I remember having a flashback reading the November 2014 Forbes Africa Edition, where billionaire Femi Otedola shared how he lost about $1.5 billion, hit rock bottom, and climbed back to the billionaire list.

That was the same year I went broke despite the massive work I put into my business. There’s a popular saying that goes like this “learn from the mistake of others” that was the inspiration behind this post.

The following are reasons why most entrepreneurs go broke:

1. Inexperienced founders
This scenario happens a lot, the founder of the business has so much enthusiasm and passion towards growing the business when starting out. The challenge happens when they don’t invest time in studying their industry, network with influencers, have an experienced team around them or have people mentor them.

Enthusiasm and passion can only take your business to a particular level. When Mark Zuckerberg started Facebook, he built up a power circle of billionaire’s, millionaires and top performers in the tech industry.

That’s why top performing teams and organizations recruit only A-level talent, you must have people who have proven themselves and are capable of taking your business to the next level.

2. No Strategy in Place
Working hard and hustling is great, but hustling alone isn’t the answer. When I started my first business I felt stuck. I worked hard but didn’t see any considerable progress.

I didn’t see any increased success until I was able to leverage the internet in growing my business. Work smarter, not harder, leverage other tools; leverage your team members, put in the appropriate amount of work at the appropriate time. Hustling 24 hours a day isn’t the goal.

The wealthiest people on the planet aren’t necessarily the hardest working people. They leverage their resources, and the time of others to achieve their goals. Success stories like Femi Otedola, Aliko Dangote, Mark Zuckerberg, Elon Musk and more had systems in place to ensure that their ggoals are easily met.

3. Lack of Sales
This is one of the most common reasons founders of businesses go broke. They have a great idea, get their company registered, get business cards then expect sales to come naturally.

The truth is that sales have to be intentional and a major part of your business plan. You must have a sales strategy that can bring in customers on a regular basis.

Having an online and offline strategy in respect to sales is great, also set weekly and monthly targets. Review it from time and analyze why you achieved your targets or why you didn’t.

Conduct training with your marketing/sales team on a regular basis and ensure your business is up to date with what’s working.

4. Bad Product/Sales
Some entrepreneurs argue that there’s nothing like a bad product but the truth is that they exist. Many entrepreneurs go into business with the mindset of “what can I get” instead of thinking about what the customer wants and how the product/service being offered can add value to the customers.

When Mark Zuckerberg started Facebook, he did a launch in Harvard, his university, to see how the reception would be. After he saw that the response was great and the market really needed it he got funding and expanded it.

Start your business from somewhere and see the results the market gives, re-iterate and improve on your product. Always test on what’s working and what’s not. Don’t invest all of your capital at once, have different strategies, invest some money into them, re-invest some of the profits and keep on growing.

5. There’s no Competitive Advantage
This happens a lot, somebody comes into the market with a business idea that turns profitable, and then all of a sudden we have over a thousand competitors with the same idea or carbon copy in the market.

It’s not bad to implement an idea that’s already working, in fact that’s being smart, but you must have a competitive advantage when doing that.

If Konga and Jumia are dominating the Ecommerce scene why not stick to just one product for your Ecommerce Company and be the best in that category. You can also make delivery time faster or offered free shipping, there are many examples of what you can do to stand out. You must always have a competitive advantage that would make you stand out in the market.

While the reasons stated above are very important, in most cases, had they had more revenue coming into the business, they could have fixed and prevented majority of those problems. Also, when you have a strategy in place to acquire customers, you would not worry about these issues.

This doesn’t mean you don’t need to have a great product or service. It’s vital, but something amazing happens when you have a great product/service and the ability to sell. A synergy is created.

It’s truly a 4+4=10 relationship. Meaning, the sum of the whole process is greater than each individual part- the product and sales.

Feel free to share your experience in the comments.

http://demidigitalagency.com

Happy birthday to me too haha.

folashade96:
If things seem under control, then you are just not going fast enough

That's very true.