10 Reasons Why Nigerian Businesses FailAbbakin
This post will bring to the limelight the key reasons why Nigerian businesses fail.
Sometimes, a failing business may be in such a way that the entrepreneur founder is unaware of its happening until it is often too late.
Without doubt, you should know that lack of good management system in a firm has many negative ways of affecting the success fortuity of businesses.
The leading causes of business failure may include not knowing how to provide leadership, poor marketing, lack of capital, starting a business ‘to make a lot of money’ kind of mindset, choosing the wrong location, among many other things.
For example, marketing doesn’t only start with learning how to use advertising and promotional strategies and having the budget. It starts with product differentiation.
Aside being a Nigerian business owner or entrepreneur, listed here are the major reasons why most small and medium sized businesses fail with ease and how to avoid them.
10 Reasons Why Nigerian Businesses Fail
#1. Lack of Mission Statement
A mission statement is a brief statement that defines why your business exists.
This statement can be either in the form of your corporate reasons for being in business or trying to stand out from the crowd.
If done right, your mission statement in a few sentences that communicate the essence of your business to the whole world.
It should describe your target market and the services/products you have and able to offer.
Don’t let the competitions or day activities override your defined ambition; and never start a business with a wrong reason.
A good mission statement should include both your short- and long-term goals; as well as a planning on how to measure goals and achieve results.
#2. Poor Product Development
Product knowledge is an essential sales skill. And it’s key to have a clear definition of the product or services you offer.
Without a clear definition, you will be unable to effectively develop, market, and sell your products.
Understanding your products’ features allows you to present their benefits accurately to your prospects.
If you understand your customers and the products, customers respond to skilled sales staff that is passionate about their products and eager to share the benefits with them.
A good product or services is about being helpful and providing value; even if it doesn’t immediately fetch you money.
#3. Wrong Business Location
Poor feasibility studies and wrong business location are also the main reasons some businesses most likely fail.
Setting up the business at a wrong city or location where your product is not in demand might be too much a risk to overcome.
If your business relies on foot traffic for its sales and customer patronage, location will be a strategic necessity.
Some of the factors influencing poor location are: raw material availability, safety, labour supply, transportation, and power supply.
#4. Lack of Focus
Most young entrepreneurs can easily be distracted with too many minor tasks and wishful offers.
As a business, if your focus tends to shift, your thinking will also shrink.
A good entrepreneur or business person should never lose focus on what is important and where his/her priorities are.
Trying to do it all or ‘being everything for everybody’ is the worst mistake you would ever make in business; one that will cost you resources in terms of time and money.
Another weakness is when you got caught up in trivial diligence in the tasks which can and should ordinarily be left to others.
Entrepreneurs should learn to delegate tasks and focus on those things they know how to do best – managing and marketing their products.
#5. Hiring Too Early
Hiring the right people for the job is a good thing if planned rightly; however too many people have got this wrong while starting up their businesses.
Hiring too many people too quickly can open up nationwide warehouse too soon and this brake them into many scattered visions that usually result to premature scaling or overexpansion.
When there is no vision of achieving targets rather than trying to jump to the scale, this can be wasteful and dangerous for a new business.
Don’t scale up your business too high at the starting point rather; put that efforts in bringing that vision to reality.
#6. The Wrong Partners
Partnership businesses that didn’t adequately define the real picture for existence beyond simply being an avenue to making money is bound to fail.
People often initiate joint venture partnerships as a result of financial reasons or so; but leave abruptly because of business principles, careers or life goals misalignment.
It’s no longer secret that it is easier to succeed in business with the right partners. The wrong business partner will hurt, or, at worst, destroy your company in the future.
To avoid such issues; solve problems before they happen by clearly outlining your individual responsibilities, signing dissolution agreement, involving an accountant that can help determine the revenue sharing formula.
#7. Lack of Capital
One of the major and popular reasons why Nigerian businesses fail is lack capital or insufficient business funding.
This factor is an alarming sign of business failure.
In this part of the world, many business startups usually find it hard to raise money for their businesses.
Lack of business investment and working capitals can lead to the inability of the business enterprise to attract good investors.
It shows that a business might not be able to pay its bills, access loan facilities (if available), and other financial opportunities.
Insufficient capital makes it difficult to grow a business, get qualified employees and it may put the business day-to-day operations at risk.
#8. Poor Cash-Flow Records
Business owners that eventually fail repeatedly misunderstood between cash flow and profit earnings. These two are not the same.
If you are not planning to fail, then forget sales; forget your revenue and; forget the total number of customers. Always be mindful of cash flow statements and profitability.
To succeed in business you don’t just need cash flow, you need positive cash flow. Yes, it is possible for you to go bankrupt with cash flowing into your business every day.
Staying profitable means you will solve many problems. And the lack of profit could put you out of business even if you have recorded good sales.
Any company that ignores good bookkeeping records end up with unconstructive cash flow and this will always happens when the outflow of cash is more than your incoming cash.
You should always differentiate your personal money and the business; and never allow negative cash flow while keeping good accounting records.
If you don’t have accounting skills, you can hire an expert to do the work or subscribe to accounting classes.
10 Reasons Why Nigerian Businesses Fail
#9. Poor Leadership
One of the real reasons why Nigerian businesses fail is bad leadership and mismanagement.
Poor leadership impact on the company’s employees; as well as the business itself because a leader is not just a figurehead.
Leaders are valuable part of every businesses; they are the ones who determine the pace and progress of work.
Leadership starts with integrity, attitude and ethics. For no one ever get to the top without starting from somewhere.
As the business owner or manager, you can easily get lost among many things when you understand what competitors do better than you.
However, if you fail to differentiate and build your team, you will fail to build a brand. According to Forbes: ‘A poor brand generally means leadership has failed’.
Bad leaders affect a company’s ability to higher, retain and motivate employees; and manage the company’s financial and material resources efficiently.
As a leader who occupies a position of authority, you should be able to show good leadership to your company’s customers and employees.
#10. Lack of Customers’ Feedback
Most businesses that fail create products/services without involving their customers in the development stage.
If you scale your productions without first understanding your market and the customers need, then, this effort will always amount to nothing.
Most businesses that fail build products based on assumptions. And if you are serious about success, you should build your products with your customers’ inputs and recommendations.
Let your customer be involved about your product or service development because they determine the business growth targets.
You should have a clear definition of your customers and not something that you can express in rows.
Contact us if you need the Nigerian online shoppers’ buyer personas – a marketing tool that will help you understand the Nigeria online business environments and customer segmentations.
Wrapping up: Reasons Why Nigerian Businesses Fail
With the current economic situation in Nigeria, Africa and across the globe, businesses fail as a result of many reasons.
But now you have the reasons why Nigerian businesses fail and how to avoid them.
If you’re just starting up a business or already in business, you should take the time and observe some of these factors and find out many more.
Some of these factors can make new startups and growing businesses fail within the first three to five years of existence.
Another important thing that makes businesses fail in Nigeria is poor marketing and advertising strategies.
Not knowing the right place to start or how to export finished Nigerian goods to other countries of the world is also a big problem to many.
Again, government policies are other big reasons why many small businesses in Nigeria fail. A business can fail as a result of high taxation, high interest rates, or excessive regulations.
Additionally, giving up easy can also affect your business career.
If you do not passionately persevere, seek advice from experts, and learn the necessary skills before you start any business, you might not be successful in the business.
For this reason, you must strive against all odds to make your business stand – unlike many business owners who make the serious mistake of commencing on business without adequate operating skills and funding support.
Don’t you ever start a business for the wrong reasons!
Because, if your sole aim of starting a business is ‘to make quick money’, then such businesses don’t last. The initiators will easily be discouraged especially when there are big financial deficits.
As a business man or woman, you will need to have and always have a positive mindset toward your business. That mindset will help you broaden your business range and eventual success.