It is no longer myth that a large percentage of new businesses crash within 5 years. For most new startups, it’s a question of ‘when’ not ‘if’.
Before you say it’s not your portion, you need to read and understand the following reasons businesses fail and what you can do to guarantee your own success.
Starting a business is really not difficult; it’s a series of steps and actions… and your business is live. The real work lies in keeping yourself in business – the first year is usually the hardest. The economic climate of the country has made things a lot worse.
This article outlines (in no particular order) some of the common reasons businesses fail and how to avoid them.
1. Lack of Solid Mentoring
Mentoring does not mean copying someone’s work or running to someone every time you meet a problem rather it can be likened to climbing on the shoulder of one who has gone ahead in a relevant field. By doing this, repeated mistakes are avoided hence a smooth sail for the new entrepreneur.
“it’s unfortunate that we lack good mentoring in Nigeria. That was one of the major problems I had. I lost over 10 million Naira due to business mistakes as a result of lack of mentoring. But don’t be afraid to start something. Go on. Do it. You will get better with time… Develop yourself. Read books. Study great companies and learn how they started. Kill fear. Fear stops us from doing anything.” Eze Chijioke – CEO GoodDay Paper Mills Ltd (Interview)
2. Starting a business without a business plan
This is one of the costliest mistakes any aspiring entrepreneur could make. When you don’t have a plan, you are already planning to fail. There is more to being an entrepreneur than meets the eye. A lot of research is needed before venturing into a business.
Passion for a particular trade or service is not enough to run a business. These research questions culminate into a business plan which states location, how to get customers, how long it would take to break even, who the suppliers are, the supply chain, competition analysis, target demographics, expansion rate of business in later years, etc. Here is an article on how to write a business plan
Starting a business could be likened to growing a tree; the root first of all grows deep down to get access to and absorbs sufficient nutrients and water. Deeply rooted in the soil, the root anchors the tree after which it can start to sprout. The root is enabled to support the tree for decades. A lot of underground work is needed for the success of a business.
3. Lack of passion for the business
Starting a business should not just be about making profit even if that is the first underlying motive. There should be an innate desire for the business you are going into because it would someday be the drive for your remaining relevant in the business venture.
Assuming Dangote started out just because he wanted to make money, what then is keeping him in business now that he is the richest man in Africa?
There would be rough times in business when you would feel like quitting but the only thing that would keep pushing you is your passion or the satisfaction you derive from meeting the needs of others. Lack of passion can hasten a business’ failure.
Think twice if you don’t have passion for that business venture!
4. If you are borrowing capital, borrow sufficiently
Do not borrow too little and do not borrow too much. Do not borrow too little to the point that you would be stuck mid-way in the business, this is a major reason businesses fail.
Do not borrow too much to the point of being in debt for the first four years of the business. It would only mean you started out the business for starting sake because there is nothing left to plough back into the business.
A business plan would help you arrive at the right figures hence the right amount to borrow. One good way of paying up your debt quickly is to make sure that sales are not done on credit. “No credits today, come back tomorrow” is a popular but true statement. Do not be nice or too kind at the detriment of your business.
What you start with today is what you would be known for. Customers would only remember to patronize you when they are broke and go to supermarkets when paycheck is intact if that is what you build.
5. Personal development
Develop yourself, train yourself, read books. Readers are leaders if only what they read is put into practice. Rub minds with great achievers. Study great companies, learn how they started. Kill fear and stay motivated. The first year is full of potential pitfalls and missteps. Gain sound financial management and control.
Businesses fail all the time, but having the right information keeps you ahead of the pack. I hope you have learnt a thing or two. It is my wish that you succeed in your business venture. See you at the top!