Even as it is true as in America, it is often said that eight out of every ten businesses fail in their first five years in Nigeria. Despite the failure rate and the tough business environment in Nigeria, entrepreneurship is still spreading like a wild fire and successful businesses are springing up with many more becoming successful with the required knowledge.
It has already been agreed that even the best of well-read business gurus with envied MBAs and Masters can collapse in the face of numerous tests that will herald the enthronement of a celebrated business idea.
Identifying potential risk and failure points can greatly increase the possibilities of succeeding.
1. Inefficient assessment of personal skills
The personal faults, habits and failures of an entrepreneur generally impact on the future of the business especially when the business begins to have increased cashflow and staff. Inability to manage funds, poor attention to details and poor people skills are some indirect factors responsible for the high rate of business failures. Entrepreneurs, like any person, have their own personal weakness, but must be able to manage them extensively. I know an entrepreneur who does not discuss financial matters but leaves the work to his financial manager because he admits not being good at negotiating business deals. Many entrepreneurs are successful in spite of themselves. The key is in working well and enjoying their work with full understanding of their strengths and weaknesses as well as averting/mitigating imminent risks.
2. Eating your investment, and not profit
No sooner than a small business begins to level up in terms of income, our wonderful entrepreneur begins to think of changing status. He buys a new car, wardrobe, changes office space, all from the proceeds of the business which should actually help build the business. When spending, it pays to separate personal funds from the business. The business pays you your salary and you must learn to live within that means. Problems occur when initial profits accrued by a business are converted to celebrate the success of his business.
3. Not Considering PESTS!
Having a business plan, helps you do something well – to anticipate surprises. Pests are crazy little creatures that cause immense damage to food and materials in a house, shop or office. I am not talking about local pests, but in business parlance means Political, Economic, Socio-Cultural and Technological factors which are not necessarily within your control but can damage the potential of your business if they are not adequately prepared for, mitigated or averted , can suck life out of any aspiring business. You may also considers external factors, which include legal, demographic, ethical, social/demographic, international and environmental.
4. Hiring Wrong People
Every entrepreneur will agree with me, monitoring employees is a major battle they fight every day. With statistics saying a large percentage of Nigerians are not employable and even some employable ones, employers have to cope with the challenge of competence, loyalty, corruption and sabotage. Employees are the face of the brand and the quality of their service and attitude has an indirect impact on your bottom-line.
5. Poor Marketing Strategy
This is where most people and especially technicians lose their business. Once you have a product or service. It is important you market and promote your business. Someone said to have a business and not advertise is like winking at a lady in the dark. You are doing all you can, but she has no idea what you are doing. Marketing your business is an imperative if your business must grow. Firstly identify your unique selling advantage in your chosen industry and go into town with it. Look for every opportunity to talk about, promote and share your potentials and selling proposition; look for every opportunity to deliver your business solutions to people all around.
6. Financial Challenges
This is a no brainer problem, for as long as your business is exists you will be needing funds, especially if we live in one of the most difficult business environments in the world: Nigeria. With banks being very discreet with funds, highly competitive market, cash-strapped clients and a very demanding customer base that continually requires servicing. Accessing funds is a continual challenge for many businesses. Your ability to use options available to you at every junction is critical to your business.
7. Inappropriate Location
The location of businesses or its operational area is a critical success factor. It is important you remain accessible to both your suppliers and customers. A restaurant will be more exposed to customers if located to business offices and factories than residential areas. A spring water packaging company spends more if the location of its supplying spring is close to the packaging factory.
8. Poor Business Documentation
Business details such as government registration, business plans, financial records and structure are a common feature in all successful businesses. Those businesses can’t be wrong. The patience required to put the necessary details in place is the requirement needed to build a strong foundation for your business. These oversights can trigger the death of the business later.
Remember, the devil is in the details
9. Poor Customer Service
Especially small businesses in the business of providing service, customer service are an Achilles’ heel. Customer service helps businesses, the quest to make huge profits drive businesses to compromise on quality of service delivery. This factor is one of the latent reasons why businesses die in that the entrepreneur thinks the business is growing because he is getting more leads, but fails to know that an efficient customer service is required to generate and sustain customer loyalty.
10. Mismanaging Reality
When entrepreneurs venture out, they are usually motivated by a deep passion– either for themselves, their idea, getting rich, an opportunity or some other object of enthusiasm. Armed with such passion, they take risks and set sail against unexpected signs of reality. The ability to succeed in business depends on the skill of adjusting one’s plans and dreams to the prevailing conditions. The idea that the challenges will bow to your plans and dreams will frustrate the entrepreneur‘s time, energy, and resources. When reality issues begin pouring in… expenses not turning into expected results, potential customers are not that crazy about the product, missed deadlines, shortfalls in sales, objectivity and reason become even further blurred by the mind-bending distractions of doubt, fear and disappointing replies from investors. Entrepreneurs are found to cave in under these kinds of pressures not knowing it is a bend towards the shining light of achievement.
11. Poor Management
Many entrepreneurs are good at starting businesses but terrible at running them. This is very true of many entrepreneurs, since most of them are powerful initiators, but lack the skills and the patience to sustain processes. Most are more interested in following opportunities, than builduilding a business. Most technicians think because they understand their product or skill, they will automatically transform those ideas into business. Working on a business and working in a business are two different worlds. While the entrepreneur works on his business, the technician works in the business. He feels if he gave in more, worked harder, profit will come. How untrue!
12. Unwilling to ask for help
Most times entrepreneurs want to do everything themselves without asking for help. Most times they think the solution is to work harder or get more new businesses without critically asking the questions that may determine the success of your business. Read books, attend meetings, meet industry leaders and gain insight, network and a lot of these challenges can be bridged by powerful relationships.
These are some of the factors I have considered and will love if you ponder on them while thinking, planning, starting and managing your business. Are there other’s you’ve encountered? Share them!
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