Africa has one of the highest rates of new business start-ups. Every day someone is starting a new business somewhere In Africa because, it is quite easy to start new businesses in Africa. There are fewer regulations for new business start-ups in Africa compared to other parts of the world.  However, many of these businesses die within the first five years in existence while those that survive do not grow above the sole proprietorship level.

I have started several businesses in the past two decades. Some failed and while some succeeded. From my experience and from the experience of others, I bring you 16 reasons why many businesses fail in Africa and how you can avoid them.

 1. Failure to write a business plan before starting the business

The need to write a well-defined and comprehensive business plan before starting any business cannot be over emphasized. You are not supposed to start a business in the first place when you do not have the right capacity to start it or when the raw materials needed for that business are not within reach. When you subject your business ideas to the test of a business plan, you will know whether or not they are worth pursuing. See my previous article on how to write a unique business plan on my website.

2. Poor leadership

Your business will not grow if you don’t empower your subordinates and staff by means of training, motivation, proper communication, delegation of duties, etc. Entrepreneurs should strive to improve their managerial skills more so when the number of their staff increases. Get a good business mentors, read good books on leadership, attend seminars on leadership. According to John Maxwell, everything rises and falls on leadership. The reason for your business failed or is stagnated can be summed as: poor leadership. Every other factor emanates from this. Good leadership is the ability to always make the right decisions that will make your business venture to succeed.



3. Impatience

One common thing among entrepreneurs in Africa is that they are in haste to start taking money from a business that they just started. I know that it is not easy not to start using some profits from a business to carter for our family needs due to the environment we find ourselves. However, bear in mind that it is better to reinvest profits into the business until the business has gained some form of stability. Even when the business has gotten some form of stability, profit taking should be very minimal. Many successful entrepreneurs I know do not start taking profits from their business until after five years.

 4. Lack of determination & Persistence

To successfully start and keep a business running and profitable is not an easy task. It takes determination, courage and persistence, else you will be discouraged. There are many sacrifices you must make as an entrepreneur especially at the early days of the business. You must be determined not to give up until you see the business successful.

However, many entrepreneurs give up too easily because of their initial failure or difficulty.

 5. Lack of focus & foresight

This is one of the greatest hindrance to business success. If you are not focused as an entrepreneur, you will not succeed in business. You must shun distractions. In your mind’s eye you should always see the great future of your business. Many African entrepreneurs start one business today and the next year they see people going into another business that they perceive to be more profitable and then they abandon their earlier business to pursue the new business in town. You cannot succeed this way. You need to stay with a business for at least five years if you are to make anything meaningful from it.

6. Lack of funds

When you don’t have funds needed to keep your business running, the business your business operations will encounter a dead lock. As an entrepreneur you should be on the lookout for new sources of funds for your business. Don’t wait until you completely run out of funds before you start sourcing for funds. See how to raise start-up capital for your business.

 7. Lack of Product improvement/development

If you don’t seek and strive to continuously improve your products and services, you will be out of business soon. You should be ahead of your competitors in product improvement and development. Continually seek for news ways to improve your product quality and delivery.


8. Lack of succession plan

When a business stops to exist, people lose their jobs and the dependents of those that lose their jobs are indirectly affected. This is not good for the economy of the country and should be guarded against.  In Africa, a lot of businesses die or begin to die once the proprietor of the business dies. This is not supposed to be so. There should be a deliberate plan to training competent staff that can take over the efficient management of the business in the event of the demise of the managers of the business.

9. Inadequate marketing

Marketing is the soul of business. Marketing is one of the most important part of your business. Marketing should be consciously done. Marketing should be the responsibility of all staff including the senior management and not only for the marketing department. Market your products using all available avenues within your reach and budget. Seek for more creative ways to reach your customers and clients. Seek to get your customers to like your products more than those of your competitors. Many entrepreneurs don’t give much priority to marketing and that’s why their businesses fail. Keep a database of all your customers and send them periodic reviews of your existing products and new products. Get a website for your business. This helps you to showcase your business to the world without any geographical limitation. You can contact us to help you develop a professional website for your business.



10. Bad customer service

Customer patronage keep you in business and so you should do everything humanly and legally possible to keep your customers happy with your company and your products. Customer service and satisfaction includes seeking for customer feedback on your products and services and attending to your customer complaints. Carry out periodic customer satisfaction surveys and ensure that you close all findings and gaps identified. Do not ignore the needs of your customers. Appreciate your customers when they patronize you. Buyers are always happy and are more likely to come back when owners of grocery stores say ‘’thanks for your patronage’’.

 11. Failure to build a good team

Any organization is as strong as its team. Your team is one of your greatest assets. Your goal as an entrepreneur should be to build a great team that would take your business to greater heights. Every member of your team matters and has an impact on the success or failure of your business.  John Maxwell said that every team is as strong as the weakest member of the team. He said ‘’ Everyone on the team needs to produce at a high level of quality; otherwise, the weakest link will pull everyone down.’’ Therefore, you should consciously develop and motivate your team via training, commendation, incentives, delegation etc.


12. Poor business Location

Many entrepreneurs fail to take this into consideration before establishing their businesses and this is one of the reasons their businesses do not succeed. If you are starting a manufacturing business, your factory should be located close to the source of your raw material. If your business has to do with sales or trading, you should locate your business very close to where people who need your products can easily reach you. A business that is close to the consumers has more chance of success. Avoid locating your business at a place where there is poor security or where there are hostilities. Give deliberate consideration and thought to the security of your business when planning to start your business.

13. Poor Financial Management

Finance is arguably the life blood of your business. Many businesses have failed because the proprietors of such businesses did not draw a clear line between the business assets

and finance and their personal assets and finance. It is a very bad practice to use the company finance for your personal interests even if you are the owner of the business. There should be proper accountability and record keeping for all company assets, finance and transactions. Employ an accountant if you can. At the least make use of the basic financial record books like the ledger, journal and the petty cash book.  You can even make use of accounting software and applications to make your record keeping more easy and accurate.

14. Premature Expansion

Many entrepreneurs are in haste to expand without maximizing the potentials of their current business and markets. As an entrepreneur your aim should be to build, develop and maximize existing systems and products first before venturing into new frontiers.

15. Little or no business profitability

Your goal and efforts should be geared towards making your business to be profitable directly or indirectly.  Your business cannot survive for long if you are not making profits.

If you are not making profits, you would not be able to keep your staff and you would not be able to grow or expand.

16. Reluctance to partner

A lot of businesses in Africa do not grow beyond the sole proprietorship level because the proprietors are too reluctant to partner with other more experienced or more capable people. They don’t want to give up a part of the ownership of their business in exchange for the growth of their business. I always tell entrepreneurs that 50% or even 40% ownership of a big business is far better than 100% ownership of a small business. Imagine having 20% stack of a business worth millions of dollars. Is it not better than having 100% stack of a business worth thousands of dollars?  When you give up a part of the ownership of your business in partnership, you stand a chance of getting more finance into the business, you access more knowledge and skills, the business is more likely to expand and grow as a result of shared efforts and resources.

Just make sure that all necessary legal frameworks are established, also ensure that profit-sharing formula is agreed and all responsibilities are defined before embarking into any business partnership. Ensure that any partner you allow into your business is bringing something useful into your business like more finance, knowledge, skill, experience and expertise.


Source : http://myafribusiness.com/16-reasons-why-many-businesses-fail-and-how-to-avoid-them/

What are other reasons you think make businesses in Nigeria to fail? Let's discuss this so that we can avoid them and build great businesses that would create more jobs for our people.

Bros leave this matter. Businesses in Nigeria fail because of the shiithole environment that exist in the shiithole country.
Here are d following reasons businesses fail:

1.Poor infrastructure:
Lack if critical infrastructure has made running business a daily nightmare. For example, how wud d fishseller, patent medicine sellers who needs light to preserve delicate medicines at low temperature or business person who deals on perishable items not experience losses that wud wreck business. Alternatives to power are expensive increasing costs of products, reducing it affordability and eventual sales. Use of generators have negative environmental inpact in terms of air pollution and noise.
Bad roads which increases time for the movement of goods and labour frim a point to another knowing fully well time na money. Vehicles breakdown on bad road which results in costly but avoidable breakdown.
Water they say has no enemy. Many parts in the shiithole Nigeria ve nwver experienced water supply from d govt which is critical to every business.
Therefore, these and many more creates a harsh environment inimical to growth of any business.

2. Multiple taxation
We all know as disorganized as other facets of the Nigerian society is d tax system. If u are shop owner or small business owner you would understand hiw some idiots would come often to forcefully extort money for reasons that leaves u dumbfounded. The mist annoying thing is that the individuals used to collect these taxes are thugs who are not fit to do such apart from using violwnce and intimidation of business owners to reap them off their hard earned sweat. These monies end up in the pockets of these fruadulent tax collectors and the other part remitted to govt is embezzled.

3. Poverty:
When u have a larger percentage of people who are poor and do not have the strong purchasing power then u re bound to have low patronage or at best forced to give out on credit some of which may never be paid cos the means is not there.
Until wealth is evenly spread to all so all can have mobey in their pockets to spend if u like be a Harvard business trained graduate, tou would fail.

My advice to Nigerians, the national aseembly both the senate in particular and the house of assembly are the destroyer of this nation for failing to enact laws to guarantee good governance and effective, transparent tax laws and they are milking this nation by taking billions each year for fraudulent constituency projects which is never executed. Remember 25% of our budget is spent on these bastards. Only we forget easily former CBN Governor Lamido Sanusi proved it when he was summoned by last national assembly. This increases cost of governance whoch should have been channeled into capital projects to develop our infrastructure. The legislature have no business financing projects. Even each of the 36 states all have their state houses of assembly which all constitutes a hugh drain on our budget.
Nigerians wake up, even if all collect PVC to change a new set of leaders nothing would change as long as we do same thing over and over we get same not different result.

FrankTalk1:
What are other reasons you think make businesses in Nigeria to fail? Let's discuss this so that we can avoid them and build great businesses that would create more jobs for our people.

Power Issue

Buhari Is the Cause Of Business Failure?


Click LIKE for YES

Click SHARE for NO

U re right op but government workers too kill biz faster too

Remove that your number 1, go and ask those successful business owners if they are working according to their business plans. Most of the times the wind of change will just change the plans for you and you get to take immediate decisions out of your business plans. Business plans most times is just to get investors or together loans or sponsors most of the times.

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Ok seen!!!

Nice one, our economy follow join

While having business plans is good, not all business needs it...( Really? ) and many more don't even know were they left it ...but its an important doc to guide any business.


Secondly you said many things without an emphasis on online presence ( websites and functioning SM channels )

Every 21st century business needs a functioning online presence ....


Another thing is knowing the extra needs of your clients creating a product around it and selling to them

Uncontrolled credit

Op, nice one.

Instead of poor leadership, it should be lack of leadership skill. Lack of innovation and lack of effective customer service skill should be included.

Op I am more than impressed with this post of yours, people tend to forget that in business "little things count"

On the track

Pat081:
U re right op but government workers too kill biz faster too

Please what's the meaning of this "op" used in addressing the poster??

Following...
OP I will really love to learn how to write a successful business plan.
I am planning on starting a production business soon, but don't know how to go about writing a business plan.
Can you please send me a demo sample of a business plan to my mail ie m2okaba@gmail.com
Tnx.

Franktalk1 well done. what other advice can u give one starting up a palm oil mill?

MrCuteking:


Choi. So you don’t know that some guys have started doing this for 10k? Lack of info also destroys business

I know....even 5K....but what do they offer?

As a business your offering is everything and you're not for everybody and can't serve every interest.

Doerstech:
While having business plans is good, not all business needs it...( Really? ) and many more don't even know were they left it ...but its an important doc to guide any business.


Secondly you said many things without mentioning an online presence ( websites and functioning SM channels )

Every 21st century business needs a functioning online presence ....


Another thing is knowing the extra needs of your clients creating a product around it and selling to them

Spot on !

iphenon:
Power Issue

. Let's not allow this hinder us to start and build great businesses. Even with the power issues, the Lebanese , Indians and Chinese have built factories here in our country and are making it. They are using diesel and gas engines to produce. I believe one day this problem of power will be resolved.

MrCuteking:


Choi. So you don’t know that some guys have started doing this for 10k? Lack of info also destroys business

I know...here in Nairaland you see many of them, but that someone offers to build a website for 10K doesn't mean i have to do same, because my offering and his are the same....That's why you're a business...When someone come's to me, i quote my price and list the value I'm offering...

You can't serve everyone as a business...neither every interest.

Eating from the profit of the business when the business is still at the survival stage which requires ploughback profits cos cash expenses is bigger than cash inflows causes business failures.


Creating a business plan too is very essential for a business growth and operations.

RennersClouds:


Please what's the meaning of this "op" used in addressing the poster??

OP means: Original Poster

Doerstech:
While having business plans is good, not all business needs it...( Really? ) and many more don't even know were they left it ...but its an important doc to guide any business.


Secondly you said many things without mentioning an online presence ( websites and functioning SM channels )

Every 21st century business needs a functioning online presence ....


Another thing is knowing the extra needs of your clients creating a product around it and selling to them

Point 9 addressed this. Just read the post thoroughly.

Excellent op

EFGH:
Following...
OP I will really love to learn how to write a successful business plan.
I am planning on starting a production business soon, but don't know how to go about writing a business plan.
Can you please send me a demo sample of a business plan to my mail ie m2okaba@gmail.com
Tnx.

For your professional business plan support, or any other business support, you can contact us on this email : info@myafribusiness.com
You can also see more information here: www.myafribusiness.com

babino22:
Remove that your number 1, go and ask those successful business owners if they are working according to their business plans. Most of the times the wind of change will just change the plans for you and you get to take immediate decisions out of your business plans. Business plans most times is just to get investors or together loans or sponsors most of the times.

I get your point, but having a business plan does a lot of good to your start-up business. A business plan is more than a loan seeking tool. It is important at all stages of your business. It is the road map for your business journey. A business plan helps you to check the feasibility of your business ideas, helps you to know your mission and business objectives, helps you to surmount the discouragements encountered during business start-up stage, helps you to set and track milestones for your business, helps you to evaluate your business financial needs and help you to seek for funds needed for the business, helps you to properly understand your target market, helps you to understand your competition and how you can add uniqueness to your brand in order to beat them and a lot more.

FrankTalk1:


Point 9 addressed this. Just read the post thoroughly.

You're right, there was a mention there. But basically it should have it's own headline

Nigeriadondie1:
Bros leave this matter. Businesses in Nigeria fail because of the shiithole environment that exist in the shiithole country.
Here are d following reasons businesses fail:

1.Poor infrastructure:
Lack if critical infrastructure has made running business a daily nightmare. For example, how wud d fishseller, patent medicine sellers who needs light to preserve delicate medicines at low temperature or business person who deals on perishable items not experience losses that wud wreck business. Alternatives to power are expensive increasing costs of products, reducing it affordability and eventual sales. Use of generators have negative environmental inpact in terms of air pollution and noise.
Bad roads which increases time for the movement of goods and labour frim a point to another knowing fully well time na money. Vehicles breakdown on bad road which results in costly but avoidable breakdown.
Water they say has no enemy. Many parts in the shiithole Nigeria ve nwver experienced water supply from d govt which is critical to every business.
Therefore, these and many more creates a harsh environment inimical to growth of any business.

2. Multiple taxation
We all know as disorganized as other facets of the Nigerian society is d tax system. If u are shop owner or small business owner you would understand hiw some idiots would come often to forcefully extort money for reasons that leaves u dumbfounded. The mist annoying thing is that the individuals used to collect these taxes are thugs who are not fit to do such apart from using violwnce and intimidation of business owners to reap them off their hard earned sweat. These monies end up in the pockets of these fruadulent tax collectors and the other part remitted to govt is embezzled.

3. Poverty:
When u have a larger percentage of people who are poor and do not have the strong purchasing power then u re bound to have low patronage or at best forced to give out on credit some of which may never be paid cos the means is not there.
Until wealth is evenly spread to all so all can have mobey in their pockets to spend if u like be a Harvard business trained graduate, tou would fail.

My advice to Nigerians, the national aseembly both the senate in particular and the house of assembly are the destroyer of this nation for failing to enact laws to guarantee good governance and effective, transparent tax laws and they are milking this nation by taking billions each year for fraudulent constituency projects which is never executed. Remember 25% of our budget is spent on these bastards. Only we forget easily former CBN Governor Lamido Sanusi proved it when he was summoned by last national assembly. This increases cost of governance whoch should have been channeled into capital projects to develop our infrastructure. The legislature have no business financing projects. Even each of the 36 states all have their state houses of assembly which all constitutes a hugh drain on our budget.
Nigerians wake up, even if all collect PVC to change a new set of leaders nothing would change as long as we do same thing over and over we get same not different result.

U take beer? Or spirit? Anything ?
Bar man, give ds nigga a bottle of cold beer.
Made load of sense, man