According to Weetracker’s The Better Africa study, 61% of small enterprises in Nigeria failed between 2010 and 2018. Despite the important role these firms play in modern poverty reduction, economic emancipation, and overall well-being, some fail within the first five years of operation.
It was discovered that the proprietors of these bankrupt enterprises did not conduct due diligence before founding the businesses, among other things. Here are seven reasons why some Nigerian small businesses fail.
1. Duplicating Other Businesses
Duplicating what is already out there with nothing to differentiate your firm is a recipe for failure. As a result, some Nigerian firms failed. They compete with firms with a market presence and a brand name. Trying to imitate other companies without first speaking with them or conducting market research can often cause more harm than good, especially if the goal is to succeed or boost sales.
2. Customer Service/Support is abysmal
Customer service is essential for a company’s survival. Customers who are not treated well or who are not appreciated generally provide bad reviews that lower the value of the business and cause them to patronize others. As a result of the loss of many clients and prospects, such a business will eventually die of natural causes. Customers that feel unimportant to a company will go for another that will value and care for them.
3. Misappropriation of Funds
Some Nigerian firms have failed due to a lack of accountability and financial management. Some businesses may not keep track of their sales or expenditures. Some people use their profits to address personal or family needs. When company funds are diverted to non-commercial pursuits, failure is unavoidable.
4. Inability to Manage Growth-Induced Changes
Some small enterprises in Nigeria have grown at an alarming rate, causing some to fail. This is due to the fact that growth and change create impediments that unwittingly damage enterprises. Among these impediments are money, billing, resource utilization, and technology. For example, GoMyWay and Efritin collapsed after rapidly expanding and failing to earn the funds required to maintain operations after 16 months.
5. Failure to Recognize and Appreciate Market and Customers
Nigeria’s market is complex, and in order to do business there, you must first understand its competitive market and people’s purchasing habits. Some small firms fail due to a lack of market and consumer awareness. They have no idea who their customers are or how much money they are willing to spend on a product.
6. Inability to Communicate Value
One of the reasons small firms fail in Nigeria is an inability to identify value propositions. They are unable to comprehend and properly convey to customers their products or services. These businesses failed because there was no synergy between the value and what the market required.
7. Lack of Focus
Investing in multiple things at once is not a wise business strategy. Multitasking is beneficial, but recognize your limits. To provide exceptional service to your customers, you should prioritize product quality, delivery, and follow-up.
Due to a lack of concentration, some business owners embarked on initiatives that were not originally planned. This has resulted in the demise of some businesses. In this situation, some small businesses ran out of funding and became unprofitable. It is sometimes necessary to say no to some ideas in order to focus on quality rather than quantity.
