As an entrepreneur, starting a business in Nigeria might be a bit difficult especially due to the harsh economic environment but asides from this there are other known reasons why businesses fail in Nigeria. And today, we will be sharing them with you.
These reasons we are about to share with you apply to any type of business in Nigeria whether it is a service rendering business or a buying and selling business.
Top 10 Reasons Why Businesses Fail in Nigeria
Below are the top reasons why businesses fail in Nigeria.
1. The Wrong Mindset
This is the first reason why businesses fail in Nigeria. In as much as Nigeria’s economy is still underdeveloped and there are so many things wrong, it is necessary as an entrepreneur that you stay true and believe in yourself.
Even despite what you see before and after starting your business it is important to stay positive and believe your business will survive no matter what. The best thing you can do here is a picture of where you want to be in the next few years and follow some baby steps to reach there.
You can get a mentor that runs the same business that has achieved a lot and has gone far. Learning from these people will reduce tension in you and will make sure all difficult times in the business are easily surpassed.
Many people think all they need to know when starting a business is to read articles online or watch videos or even get their hands on business plans but this is not all. After reading everything you need to know and you have started your business you need to set a mentor for lifelong guidance.
2. No SWOT Analysis
Many businesses in Nigeria especially the small-scale ones underestimate SWOT analysis. They believe it is not necessary because they have business plans available to them. This is another reason many businesses fail in Nigeria today.
As a serious company whether a sole proprietorship or private limited liability or public limited liability company you need to perform your SWOT analysis. If you are new to the business and you are wondering what SWOT analysis actually does – its benefits.
SWOT analysis helps you assess internal and external factors that might affect your business in a big or small way. SWOT is an acronym that means S – Strengths, W – Weaknesses, O – Opportunities, and S – Strengths. Strengths and Weaknesses are the internal factors while Opportunities and Strengths are the external factors.
You need to find out as a business or organization what are your strengths, weaknesses, opportunities, and strengths. Doing research on this will make sure your business stands the test of time.
3. Poor Management
Poor management is the third reason why businesses fail in Nigeria. I once heard about a successful school that was run to the ground within a year after the owner died. When she died she left the school to her daughter to manage despite the fact that her daughter was not experienced in managing a school.
Her daughter was a spoiled brat and she and her husband made sure that the school could no longer run well. They spent all the profits made by the school and would not listen to the advice of the accountants and head teacher.
When the school could no longer maintain its quality service, pupils started leaving and when it could no longer pay its teacher’s salary, teachers started leaving too. As of today, the school no longer exists. Even its building has been sold. Having bad management is another reason why businesses fail in Nigeria today.
It is important to provide a good management structure – creating checks and balances. This will make sure the proceeds of the business are protected and not spent anyhow.
4. Poor Customer Care Service
All businesses are channeled to one thing which is to make sales and all your sales are directed towards your customers. Anybody who patronizes you is your customer and anyone you are trying to convince to patronize you is a prospect.
To make sure you are listening to your customers in terms of complaints and feedback you need to create a customer care unit. Depending on the size of the business this can be one person or two or more persons. These workers must be trained properly to be able to handle all issues.
If they are rude and they do not know how to provide solutions your customers will leave to patronize your competitors. The customer care unit is usually the most powerful unit because it can keep or chase away your customers.
5. Poor Funding or Financing
There are many new business ideas coming up every day in Nigeria. Many of them demand small capital before you can start them while some demand huge capital. The inability to access funding for these new businesses is another major reason why businesses fail in Nigeria.
Banks like commercial or microfinance banks may offer big loans but the interest on these loans can be overwhelming. Due to this problem, we have written an article on how to get funding for your business in Nigeria.
6. Not Keeping Financial Records
This is another reason why many businesses fail in Nigeria. Many business owners undermine financial records. They feel it is not necessary so they just work with what they have in their accounts daily, weekly, monthly, or even yearly. But they do not know that financial records are not only used to record day-to-day transactions.
They are also for auditing and to know if a business is progressing or not. Financial records are also needed when you want to obtain loans on behalf of your company. No matter how small your business is you need to have records of your daily transaction. This goes a long way.
7. Copying your Competitors
It is not bad to copy your competitors especially if you are looking for a few inspirations or guides but when you copy every move of your competitor you are putting your business at a huge risk.
Your business might be on the verge of failing because not everything that works for your competitor will work for you no matter how similar your business looks. As a company, you need to have your own data and how you source it. It is this data that you need to rely on, not your competitor’s every move.
8. Not Evolving
Many businesses have refused to dump their old ways and move with new trends. This is another reason many businesses fail in Nigeria (small and large scale). For example; many businesses do not know of digital marketing as a tool to increase awareness for products and services.
Many businesses do not know how to also create an online presence. They only exist physically. This has killed many businesses in Nigeria and will kill new businesses if they refuse to be 21st-century businesses.
9. Not Having a Business Plan
I once got the email of an avid reader of our blog. In that email, he was telling me that he read one of our blog posts on how to start a particular business in Nigeria yet the business failed. So I decided to ask him some questions. In my digging, I discovered that he did not use a business plan as a guideline.
He just followed our article word for word. This is why his business failed. I am not saying our articles are bad but they are not 100% good either. Just like you cannot build a house with just the guidance of a surveyor you need a building plan so is the importance of business plans. Read our article on how to write a business plan in Nigeria.
10. Not Conducting Your Market Survey
If it is not needed, you can simply divert your money into something else. This is the way to go but unfortunately, many Nigerian entrepreneurs do not do this. They feel as long as what they are bringing is new it will be accepted. This is another reason many businesses fail in Nigeria.
We have written an article on how to conduct market research for new and old businesses. You should read it to be able to know you can go about your surveys.
These are the major reasons businesses do not succeed in Nigeria. But asides from all mentioned above, what are other reasons for business failure?