Common Causes Of Business & Entrepreneurial Failure In Nigeria And Their Remedies/Solutions
Entrepreneurship refers to the act of creating and managing a self made business, which most often is started on a small scale. The positive and the negative responsibilities of this business are borne by the individual or people involved in the creation of the business.
It is common knowledge that quite a number of entrepreneurial businesses in Nigeria fail after a couple of years. Several factors are responsible for this, which will be address as we go on.
Types Of Business Failures In Nigeria
Failure is a common occurrence when it comes to business. But pressing on and trying over and over again is the attitude which the average Nigerian entrepreneur greatly lacks. Business failures can be grouped into two: avoidable and unforeseen failures.
Avoidable failures as the name implies are the kinds of business failures which could have been prevented. The blame for this kind of failure falls solely on the shoulders of the business owner. Here, internal factors are usually to blame. Failure occurs due to short-comings on the part of the entrepreneur. He/she may have failed to adhere to certain rules, lacked the needed knowledge or just was not attentive enough to what the business required hence, the failure.
Unforeseen failures are failures which spring up due to uncontrollable circumstances. These failures can hardly be termed the fault of the entrepreneur as he/she had little or no control over them.
Causes Of Business Failures In Nigeria
Lack Of Adequate Funding
Finance is necessary to begin a business and to keep it afloat until it begins to yield profits. Money will be required to take care of various expenses which the business will incur. The unavailability of these funds is often times, a cause of business failures in Nigeria.
Having a comprehensive plan for your business down to the tiniest detail is what most Nigerian entrepreneurs fail to do. They do not have a clearly outlined plan for the business which covers the now, as well as the future. They fail to set goals, achievements and time frames for the fulfillment of these goals and achievements. Simply put, most entrepreneurs do not fully research and map out good business plans for their organizations and this sets them up for failure.
This is a major cause of business failure especially in Nigeria. Launching your business and doing everything according to the book will mean nothing, if the business is not well managed. A good management team means, the survival of a business and a bad management team is capable of killing any business, given enough time. Most Nigerian businesses lack good management. The management team of most of these businesses is often made up of just the business owner, who may lack the experience and practical knowledge it requires to manage the daily activities of the business.
Lack Of Adequate Business Skills
Most people in Nigeria, who want to start up a business, just think of one and venture into it. They make no effort to educate themselves properly on what it takes to own a business. They possess little or no experience in business; neither do they possess correct business knowledge or skills. Many are not aware of the need to acquire proper business skills. While others may feel this kind of preparation is unnecessary, believing they have what it takes. For these reasons Nigerian business entrepreneurs go into business having little or no business skills and hardly knowing what to expect.
Failure In Investigating The Market
Failing to properly investigate your market before beginning a business is laying the foundation for business failure. When considering a business idea, it is not enough to come up with a good idea. You should have a target market, which need the services which your company plans to offer. Entrepreneurs fail to properly investigate the market and the needs of potential customers, before beginning. Providing services that nobody is willing to buy is failure in the making.
Incorrect Product Pricing
A lot of business owners fail to appropriate the right prices to their products and services. Some price their products and services too high and in so doing discourage customers. While other businesses, in order to get and keep customers, set their prices too low which makes them run at a loss. These two extremes are a recipe for business failure. A balance should be reached when setting the prices for your services.
The average Nigerian entrepreneur goes into business solely for the purpose of making as much money as possible. Granted, making profits should be one of the purposes for starting a business. But it should not be the only purpose for it. There should also be passion and zeal for the business in question; as this will keep you pushing for the success of the business. Many business owners are only thinking of the most profitable business they can venture into. When they get in, they realize running a profitable business does not happen overnight, they become discouraged and relent. This eventually leads to the failure.
Personal Problems Responsible For Business Failures In Nigeria
Bad Customer Service
Customer service is very important to any business because getting customers is not enough, but keeping them is the goal. Your attitude to first time customers and regular customers could either encourage their patronage or discourage it. Bad customer service by several Nigerian business owners is a serious contributing factor to the failure of many businesses. Many Nigerian business owners are not very skilled in the act of handling their various kinds of customers or assume their poor attitude has no effect on their business. They fail to see the importance of keeping the customers happy and satisfied. They forget that customers are the heart of any business. These poor services often affects their businesses because nobody wants to be treated poorly and poorly treated customers, will most likely go elsewhere for better services.
Nigerian business owners hardly prepare themselves in any kind of way for running a business and those who do, are hardly adequately prepared for what will be encountered in the business world. Many believe owning and running a business is easy enough. They are of the opinion that whatever lessons needed to be learnt, can be learnt on the job. True, some lessons will be learnt as you move along in business. But going in blind and hardly knowing what to expect, will surely cause a lot of problems.
Poor Treatment Of Staff
A number of business owners have no idea how to handle their employees. Many Nigerian employers come across too harsh when it comes to issues of their employees. They have little or no regard for their workers. They address them badly and use derogatory remarks on them, in private as well as publicly. Such employers are difficult to work with, making employees unable or unwilling to give their best to the success of the business
Misuse Of Business Funds
Business owners sometimes have no discipline when it comes to money. The proper financial ethics of handling a business is grossly lacking. They go ahead and spend money meant for the running of their business on personal needs or make unnecessary expenses and incur debts for the business. They have poor financial records and do not keep track of how money goes in and goes out. After making personal and unnecessary expenses, we find cases where business owners have little or no money left to pay the salary of workers. This kind of attitude will eventually cripple any business. When you spend way above what you make, you are definitely going to have problems.
Economic Factors Affecting Business In Nigeria
A number of economic factors have effects on businesses in Nigeria some of these factors are as follows.
The level of demand and supply; we have a lot of unemployed individuals in Nigeria and those who are able to secure employment, make barely enough to live on. This factor stands to reduce the demand of customers, as well as their purchasing power.
Adequate consideration is not being extended to small businesses in the area of taxation and various government levies. These taxes and levies drain a lot of money from these struggling businesses.
Nigeria is currently still fighting her way out of a recession, which has led to the reduction in man-power and finance. Businesses in Nigeria have experienced set-backs as a result.
The current pitiful state of the Nigerian economy, where there is little or no economic development earnestly affects businesses in Nigeria.
Solution To Business Failures In Nigeria
Secure adequate financial assistance for your business, enough to keep it going until good profits begin to roll in. Make detailed and standard business plans which will indicate everything your business requires per time.
Choose to give excellent and quality products and services every time. This will ensure your customers are always satisfied and therefore keep them coming back. A lot of Nigerian businesses care less about this and this eventually leads them to failure. Many start out strong with good services but compromise along the way and lose customers in the process.
Get the required education on how to handle the finance of your business. Educate yourself on financial management and the keeping of proper business records. Be disciplined enough when it comes to spending and making business purchases. Know what to buy and what you can do without. Making personal expenses from the money meant for your business should never be done because it lays the foundation for failure.
Learn how to treat customers. They are of great importance to the success of your business. Attend trainings on customer service and learn how to handle people properly. Employees should also be trained in this wise.
Your business should have something extra, something special and different from others who offer similar services. Don’t go into a business because everybody around you is doing it. Learn to think of good ways and strategies to help your business have an edge over other similar businesses.
Just as happy employees have the ability to move your business forward. Unhappy employees can run your business to the ground. Learn to treat your workers right.
Never stop learning new strategies in order to improve yourself and your business. The world is constantly changing so are the demands and wants of your customers. Learn to keep up with their demands and don’t get left behind.
In conclusion, before starting a business, serious thoughts should be put into the kind of business. It is not enough to start up a business because everybody is going in that line. This is a common trend amongst Nigerian business owners. We have a lot of people conducting the same kind of business in the same way and awaiting different results. Be creative when generating business ideas.