Reasons Why Businesses Fail In Nigeria: The struggle of sustaining a business is a continuing one. Business in Nigeria demands everyday commitment and all intentionality. It takes a lot of patience, consistency and strategies to build and maintain the success of a business but can only take a few mistakes to crash all the efforts if one is not careful.
Worse is the case that one can still be careful with his business, put in all the requisite efforts and comply with the business strategies but still be a victim of business failure.
This is because, inasmuch as running a business has several demands, some of the causes of business failure are circumstances beyond the person’s control. But regardless, one still has a lot to commit to, of which if not, would be walking down the aisle of business failure.
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15 Major Reasons Why Most Businesses Fail In Nigeria
1. Lack of Capital: Capital is a primary demand of any business. It is not enough to have the skill and ideas. Without capital, one would merely be propounding theories which he has no means of implementing.
It is not just having capital but having it sufficiently, or at least, having means of acquiring it. Worse is the case if one has no capital and still is not creditworthy to be granted loan maybe because he has no assets to secure the loan.
Running a successful business in Nigeria requires steady capital which includes working capital, contingency capital and capitalization. When the available capital is not enough to fund the business, it simply translates to business failure.
2. Poor customer care: Every business must maintain a good business-customer relationship. All businesses are target at the customer who constitutes the business stakeholders. Yes, they are part of the stakeholders because without them the business is a failed one.
In fact, the success of a business can be measured by the quantum of prospective and actual customers. The maintenance of customers is a business strategy which requires strategies.
Having a medium for customer feedback is a necessity, for it sustains the relationship and most importantly, informs the business owner of the credibility of his products and services. When customers’ interests and expectations are not met, the failure of the business would be in view if the necessary adjustments are not made.
3. Ineffective or poor marketing strategy: Marketing strategy entails those means and media employed by the business owner in the promotion, distribution and selling of his products and or services.
Marketing is the part of the identity of the business which the audiences can see. It is in fact the face of the business to the outside world. Therefore, this part of demand must be invested in.
Having an effective marketing strategy requires skills, the necessary information and the act of innovation. A business owner may employ several channels for the marketing of his products and services.
The effectiveness of such means is very instrumental in dictating the success or otherwise, of the business.
4. Mismanagement of capital: The capital of a business is meant to be maintained. A business owner must ensure to spend only from profits realized and also be conscious of capitalization of the business.
Mismanagement of funds also entails investing wrongly and in fact, making wrong economic decision. Mismanagement of capital equals incompetence on the side of the person responsible for running the business. When capitals are not rightly appropriated, the business risks failure.
5. Unskilled employees: Having unskilled employees can be very detrimental to one’s business.
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6. Government policies: This is a major cause of business failure in Nigeria. This subheading is of the reasons why a rich man today may become a poor man tomorrow.
Government policies have direct impact on businesses even when does policies were not specifically made for or against the affected businesses. Just one unfavourable government policies is enough to crash one’s business overnight. This has happened overtimes to Nigerian business owners. One of the recent instance which it Nigerians badly is the banning of importation of foreign rice into Nigeria.
Business owners who deal on rice distribution are still suffering from the impact of this policy today. The most recent of them is the naira scarcity saga as a result of the cashless policy implementation.
This policy sent a lot of small businesses home and impacted heavily on large scale businesses too. Worse is always the case when these policies are made without the government doing all that is necessary prior to its implementation.
An unfavourable government policy is like a bulldozer. It knows neither weeds nor crops. One can only be hopeful not to be a victim, or at least have an alternative if such policy occurs.
7. Improper accounting: Running of business requires book keeping and accounting. Records of all transactions, debts and receivables are to be accurately recorded and well calculated.
Accountability must be ensured with all the relevant details represented. Mistakes in the record books are tantamount to improper accounting and this can be fatal to a business, because the owner is forced to rely on wrong representation of his capital.
8. Absence of interest or passion: It is possible for one’s failure in business to be warranted because he has no passion or interest in his line of business. Businesses are to be ventured into and carried out with all enthusiasm; otherwise, the business may not be run as it should.
9. Lack of focus: Businesses are to be carried out with all intentionality. Not being focused equals unseriousness with the business, and the outcome in such an instance is very much predictable.
10. No innovation and adaptation to developments: A business owner ought to be innovative in his strategies whilst he tries to solve the needs of the people in return for customer patronage and his profit.
Innovation may come in form of rebranding. More so, the society is dynamic as much as the demands of the people. A successful business must have the ability to adapt to societal changes and bring forth the business up to the level of development in the society.
For instance, during the cashless policy saga in Nigeria, a lot of businesses were place to a halt because the owners were unable to cope with the technology of the banking system.
Whilst many businesses adapted to the changes, many could not, especially small businesses. This led to their failure.
11. No Contingency Plan: Business owners are advised not to put all eggs in one basket because anything can happen.
It is best for business owners to have contingency plans which they can fall back on if anything should go wrong in their business. This is a very important business sustainability strategy.
Wise business owners do create contingency funds of which they do not touch unless in extreme circumstance affecting the business. Some explore investment opportunities.
Not having a contingency plan is risky because, just one horrible incident, the business is gone without immediate remedy.
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12. The Degree Of Value Offered: The degree of value offered to the prospective customers is a determinant to the success of a business.
If the customers do not get the value of their money in exchange for your product and services, this surely affects the prosperity of the business.
Business owners must be mindful not to offer substandard products to customers; otherwise, the business is bound to fail.
13. Business location: Getting the right business location is a good business strategy. Location has a lot of impact on businesses. Businesses are sensitive to environments.
One might be doing what is right but in a wrong geographical location. In that case, he would have nothing to show for his efforts.
14. Bad Economy: Bad economy translates to bad governance. It is good governance that provides an economy that is business friendly. When the economy is bad, it affects all businesses, and some may get to the point of failure.
15. Horrific and frustrating events: The occurrence of certain horrific events which although may be foreseen, but beyond the capacity of a business owner to prevent, is another major cause of business failure in Nigeria.
Incidents such as: fire outbreak affecting one’s business, loss of goods in transit, burglary, and so on, leads to business failure.
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The running of business in Nigeria is summed up by the idea of management of risks. Every day in business is a fight against risks capable of culminating to business failure. The knowledge of such reasons for the possible failure of businesses is a step to proper management of the risks and the concomitant reduced chances of business failure.
Edeh Samuel Chukwuemeka, ACMC, is a lawyer and a certified mediator/conciliator in Nigeria. He is also a developer with knowledge in various programming languages. Samuel is determined to leverage his skills in technology, SEO, and legal practice to revolutionize the legal profession worldwide by creating web and mobile applications that simplify legal research. Sam is also passionate about educating and providing valuable information to people.