Neil Patel, a former contributor to Forbes Magazine once published a piece titled “90% of Startups Fail: Here’s What You Need To Know About The 10%”. Apparently, his positions were based upon another article written by Erin Griffith where the writer clearly said in 2014, that from research and the personal accounts of entrepreneurs themselves, 9 out of 10 Startups will actually fail.
This is not peculiar to most Nigerian Startups as businesses everywhere face various challenges that threaten their growth and success. However, the Nigerian startup is quite peculiar as not only external factors can derail the business but internal factors as well. This blog post also explores and brings to light 5 reasons why most Nigerian Startups may not exceed the 12th month of their inception.
Most Startups usually ignore Brand Reputation Management
Sadly, a good bulk of the Nigerian populace are still illiterates and get their news mostly off rumors. A simple Whatsapp message flying around which says that the product of a particular Startup is mixed by virgin blood will not need any confirmation from NAFDAC or the brand before many Nigerians will begin to believe it and spread the message without concrete proof. The commercial market in Nigeria is highly competitive and there are entrepreneurs willing to play dirty to keep their hold on the market and prevent other Startups from sprouting successfully.
What then is an Entrepreneur to do to protect his Startup? Simple! Brand Reputation Management; most especially the aspect of Public Relations. A strong PR strategy will position your SME as a leading and reputable enterprise in your industry in major media and lead generating outlets. Companies like Caritas are professionals in Brand reputation Management and can help startups manage their public image and prevent mishaps.
No Partners
The average Nigerian Entrepreneur feels that the next man wants to steal his business idea so he’d rather do it alone. Why? They want to do it themselves, either to save money or to prevent other businesses from knowing or using their business models which they feel is the most unique and surefire way to succeed. The truth is that this ideology is largely built by how the media presents the most successful businessmen.
We hear about Jack Ma, this richest man in China who succeeded through entrepreneurship but we don’t hear of his 17 other friends with whom he started Alibaba. In fact, his first business idea “China Pages” which he started alone failed within the first 13 months. When we read about Elon Musk, Richard Branson, Arianna Huffington, and all the other business giants we immediately see a single champion. Much like old literature traditions where the hero triumphantly wins alone, our legends in business are often portrayed as the singular hero. However, going it alone is usually a bad idea. You’re more vulnerable to mistakes and you’ll eventually slow the growth of your business.
Inability for Startups to easily access Bank Loans due to lack of proper structures
In Nigeria, entrepreneurs hardly keep record books and proper financial statements to track the growth of their SMEs. They don’t track clients, profits, or cash flow so most can’t really give you a clear account of what their business is actually worth if you asked them right now. At best they’d give you an estimate not supported by the laws of economics at all.
Since banks are also businesses with the intention to make profits, they want to know how businesses have fared overtime before they begin to invest in the business by giving out loans. However, poor management practices and lack of proper financial records will cause a stumbling block to an SME that seeks access to a bank loan. Thus, they remain bridled with the consistent problem of insufficient capital and lacking security or emergency funds. SME’s that fall in this category may not live to win over the imminent business challenges ahead of them in their various industries.
Lack of Clear Strategy
Unfortunately for most entrepreneurs, simply knowing how to carry out the activities of buying and selling won’t cut it. Business management is a skill and sometimes, you need an expert to help you kick off or maintain your ground in the industry for the first few months. Most Nigerian startups do not have any clear business strategy. If you ask one or more entrepreneurs in Nigeria right now what their business goal is, they would most likely tell you that they want their business to be the biggest in the country with an international reputation. Yet, if you ask them what their strategy is in order to achieve that goal, you largely won’t get as clear an answer. Most SMEs in Nigeria start and run without as simple as a business plan and a concrete strategy to drive growth.
Lack of Patience
Most SME owners in Nigeria are usually excited about getting returns from the sales of their products or services rendered. To the inexperienced entrepreneur, this business success translates to spending the profits on living large and maintaining the facade of a successful business mogul to attract prospects.
While most Founder-CEOs feel immense pressure to keep up the facade of success, even when things are actually falling apart behind the scenes, faking it until you make it will very likely ruin your business. What entrepreneurs should do instead is to patiently reinvest the profits back into their startup so that they can better position it for growth. This continuous re-investment will certainly improve the business’s profitability in the future.