Hello All,

Many businesses in Nigeria fail from inception because of lack of idea about the products or services they want to render. what do you think, Nairalanders are the reasons Nigerian business fail?

thx

Businesses fail everywhere,Nigeria is no exception.But the incidence of failure can be minimized with effective business planning.Prospective business owners are encouraged to conduct adequate feasibility studies before venturing into business.They should also avoid the bandwagon.Innovation is the key to success in business.

Businesstools:

Businesses fail everywhere,Nigeria is no exception.But the incidence of failure can be minimized with effective business planning.Prospective business owners are encouraged to conduct adequate feasibility studies before venturing into business.They should also avoid the bandwagon.Innovation is the key to success in business.

GBAM

my exact thoughts

Businesstools:

Businesses fail everywhere,Nigeria is no exception.But the incidence of failure can be minimized with effective business planning.Prospective business owners are encouraged to conduct adequate feasibility studies before venturing into business.They should also avoid the bandwagon.Innovation is the key to success in business.

an american writter claimed that 9 out of 10 new start ups fail in first five years. He didnt mention nigeria there.its not perculier to nigeria, a lot of things can lead to business failure anywhere not just Nigeria.

Its not only in NIgeria, Its a global problem amongst SME's,

In some climes, up to 70% of SME's fail within the first year and close to 50% of the remaining 30% fail within the next 3 years from inception.

Cultural ways of life,Security,exchange rate ,electricty,railway etc.

crow_addy:

Its not only in NIgeria, Its a global problem amongst SME's,

In some climes, up to 70% of SME's fail within the first year and close to 50% of the remaining 30% fail within the next 3 years from inception.

Text book business man

You see, thats one thing we fail to understand, the TEXT BOOK does not lie.
Its open for all to see and derive knowledge from.

olas2u:

Text book business man

There are several reasons why businesses fails, not only in Nigeria, globally.

However, among many other causes, I think the foundation for failure in any business is starting one with a wrong reason. For example,starting a business becos
1.  it is hottest thing
2. a friend or someone else succeeded in it
3. you are tired of your job or of working all the time
4. you want to be your own boss
5. you have a enough money to start it
6. you want to rich

Anyone who has such wrong motivation and such as that, has started failing from start. Even if the fall does not happen in 5 or 10 years, it will still fail. People pay for feasibility studies, and it will look very convincing, However, right motivation, clear vision and strong passion as what cements the foundation of a biz that will outlast its founder. People succeeds even in business they are not knowledgeable about just becos they are passionate about it. Passsion, just like vision, is contagious and it attract likeminds that can work with you to build a business that it outlast its founder.

It is not peculiar to Nigeria and not specific to small businesses or businesses in general. However, look around you and see just how few the number of successful people in whatsoever they do. Success and failure are a matter of attitude, belief, passion, innovation, perseverance, delayed gratification and above all it is a LONER !!!!!

It is not peculiar to Nigeria and not specific to small businesses or businesses in general. However, look around you and see just how few the number of successful people in whatsoever they do. Success and failure are a matter of attitude, belief, passion, innovation, perseverance, delayed gratification and above all it is a LONER !!!!!

I would have loved to give you a detailed reason of why businesses fail but mostly its not as a result of the entrepreneur in most cases but as a result of circumstances and conditions but looking at it abstractly larger organisations like banks are also failing and the most basic reason why they are failing is as a result of lack of assessibility to long term finance and reduced interest rates particularly in nigeria its as a result of the amount of charges involved in assessing this finance and the kind of policies that encourages the inability of the entrepreneur to make use of loans when he is even granted please for more details grab a copy of THE CRITIC magazine this is a detailed chronology of my personal experience soon to hit stands but nairaland peeps you would be the first to read about my experience

Most of us do it alone unguided, not based on business ideology but "I am the owners' sentiments"!
Please check this link out, learn, discover more sir.
https://www.nairaland.com/nigeria?topic=876162.msg10241552#msg10241552

- If you go into a business with the sole purpose of making money in a short term (others are doing it so you think it will work for you too), it will fail in most cases.

- If you go into a business without adequate planning, it will fail in most cases.  #project_management

- If you go into a business without enough startup capital (enough money to sustain the growth), it will fail in most cases.

- If you go into a business in an environment with no maintenance culture, it wont last in most cases

- The Nigerian environment also does not help matters - you have to generate your own electricity, water, security, etc

- If you go into a business where the banks are not willing to give you loans, it is even harder.

- If you go into a business where the little income you make is used for family events, it will fail in most cases.

- If you go into a business in a country where you friends and family believe they dont have to pay for your services, it will fail in most cases

- If you go into a business where the closest business partner, friend or family is always trying 'obtain' you, it will be tough.

- If you to into a business in a country where people call everything locally made 'fake' and only run after oyinbo goods, it is even tougher.

The environment is very harsh

Even when all plannings are made, you can hardly beat the 9ja factors, infrastructure. electricity, etc.
At the end of the day, u realise that people who has enough money to do that business will eventually send you out of business.
Sometimes, I wonder if there are people who earn money 100% purely legitimately in this country.

To me, from empirical research conducted, the following reasons are why business in Nigeria, both small and big almost and always fail:

1.   Employing family members to run the business who will eventually ruin the business
2.   Employing tribal people to run the business who will essentially ruin the business.
3.   Not employing qualified, experienced and capable hands. They know too much and demand big pay!!
4.   Paying pea nuts as salary and allowances, thereby encouraging pilfering from staffers.
5. No good conditions of service for staff members thereby throwing commitments to the dogs!
6.   Taking advantages of the female staff and bullying the male staff becuase "I am the boss"
7.   Not paying  salary and allowances  as at when due, usually the boss travelled overseas so nobody to sign cheque!!
8.   Not willing to expand or diversify if even there is means to do that. Most small business overseas became the multi-giants of today.
9.   Arrant arrogance, pride and selfishness of most Nigerian big men. Mr or Mrs know all. No advice is tolerated from anyone!!
10. Corruption, Corruption and Curruption.

I can go on and on but digest the above points, in the meantime!!!

Do small businesses in Nigeria have access to credits?

While it is true that most Small Businesses fail from inception globally and not only a Nigerian phenomenon, the question of why Small Business fail in Nigeria is a valid one. Global failure of small businesses and the prevalent failure of businesses in Nigeria are two different things albeit not mutually exclusive nor collectively exhaustive. So why do most Small Businesses fail globally?

One reason why small business failure globally nay Nigeria is capital constraints (surprise, surprise). Most founders of small businesses experience untoward capital constraints and bootstrapped their fledging venture with dire funds, practically scrapping the barrel to come up with funds from personal saving, expensive credit cards, loan sharks, family members, etc. Because of paucity of funds, most small venture founders don't undertake market research, don't spend time searching for opportunity or gap in the market or even writing a feasibility or business plan. They just replicate or copy  an existing business because it seems easy to go into or popular or they put to use skills/knowledge gained from previous work experience. The result is a lack of strategy and goal to grow the business going forward. They just adapt to unexpected opportunities and problems. If this is your case, you've already set up yourself to fail.

A second common cause of failure is the founder who is inexperience in the critical nodes of the venture but undertake these crucial functions of the business like accounting/bookeeping, marketing, sales etc and only recruiting mostly family members or close associates to perform task they feel too big or stretched to perform.

A third reason has to do with resource security. Resource security is not the same thing as finance. It is the difficulty in convincing customers, suppliers, highly skilled manpower to take a chance on the venture. Because of lack of resource security, small businesses tend to make promises they cannot possibly fulfil just to gain business with negative and costly consequences.

So why do most small businesses in Nigeria fail?
Most start-ups in climes like Nigeria tend to fail for two main reasons: Lack of trust and lack of spontaneous sociability. The question and argument is: What is TRUST and what is SPONTANEOUS SOCIABILITY? The story long abeg. But I can recommend two bestsellers.

Trust: the Social Virtues And The Creation Of Prosperity by Francis Fukuyama. Free Press Paperbacks (1996)

The Origin And Evolution Of New Business by Amar V. Bhide, Oxford University Press (2000)

I would say the reason why many small businesses fail her is because people dont put in the time and effort to make the business grow.And while operating it, you need to seek ways of improving on your services, invest what little profits you make in making those improvements. In short you have to make a lot of sacrifices.

One of the reasons Businesses fail irrespective of geographical location is

LACK OF PLANNING

Many business start ups do not have a business plan, many people who
start a business do not even know how to write business plans.

I've been a victim of this too.

In summary. Values.

I want to start by saying that its not all small business has failed, I know more thank twenty people that started very small at ikeja computer village today they they are millionares, before u go into any business check the environment, population, then u will be able to know u will make it.  Another thing kills business is giving out ur goods on credit.

another reason small business dont fail : because they dont make sacrifice to juju

There needs to be steady infrastructure so power and roads must be well. Also Nigerians must support other Nigerian companies. Some Nigerians have inferiority complex and this needs to end!! Go here www.nigerianedp.com to support your economy!!

This whole debate is based on the unproven claim that most small businesses 'fail' in Nigeria.

Where's the proof of that?

You do realise that a market woman with a stall is a valid small business for the purposes of this discussion?

9 times out of ten, check her out next year and she'll STILL be running that stall. If you check her in three years time, she would have moved to a lock up shop somewhere, or STILL be at her stall, selling.

These are the people who make up the majority of small businesses in Nigeria. Spare parts dealers, boutique owners, hairdressers, buka owners, mechanics,  taxi drivers, suya sellers etc.  There's no way you're gonna tell me that 90% of them fail after a year or two.

Where you're more likely to see high failure rates are in some of these areas that guys dabble into without doing their homework, like 'internet marketing', 'real estate', 'oil business' etc etc, but these kind of chaps are in the minority in terms of small businesses in the country.

Rossikk:

This whole debate is based on the unproven claim that most small businesses 'fail' in Nigeria.

Where's the proof of that?

You do realise that a market woman with a stall is a valid small business for the purposes of this discussion?

9 times out of ten, check her out next year and she'll STILL be running that stall. If you check her in three years time, she would have moved to a lock up shop somewhere, or STILL be at her stall, selling.

These are the people who make up the majority of small businesses in Nigeria. Spare parts dealers, boutique owners, hairdressers, buka owners, mechanics,  taxi drivers, suya sellers etc.  There's no way you're gonna tell me that 90% of them fail after a year or two.

Where you're more likely to see high failure rates are in some of these areas that guys dabble into without doing their homework, like 'internet marketing', 'real estate', 'oil business' etc etc, but these kind of chaps are in the minority in terms of small businesses in the country.

Yes, by definition, a market woman running a stall is a small business owner, but you confuse what "success" is. Success is not only the ability to run a business at current level but to also grow that business to run itself and outlive the founder. A market woman who runs same stall for years can't be termed as successful. She is just scrapping by. She cannot afford to be sick, go on holiday, no retirement plan or even pay herself handsomely from that business. She works 12 hours a day on average and over 300 days a year. If you factor in these cost, you realise the business is barely breaking even. Is this what you term as success?

The suya man who moonlight as okada driver by day and roast suya by night and is unemployed during the raining season and go back to the north to farm cannot be termed as successful. He is just existing. Most founders of small ventures are slave to the business. Yes, there is paucity of statistics in the country; Nigeria is a country renown to plan without statistics, but it is safe to say most small businesses in Nigeria fail and most don't outlive their founding fathers. Can you point to a truly indigenous (home grown) Nigeria business that is over a 100 years old in its original form? Don't go pointing at First Bank which is a nationalised foreign bank.

Abiola bread (gone!), Okada Airline (Gone!), Belview Airline (Gone!) All State Trust Bank (Gone!) Binta Shipping Line (Gone!), Iwayanwu Nationelle FC (Gone!), ITT (Gone!), Ibru fisheries (Gone!), Oghareki Shrimes and Salt Company (Gone!). The list is endless.

I can count the number of businesses in Nigeria built to last and survive in the long run (as in successful) on the tip of my fingers and still have enough fingers left to eat starch and banga soup.

Insert Quote
This is an interesting topic. Every contribution has been enlightening in one way or the other. To start, let me point out that business failure is a global phenomenon. It is not peculiar to Nigeria. The issue here should be the rate of business failure compared to other countries around the world. Unfortunately, there is no such statistics available. Nevertheless, we cannot shy away from the truth that businesses are failing. The causes can be broadly classified into two: internal and external factors.
External factors will include such as lack of enabling environment; electricity/power, water, good roads, government policies, interest rates, exchange rates, taxation etc. The truth is that, any business operating where all these infrastructure are in place in addition to favourable government policies, will have a comparative advantage. That is why it is possible to import an item into Nigeria, and such item will still be cheaper (after paying for freight, insurance and taxes) than our local products.
But since all these are external factors which an individual does not have control over, there is no point crying over spilled milk. Though it worth it, we need to move forward. That is why I would rather focus more attention on internal factors.
Why? You will discover that why some businesses are failing, some are thriving. They all operate under the same economic conditions. So, the internal factors contribute immensely to the failing of some businesses. These factors will include:

Lack of planning
Ordinarily, nobody plans to fail but some have already planned to fail on the onset without knowing. How would somebody go into business without adequate planning about such business requirements; human capital, machinery, finance. In fact, the financial aspect is the undoing of many businesses. Many so called entrepreneur enter into business without having adequate 'working capital' in place. I remember a relation that went into fish farming. He has the skill, expertise and went ahead to invest huge amount to construct fish ponds. He stocked the pond with fingerlings, but along the line, there was no funds to buy feeds. The result, business failure. The business on its own was lucrative then,( I don't know of now) with promising high margin. But whose fault? Lack of planning will make fool of any business idea.

"One man" Mentality
Everyone wants to eat alone. We all know that, when you eat alone, you die alone. A lot of people are falling victim of "my business". "my idea" syndrome. Instead of seeking support from trusted relations/friends, some will rather sink alone. What is wrong in sharing your profits with others? Which one is better between making a loss and sharing N1m equally between two partners? May God open our eyes to see our own wickedness. Some things do not require prayers. A man of God once said "God has given us mind so that we can give God rest"

Lack of understanding of the phase of business
Business has life cycle. Business changes in phases. There will be a time when all the business requires is you alone. Your expertise is enough. But as the business grows, you need some experts in the areas of Finance, HR, Operations. If you don't know when to engage experts, no matter the grow rate of the business, it will start to nosedive.

Status Quo
We live in a changing environment. What works perfectly yesterday may not work today. Change is constant. If you refuse to change, you will be forced out of the market. One should not stick to the traditional ways of doing things. While you maintain your vision and goals, you need to continously work on your strategies. Have a workable business models. There is a model that is now becoming the order of the day now. Multinationals and few growing companies are using it and it has been working like fire. If you operate in the same market with such a company, there is tendency they may push their competitors out of the market.

The list can go on and on. When I have enough time, this topic may need to be discussed again. Meanwhile, I think the articles from the links below will help our business men/women

http://otnconsultinglimited.com/resources/Benefits_of_Accounting_Outsourcing.pdf
http://otnconsultinglimited.com/resources/Improve_Profitability.pdf

It think this should be the major reason for their failure