Reports show that at least 70 percent of businesses failed within the first two years of operations. In this article, we explained ten reasons why business fails in Nigeria.
Failure to do research
Starting a business is more than simply having funding and a personal decision to begin with. Some people start businesses because someone says such an idea or prospect is profitable. Following the bandwagon is wrong! You need to do your own research first before deciding whether a business is feasible.
People use tools like PESTLE and SWOT analysis to understand the business environment and the owner's and employees' strengths and weaknesses before starting a new business. They also make strategic choices, such as if to sell a unique or low-cost product.
Lack of planning
A successful business begins with planning. It is said that he who fails to plan plans to fail. This statement has proven true times without numbers. Successful companies have plans. This begins with a strategic objective. Next, a long-term plan and several annual plans to help meet the objectives. When there is a plan, senior managers and business owners know the direction they will follow to achieve business goals and objectives.
Cash flow issues
Lack of funding may, at times, lead to business failure. A business with cash flow issues is worse than a business not making a profit. Lack of funds means no money to meet daily operational needs, pay salaries, clear off vendors' debt as and when due, and make purchases. This reduces a company's reputation, affects the health care of the founders, and, of course, leads to winding up of a company.
Low capital
This is similar to a lack of cash flow. But also includes not enough capital or equity to start up the business. Therefore, the business will struggle to survive in an industry that requires a high cost of initial investment. Low capital might make it almost impossible to start a business.
Inexperience of the entrepreneur
An entrepreneur may start a business that he or she has little or no experience in. This is why it is always advised that before starting a business, an individual should have some work experience. A lack of experience will make the entrepreneur make mistakes. Also, during dynamic periods in the business, it won't be easy for the entrepreneur to resolve the issue.
Employing the wrong team
Business strife when it has sustainable core competencies. A corporate team will help a business achieve this competence, compete favourably and achieve strategic objectives. However, a lack of cooperation among staff can be disastrous.
Failing to change
We are in a world where there is constant innovation and technological advancement. This requires a change in the way business activities are done to remain competitive and maintain a share in the marketplace. When a company fails to change to meet the latest demand, customers will move to other substitute products. This will affect cash flow and, of course, lead to business failure.
Not enough control
Internal control helps to reduce operational risks. Employees without good ethics may steal from the company. To keep things checked and to reduce risks, it is important to have enough control in place to mitigate the risk.
Doing all tasks yourself
Some entrepreneurs may prefer to do every aspect of the business themselves. In many cases, when they have employees, they tend to drive themselves. Therefore, keeping little time to think about strategies and growth. This can lead to failure because there might not be enough time for him or her to scan the business environment for potential opportunities and threats. Thereby failing to cease business opportunities and avoid threats from external sources.
Poor financial management
Finance is the lifeblood of a company. Poor management of this is a bad thing. Businesses should plan to save and invest. Excess cash should be invested either as treasury bills, fixed deposits, bonds, or shares. This helps increase the company's profitability because interest or dividend income earned from such investment can help the business grow. However, the opposite will mean that the company is feeding from hand to mouth. That is, as it earns revenue it spends them all without thinking about when revenue will slow down.
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