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According to a report titled “Perception Study: Efficiency and Impact of Regulatory Activities of Standard Organisation of Nigeria on SMEs,” about 80% of small businesses in Nigeria fail within the first five years. This is a staggering figure, considering the sheer number of new businesses launched every year. For instance, according to the International Labor Organization, the majority of enterprises and employment in Nigeria are small- and medium-sized businesses. You might be wondering, “Why do so many startups fail, and how can I ensure my business succeeds?” If this is you, you have to understand that failure isn’t inevitable. With the right strategies, you can build a startup that thrives in Nigeria’s challenging business environment. This post discusses some of the reasons that have been discovered for why most startups fail, and then it also discusses what you can do differently.
1. Lack of Market Demand
One of the major reasons many Nigerian startups fail is that they offer products or services that no one needs. It’s common for entrepreneurs to develop ideas based on personal passion rather than real market demand. This oversight can lead to offering products or services that don’t align with customer needs. For instance, launching a tech solution without assessing its relevance to the local audience can result in poor adoption rates.How to Succeed Instead:
Before launching your business, conduct thorough market research. This research should be aimed at identifying what problems your target audience faces and if they are willing to pay for a solution. Also, you will need to test out the solution you’re offering to validate it.2. Poor Financial Management
Many startups run out of money because they don’t manage their finances properly. Some entrepreneurs overspend on unnecessary expenses like fancy office spaces and branding while ignoring critical investments like product development and marketing.How to Succeed Instead:
Do away with the “arrival mentality” that, because you recently received funding for your startup then you’re made. Understand that any funding you receive is for your business and not for your upkeep or your lifestyle. Separate your business finances from personal funds. Create a lean budget and stick to it, especially in the early days.3. Weak Business Model
A business model defines how a startup makes money. Many Nigerian startups fail because they don’t have a sustainable revenue model. For example, launching an online store without a clear plan for generating consistent income will likely lead to failure.How to Succeed Instead:
Choose a business model that aligns with your market. Diversify your revenue streams. Don’t rely on just one source of income. Study what other successful brands, especially those in Nigeria, are doing and see what you can learn from.4. Poor Marketing and Branding
A great product means nothing if people don’t know it exists. One of the common mistakes many Nigerian entrepreneurs make is believing that just because they have set up a business, customers will naturally flow. But, they’re always shocked when reality hits.Sign up for the Connect Nigeria daily newsletter
How to Succeed Instead:
Don’t just rely solely on word-of-mouth and ignore digital marketing. Develop a comprehensive marketing plan that leverages social media platforms like Instagram, Twitter, and TikTok. Run paid ads on Facebook and Google to reach a broader audience. Collaborate with influencers who align with your brand. Create a strong brand identity with a professional logo, website, and engaging content.5. Inability to Adapt to Market Changes
The Nigerian business environment is very unpredictable. Economic downturns, government policies, and shifting consumer behaviours can affect businesses. Startups that refuse to adapt to change often fail.How to Succeed Instead:
Be flexible. If one business approach isn’t working, pivot to a better strategy. Stay updated on industry trends and government regulations.6. Hiring the Wrong Team
Your startup is only as strong as the people behind it. Many startups fail because they hire the wrong people. Some hire friends and family members without the right skills or employees who don’t share the company’s vision.How to Succeed Instead:
Hire for skill and passion, not just relationships. Clearly define roles and expectations. When you hire, invest in the training and development of your employees.7. Poor Management and Leadership Practices
Effective leadership is the backbone of any successful enterprise. However, a lack of managerial and leadership experience or skills can lead to disorganized operations, financial missteps, and strategic blunders. It’s reported that poor project management contributes to the failure of 60% of startupsHow to Succeed Instead:
Invest in improving your management and leadership skills through training and mentorship programs. Building a team with diverse skills can also provide a balanced approach to decision-making.8. Lack of Persistence and Patience
Finally, many businesses fail simply because many entrepreneurs give up too soon when they don’t see instant success. You need to understand that building a successful business takes time. Be patient with yourself and persist in the face of challenges. You can read books like Zero to One by Peter Thiel and The Lean Startup by Eric Ries to gain business insights.Did you find this article useful? Contact us: editor@connectnigeria.com
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