetence of employees, if they lack the necessary skill-sets in terms of marketing, sales, customer service, problem-solving, etc, the company wouldn’t be to achieve the goal being projected during the initial stage of launching the business.
Solution: During the pre-launch phase of your business, it is advisable to give each of your team members a ‘problem-solving task and why is that so? Because it will help you realize the strengths of each individual and the best role that they will be of good fit in your company.
For example, if you discover as the team leader that one of your team members is a tech-savvy, it is a wrong decision to make by assigning he/she as the sales manager but it will be much more preferable if they are the one in charge of the computer system, software, networking, telephone communications, etc and that position is where they will give in their best.
Read Also: https://www.probusinessideas.com/10-things-to-do-if-your-business-starts-failing/
Conclusion
Was this article helpful? And in what other ways can lead to business failure in Nigeria? Please use the comment box let’s relate.
