80 percent of businesses fail within the first eighteen months, and about half of these failed businesses are from emerging markets in Africa and Asia, according to Bloomberg. What are the reasons for these failures? Is it due to the infrastructural decay in most African countries or are African entrepreneurs to blame? Though there are many factors, we have outlined 5 major reasons why many African ventures have short lifespans:
- Wrong reason for starting up
Many entrepreneurs are successful because they are passionate and have discovered an opportunity that has led them to starting a venture. The story is quite different in Africa. A lot of African entrepreneurs go into business out of necessity – because they have to make ends meet. Others start because they want to make money. While some start because they have seen others succeed in similar ventures. The problem is if these motives take longer to achieve than expected, or are not met at all, chances are the business will fail because its foundation is faulty.
- Lack of knowledge
Steve Blank, the pioneer of the Customer Development model, once said: ‘you don’t need capital to build a business, you need knowledge.’ This is absolutely true. You may inject millions into your venture, but risk failing because you lack the skills and know-how needed to grow and sustain it. Be sure to have adequate skills and knowledge in the industry that you are operating in, to ensure longevity.
- Single founder
Building a business is like building a mega city from scratch. It’s tough. How do you decide how to implement your business ideas or how to sell products and acquire customers all by yourself?
Entrepreneurs in many first world countries understand that it’s difficult for a person to build, manage and sustain a business on their own. The smartest way to build a business that will stand the test of time is to get a partner – someone with a long term vision to help build your empire.
- Poor execution
Even when you have a good business idea, the technical know-how, and a reliable partner, if you don’t properly execute your plans, your business will be short-lived. To ensure effective implementation, you must have a timeline for achieving business objectives. It is helpful to split your objectives into phases and keep all stakeholders accountable for meeting set targets.
- Expanding too quickly
Just because you have good business idea and enough capital doesn’t mean you must expand right away. Start small and gradually scale up.
Expanding a business requires a lot more work, stakeholders and responsibilities. Most start-ups can’t handle the burden during their infant stage, so they crash. It is important for your business to start small and evolve over time.
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234Finance is an online hub that promotes African Entrepreneurship. We feature small and medium sized businesses on the platform, shedding light on the current and future developments in diverse sectors across Africa. We also provide free resources, share opportunities and events on our platform that entrepreneurs can benefit from and thrive in Africa’s tough business landscape.