Statistics show that in Nigeria, 80%of businesses crash and burn within the first 18 months of starting up. As an owner of a startup, these figures might seems scary and discouraging. As scary and discouraging as these figures seem, there’s a silver lining. You have the opportunity to learn from their mistakes and ensure your startup doesn’t fall prey to their mistakes. Starting a business in Nigeria can be very difficult because of the economy, startups have to fight in this business climate to succeed. This post is going to highlight 3 common reasons why startups fail in Nigeria and how to avoid them.
Lack of Market Need/ Market Research
A major reason why startups fail in Nigeria or any part of the world is a lack of market need. Startups fail because their owners don’t do their homework. Before you start a business you have to make sure your product or service is something your market needs. The economy of Nigeria forces a lot of people to go into business with the sole purpose of making money, this mindset doesn’t equate business success. Most successful businesses are successful because they meet a need or solve a problem.
To avoid this reason for why startups fail, ensure you do your due diligence. You can conduct interviews, surveys, and use other online tools to get information about your market. Ensure that your product or service meets a need and solves a problem. The Nigerian economy and lack of infrastructure have created a few problems for its citizens. This is a great opportunity for business owners to come together to figure out what the problems are and find solutions. Your business is most likely to succeed when it solves a common problem. If your business idea already has a saturated market, then work on adding value to the user experience.
Financing as a reason why startups fail can be categorized into two especially in Nigeria. The first one is insufficient funds and the second is mismanagement of funds. Let’s tackle the first one which is insufficient funds. Startups fail due to a lack of funds, the funds aren’t enough to cover their operations. Some business owners fail to properly account for the capital they truly need to run the day to day operations of the business. They have high and impractical expectations of what their profits will look like and how quickly it would start coming in.
To avoid this problem, you have to ensure you adequately plan and not act on expectations. Calculate how much money you will need for your day to day cost. Estimate the funds you will need for a minimum of one or two years in advance without considering the profit you would be making.
The second problem when it comes to financing is the mismanagement of funds. A lot of Nigerian businesses have a problem with differentiating between business funds and personal funds. They often mix the two together.
The simple solution to this problem is to have a clear segregation between your business and personal funds. You should create checks and balances to prevent dipping into the business funds.
Poor customer service
Nigerian businesses often underestimate the importance of good customer service. As a business owner, you have to ensure that you and your staff are professional and treat your customers well. The best form of advertisement is a satisfied customer. You should also listen to your customer feedbacks and compliant. Don’t build your product or service to please you, build it to satisfy your customers.
To avoid this reason why startups fail, ensure you build a business that’s customer-centric. Value and listen to your customers.