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The Number One Cause Of Business Failure And How To Avoid It - Business - Nairaland

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The Number One Cause Of Business Failure And How To Avoid It by PatrickOkunima(m): 6:23am On May 11
vapatrick.com

Every day, business ideas are birthed by self-motivated individuals with a passion for entrepreneurship. The number of new businesses that have sprung up in the last couple of years is exceeding, but it might surprise you to learn that the majority of these businesses closed down within their first five years.

The fear of business failure is one of the worst nightmares every first-time entrepreneur faces. You would agree with us that no one wants to start up a business, sufficiently invest in it only to see it crumble after a few years.

As a budding entrepreneur, the only way to save yourself from experiencing business failure is to discover its number one cause. Learning the major reason why businesses close their doors in their first few years will put you on the right path and also save you from making the same mistakes of failed entrepreneurs.

Research has shown that the biggest cause of business failure is none other than – Poor Management. In truth, managing of a business/firm encompasses a whole lot of activities to include: planning, controlling, organizing, communicating and directing. For a business to thrive it needs a competent manager at the helm of affairs. Falling short in this area will eventually lead to the death of any business.

Most businesses that failed were the results of rookie entrepreneurs with no experience of how to run an enterprise. They were passionate and enthusiastic, but they failed to come up with strategic plans to move their business forward and were also terrible at managing the business in their hands.

Running an organization isn’t an easy task, and if you own a business or wish to start a new business that thrives and goes past the five-year mark, a lot work needs to be done in the area of management. In order to avoid starting a business that eventually fails, here’s a few things you must do.

1. If you consider yourself incompetent in the aspect of business management, then it is imperative that you hire a reputable manager. A good manager is one who’s great at planning, controlling, directing, organizing and hiring the right employees. Understanding how to manage people is another area where expertise is required.

2. Consider if you are quite experienced in the field of entrepreneurship before venturing into it. Don’t just start up a business because a few individuals you know are getting rich from being their own bosses. Expertise and experience in entrepreneurship are prerequisite to making a business successful.

3. Get knowledge – There are lots of business fields out there, the fact you excelled in a particular business field doesn’t mean you’ll succeed in another. Don’t go into a line of business you have limited knowledge about. Learn about it first.

4. Ensure your funds are properly managed – Since money is one of the things that keeps a business running, an enterprise with no funds will definitely fold up. Poor financial planning and management cripples businesses like no other so it is imperative that entrepreneurs are effective in this key area.

Now you know what causes most businesses to crumble, the fear of business failure should no longer stop you from chasing those entrepreneurial dreams you’ve always had. Get your business started today, surround yourself with a good managerial team and watch your business soar to the uttermost height in no time.

Source: https://vapatrick.com/2019/05/11/the-number-one-cause-of-business-failure-and-how-to-avoid-it

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Re: The Number One Cause Of Business Failure And How To Avoid It by PatrickOkunima(m): 6:35am On May 11
Do you agree that poor management is the number 1 cause of business failure? State your reason(s).

Re: The Number One Cause Of Business Failure And How To Avoid It by Redoil: 7:00am On May 11
Bad govt policy kills business faster than any other thing

41 Likes 4 Shares

Re: The Number One Cause Of Business Failure And How To Avoid It by PatrickOkunima(m): 8:12am On May 11
Redoil:
Bad govt policy kills business faster than any other thing

You have a point, but I'll still go with poor management. As regards the govt policy, it was there before you started your business. Changes to the policy may have adverse effect on your business, that's the reason managers are expected to be proactive. As a manager, you do not sit and wait for external factors to come and kill your business. You're to come up with measures to counter the effect of such policies, even before they're in place.

I believe you're familiar with corporate strategies: diversification, concentration, integration (forward, backward), etc. Those are some of the measures management take to expand or maintain stability during turbulent times.

In conclusion, if govt policy kills a biz, poor management is to blame, the only exception being that the policy results in the death of every business in that industry.

14 Likes

Re: The Number One Cause Of Business Failure And How To Avoid It by Redoil: 10:09am On May 11
Now look at the following scenerio in lekk/ajah/victoria island axis Small Shop rent 1million Compulsry fummigation by govt 150,000 Radio and tv license 150,000 Phcn 20,000 Monthly estate charge 20,000

4 Likes

Re: The Number One Cause Of Business Failure And How To Avoid It by PatrickOkunima(m): 11:13am On May 11
Redoil:
Now look at the following scenerio in lekk/ajah/victoria island axis
Small Shop rent 1million
Compulsry fummigation by govt 150,000
Radio and tv license 150,000
Phcn 20,000
Monthly estate charge 20,000

I understand you perfectly, sir. The business climate is not conducive. In fact, it's hostile. But some businesses in that environment are still doing well, otherwise, they would have all closed shop.

1 Like

Re: The Number One Cause Of Business Failure And How To Avoid It by Kaybaba5(m): 12:58pm On May 11
Tbe nature of our country kills more

1 Like

Re: The Number One Cause Of Business Failure And How To Avoid It by Gforce2019: 1:02pm On May 11
All these ranting PDP ipob e-rat can also cause business failure. The reason is that the PDP presidential candidate is a serial failure, and if you align yourself with this kind of person , your business and your career can also suffer failure....

All the ipob failure in the house, pls cross to the winning side and your life will never remain d same

1 Like

Re: The Number One Cause Of Business Failure And How To Avoid It by wakes(m): 1:05pm On May 11
thanks
Re: The Number One Cause Of Business Failure And How To Avoid It by mixta140: 1:06pm On May 11
Redoil:
Now look at the following scenerio in lekk/ajah/victoria island axis
Small Shop rent 1million
Compulsry fummigation by govt 150,000
Radio and tv license 150,000
Phcn 20,000
Monthly estate charge 20,000
Wetin happen na, kilode,
Re: The Number One Cause Of Business Failure And How To Avoid It by Younghacka(m): 1:09pm On May 11
I Wonder Why Our Government Charges All These Exhorbitant Utility Bills When Nothing Works In Nigeria.

2 Likes

Re: The Number One Cause Of Business Failure And How To Avoid It by Smaade: 1:10pm On May 11
Very informative.
Re: The Number One Cause Of Business Failure And How To Avoid It by oneolajire(m): 1:15pm On May 11
Etr
Re: The Number One Cause Of Business Failure And How To Avoid It by oneolajire(m): 1:15pm On May 11
Entrepreneurship in Nigeria is a Scam and a Multiplier of Poverty: Part 3


In the second part of this article, I described the four types of entrepreneurship available, they are, traditional, conditional, capital and innovative entrepreneurships.
Link to part 2
https://www.nairaland.com/3102449/part-2-entrepreneurship-scam-nigeria

It is important to note that nations that have developed over the years ensured massive emphasis on both capital and innovative entrepreneurship.

Unfortunately, the emphasis of entrepreneurship in Nigeria is on traditional and conditional entrepreneurships. I wonder how these kinds of entrepreneurships will solve socioeconomic problems in Nigeria.

Entrepreneurship in developed nations was used to provide infrastructures such as electricity, railways, airports, hospitals among others. Steel plants, petroleum refineries, automobiles, aircraft and hi-tech companies came to existence as a result of exploits in innovative and capital entrepreneurships.

Nigeria's kind of entrepreneurship being preached to our youth cannot be used to solve any kind of socio-economic problem such as lack of power supply, good roads, portable water, railway and so on. It is so obvious that the entrepreneurship we practice in Nigeria is absolutely handicapped. It lacks both solution and growth factor, however, it is a poverty multiplying one.

Nigeria's kind of entrepreneurship lacks the capability to provide substantial job opportunities needed by the youth. The traditional entrepreneurship we practice provide jobs in retailing, unskilled or semi-skilled jobs, exportation of raw materials and importation of finished goods. Developed nations have massive jobs in information technology, aerospace, space technology, healthcare power, sports, tourism, oil and gas, which are products of innovative and capital entrepreneurship. It is certain that the number of unemployed people in Nigeria will continue to increase if there is no change to our entrepreneurship approach.


Taking a look at the genesis of institutionalisation of entrepreneurship in Nigeria, which can be traced to 1986 when the Government established the National Directorate of employment, NDE, to provide skills for youth in order to make them employable. It was this same time that several industries began to fold up, banks began to liquidate, the quality of education began to experience sharp decline and government's investment in infrastructural development began to recede. It is so obvious that the government at that time lacked job creation skills.

Over thirty years down the lane, one should ask, how much jobs has NDE provided? Would we have the need of NDE if we had abundant industries and functional education that produces job creating graduates? What a pity to see that the major mantra of the government to the youth is traditional entrepreneurship. If Nigeria's kind of cake baking, hair dressing and dough-nut entrepreneurship had failed in the past, how would it help create factories and solve our unemployment problem? I see no reason why we should magnify the failures of entrepreneurship in the name of self employment.

Innovative entrepreneurship of Mr Innocent Chuckwuma of Innoson Vehicle Manufacturing and Mr Adetokunbo Ogundeyin of Proforce Limited -manufacturer of armoured vehicles- are undeniable examples. They built technological empires without government's help, yet, the sky is not even their limit, but their starting points. Imagine if we can replicate this achievements in electricity generation, petroleum refining, road/railway construction, metals and material production.

Nigeria is facing serious budget finance crisis because the revenue earned from petroleum is no longer sufficient to fund the budget. Massive funds is being ploughed into traditional entrepreneurship that provides very little tax, thereby plunging the nation massive borrowing. However, products and services of innovative ventures in developed nations have become huge sources of revenue to their respective nations. Therefore Nigeria should to invest in entrepreneurship that will generate abundant revenue to fund subsequent budgets.

Nigeria has more than thirty percent of an estimated population of 200 million people involved in agriculture, yet malnutrition is ravaging our land. The major problem of insufficient food production is the primitive farming using cutlass and hoe -a form of traditional entrepreneurship. So unfortunate that insurgency in North-Eastern Nigeria and the nationwide herdsmen killings hsd highly contributed to reduced crop production.

On the other hand, some nations have lesser than two percent of their population in agriculture, yet they meet local demand and export. They make use of innovative entrepreneurship both on the farm and in the lab/workshops. They don't depend on normads to provide beef for them. Here in Nigeria, graduates of agriculture do not practice farming professionally, yet it is the unequipped graduates of other courses, that are persuaded into agriculture as a result of unemployment.

It is good to have several capital entrepreneurs like Aliko Dangote, who has built several industries in Nigeria and across Africa. His latest investment in the 650,000 bpd of crude oil refinery and petrochemical complex which is expected to help tackle the availability of petroleum products is highly laudable. However, he didn't become an overnight investor, his success story began in 1977 with the 500,000 naira loan -when 1$ = 0.65k - given to him by his uncle, Alhaji Dantata. The major problem of capital entrepreneurship is how to get massive loans for industrial development.

Finally, a paradigm shift is still the solution to our challenges.

3 Likes 4 Shares

Re: The Number One Cause Of Business Failure And How To Avoid It by ultron12345: 1:18pm On May 11
I totally agree with the OP.

The next big business killer after bad management are bad and dishonest employees who want to make more than your profit as their personal gain. The sad thing is that majority of Nigerian employees fall under this category. Really hard to get good employees in this country. Employ Nigerians and you have to spend a lot on all sorts of measures to decrease theft, internal controls, CCTV, more security etc. No wonder companies prefer to employ more expensive expatriates in sensitive positions than to employ locals.

Next is credit sales. Nigerians will never pay debt. Nigerians always have this fraudulent mentality, some will even fight you on top of money they're owing you. I think its time debt is made a criminal offence on Nigeria.

Next after that is bad market unions, trade associations and all that. The money they extort is enough to be declared as profit. Some silly Nigerians will just form a union and be using it to extort businesses in the name of all sorts of fees and dues. A good example was the Lagos tailor freedom list brough to front page some days back.

In short, the very nature of Nigerians is the biggest problem to businesses operating in the country.

12 Likes 1 Share

Re: The Number One Cause Of Business Failure And How To Avoid It by Odani: 1:20pm On May 11
Re: The Number One Cause Of Business Failure And How To Avoid It by 400billionman: 1:21pm On May 11
Nigerian factor is the number one Business Killer in the whole world...

Incase you don't know the meaning of Nigerian factor: .

You build house, bad tenants no go gree pay rent.

You open business, they will owe you to bankruptcy.

Lack of liquidity in the economy.

Poor buying power.

Mixing business with family relationships.

Gossip Mongers.

Stiff and unhealthy business competition.

Advance Fee fraud experts after you.

These points are the number one Business killers in the whole world.

8 Likes 1 Share

Re: The Number One Cause Of Business Failure And How To Avoid It by GideonOludayomi(m): 1:22pm On May 11
PatrickOkunima:
Do you agree that poor management is the number 1 cause of business failure? State your reason(s).

I agree but strongly disagree.

I assume you are writing this with a general audience in mind and not the Nigerian audience in specific. Kindly research more on the Nigerian business environment and then let us know the causes of business failure. I will be following you to respond promptly.

5 Likes 1 Share

Re: The Number One Cause Of Business Failure And How To Avoid It by Kobicove(m): 1:22pm On May 11
ultron12345:
I totally agree with the OP.

The next big business killer after bad management are bad and dishonest employees who want to make more than your profit as their personal gain. The sad thing is that majority of Nigerian employees fall under this category. Really hard to get good employees in this country. No wonder companies prefer to employ more expensive expatriates than to employ locals.

Next is credit sales. Nigerians will never debt. Nigerians always have this fraudulent mentality, some will even fight you on top of money their owing you. I think its time debt is made a criminal offence on Nigerian.

Next after that is bad market unions, trade associations and all that. The money they extort is enough to be declared as profit.

In short, the nature of Nigerians are a big problem to businesses operating in the country.

You have said it all.

If you plan to employ Nigerian in your business just make sure your internal controls are top notch otherwise your employees will steal you blind!

4 Likes

Re: The Number One Cause Of Business Failure And How To Avoid It by idonhammer: 1:22pm On May 11
Business failure is not for original igboman.. Forget entrepreneurship grammar. Na we be business.if you know, you Know.

4 Likes

Re: The Number One Cause Of Business Failure And How To Avoid It by babakb: 1:23pm On May 11
Gforce2019:
All these ranting PDP ipob e-rat can also cause business failure. The reason is that the PDP presidential candidate is a serial failure, and if you align yourself with this kind of person , your business and your career can also suffer failure....

All the ipob failure in the house, pls cross to the winning side and your life will never remain d same

For real? I never thought some people could be zombified like this.

You need serious healing men.

5 Likes 2 Shares

Re: The Number One Cause Of Business Failure And How To Avoid It by PNANYIAM(m): 1:24pm On May 11
PatrickOkunima:


You have a point, but I'll still go with poor management. As regards the govt policy, it was there before you started your business. Changes to the policy may have adverse effect on your business, that's the reason managers are expected to be proactive. As a manager, you do not sit and wait for external factors to come and kill your business. You're to come up with measures to counter the effect of such policies, even before they're in place.

I believe you're familiar with corporate strategies: diversification, concentration, integration (forward, backward), etc. Those are some of the measures management take to expand or maintain stability during turbulent times.

In conclusion, if govt policy kills a biz, poor management is to blame, the only exception being that the policy results in the death of every business in that industry.
ur brain is still in ur head

3 Likes

Re: The Number One Cause Of Business Failure And How To Avoid It by Eeroh95(m): 1:26pm On May 11
apply the rule of POSDCORB and it shall be well with your business
Re: The Number One Cause Of Business Failure And How To Avoid It by JohnNgene: 1:35pm On May 11
I think the number one cause of business failure IN NIGERIA is lack of credit facilities.

So many businesses fail even before they start because there's no money to bring the business idea to reality. Raising capital on your own to start a business is hard. Getting a loan from Nigerian banks is even harder. Then, paying back the loan with the high interest attached to it is the hardest. Lol.

If Nigerian youths could easily access loans of N100,000 (one hundred thousand naira) by submitting the original copies of their certificates for example, I'm sure the Nigerian business environment will flourish.

2 Likes

Re: The Number One Cause Of Business Failure And How To Avoid It by lonelydora: 1:59pm On May 11
Number 1 cause of business failure is people not being able to differentiate between Profit and capital.

1 Like

Re: The Number One Cause Of Business Failure And How To Avoid It by drezo(m): 2:00pm On May 11
A lot of them sustain their businesses with fraudulent activities.....you can barely find people who built an empire solely on clean money. Just look at those figures do you think any business sponsored single handedly in those regions you mentioned, would survive that? wink
Redoil:
Now look at the following scenerio in lekk/ajah/victoria island axis
Small Shop rent 1million
Compulsry fummigation by govt 150,000
Radio and tv license 150,000
Phcn 20,000
Monthly estate charge 20,000

2 Likes

Re: The Number One Cause Of Business Failure And How To Avoid It by princefunmmy(m): 2:16pm On May 11
Poor Management is a result of inexperience... young people are just in a haste to make money, everybody wants to become CEO. you will hear things like "I want to be my own boss"... well, every man with his cross

6 Likes

Re: The Number One Cause Of Business Failure And How To Avoid It by preacherz: 2:22pm On May 11
its government first, government second, government third before u can mention other factors.

example! if we boast of 16 hours power supply in every part of Nigeria, an additional 150% of the no. of businesses we have on ground will be running.

just imagine.

2 Likes

Re: The Number One Cause Of Business Failure And How To Avoid It by sweetilicious(f): 3:07pm On May 11
informative
Re: The Number One Cause Of Business Failure And How To Avoid It by biztip: 3:40pm On May 11
more businesses has crumbled under buhari than ever. so una still dey look for reasons why biz closes in nigeria
Re: The Number One Cause Of Business Failure And How To Avoid It by Mizwisdom(f): 4:10pm On May 11
ultron12345:
I totally agree with the OP.

The next big business killer after bad management are bad and dishonest employees who want to make more than your profit as their personal gain. The sad thing is that majority of Nigerian employees fall under this category. Really hard to get good employees in this country. Employ Nigerians and you have to spend a lot on all sorts of measures to decrease theft, internal controls, CCTV, more security etc. No wonder companies prefer to employ more expensive expatriates in sensitive positions than to employ locals.

Next is credit sales. Nigerians will never pay debt. Nigerians always have this fraudulent mentality, some will even fight you on top of money they're owing you. I think its time debt is made a criminal offence on Nigeria.

Next after that is bad market unions, trade associations and all that. The money they extort is enough to be declared as profit. Some silly Nigerians will just form a union and be using it to extort businesses in the name of all sorts of fees and dues. A good example was the Lagos tailor freedom list brough to front page some days back.

In short, the very nature of Nigerians is the biggest problem to businesses operating in the country.


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