Why African Start-ups Fail

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Research has it that one in every three start-ups fail within the first three years. There are many reasons why businesses fail including lack of adequate planning, unrealistic projections, and insufficient market research amongst others. Here are a few avoidable mistakes that African Start-ups tend to make:

A Blurry Vision

In building a successful start-up, it is imperative that there is a clear vision, mission and objective defined before embarking on the venture. The vision is typically the long-term goal that the company aims to achieve. The mission is medium term goal, and the objectives are short-term and operational goals that the company needs to achieve to measure its ongoing success. For a start-up to achieve success, the vision, mission and objectives must be effectively communicated and aligned with the business processes. All stakeholders must be on the same page towards achieving success for the company.

Unrealistic Financial Projections

When it comes to running a successful start-up, it is important to have realistic financial expectations. Unrealistic financial projections can result to a business making risky investments, only to bear all the costs and high interest from investors in the long run. This could be avoided by conducting a comprehensive market research, capturing a safe percentage of the market to determine your success and also by accounting for unforeseen expenses and business downtime.

Poor Cash-flow Management

A lot of start-ups struggle with poor cash flow management. This can result from a company being overambitious.  Companies that make expansion plans or invest without considering the operational cost, risk poor cash-flow management. For example, if a company takes on bank loans and starts incurring interest charges without a clear repayment strategy, that company will be doomed for destruction. To avoid this mishap, start-ups must be capable of meeting short-term expenses and focus on steady growth as the company’s revenue increases.

Poor Business Management

Managing a business is just as important as the business itself. Lack of adequate business management will take the company straight into failure in no time. There must be effective management across of corners of the business. From dealing with customers, to managing company’s assets and even managing growth in the organization, are key to a successful start-up.

Failure to Embrace Innovation

Our country’s economy is fast embracing innovative and digital change. As a start-up, it is significant that you move along with the trend of modern day technologies. With the inflow of foreign direct investment (FDIs) by companies like AIH into Africa’s online space, it is clear that there is a shift towards the digital and e-commerce way of communicating and doing business. Careful measures must be taken to keep your start-up relevant in the tech world. You can start by opening a company website and implementing social media advertising.

Cutting Corners

Many start-ups are built, based on a “get rich quick” notion. Unfortunately, this often results to compromising customer satisfaction, reducing product quality and ultimately lowering the company’s standards to make profit. Cutting corners will result to an awful reputation for the company, create an unsustainable brand and eventually run down the business. A start-up shouldn’t operate for the sole motive of making profit, but rather aim to meet a need or solve a problem.

Author: 234Finance

234Finance.com is an online platform that promotes African entrepreneurship. We achieve this by bridging the gap between investors and early stage startups in Africa’s emerging market.
234Finance.com is strategic for promoting entrepreneurship through the power and effective use of information.

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234Finance
234Finance.com is an online platform that promotes African entrepreneurship. We achieve this by bridging the gap between investors and early stage startups in Africa’s emerging market. 234Finance.com is strategic for promoting entrepreneurship through the power and effective use of information.

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