In August 2015, an online business threw open its door to allow Nigerians sell and buy everything from its website. It employed over three hundred staff and went viral on social platforms to capture the attention of Nigerians. It sure did and business was booming. Then suddenly, the unexpected happened. The business announced it was shutting down operations. The CEO declared that operations would commence from outside the country. It’s been months and not a sign of a comeback. The business was less than three years old.
Research shows that more than ninety percent of startups start and close down within three to five years. There are several reasons why startups fail. Here are the few reasons for their sudden disappearance.
Starting Big: There is nothing wrong with thinking big, but starting big can be a disaster. Except you are already a player in a particular industry, it is not a fantastic idea to start big. Even if you have access to grant, loan or personal capital, be cautious, play safe and start small. Focus on building your system precept by precept until it is formidable.
Unnecessary overhead: Even if you have an excellent structure or system that will run your business, be very careful not to accommodate unnecessary money draining overhead. From production to marketing to logistics to administrative must be managed under a considerable budget. This is important: don’t employ an entire community as staff because you have access to fund; a sizeable number of employees can get any business off the ground if they are well coordinated.
Lack of startup capital: Nothing kills business faster than not having access to the required capital needed to run the business successfully. Don’t be misled by those who say you don’t need money to start a business. You need money; you may not need plenty of it. As an entrepreneur, you need to learn how to be a fundraiser. You must learn how to raise capital for your business because it will need money at different stages. So, one of the skills you must learn is how to raise money for your business.
Irregular or uncoordinated system: Business is not about a fantastic product; everyone’s product of course is fantastic. What runs and makes money for any business is the system. Even if you have a fantastic product, your business may die if the structure isn’t in place. What your business needs to survive in any condition is a well structured network of system. System makes every activity in the business work on autopilot. Once activities are on autopilot, the rest is history.
Poor Management: What makes a great business great is the management team. As a business owner, you must work hard to build a team that will relentlessly be committed to the growth of your business. Your major activity is to make sure the business operations are well managed by an experience team. This is the secret behind successful businesses.
Lack of vision: I hate to talk about this, but it is important. I’ve seen quite a number of entrepreneurs who run their businesses without a vision. Isn’t that absurd? The vision of a business will inspire the owner, motivate and propel the team that will be working in the business. So, get the vision right so you can channel the course of your business.
No quality control: Good product or service will introduce you, but it won’t sustain you. Consistency will sustain you. That is why every arm of your business must be supervised by experts and yourself. Ignore any area of your system at the detriment of your business.
Lack of mentors: Most business owners don’t have business mentors and so they end up reinventing the wheel. Mentors will guide and advise you. But they are not to make decisions for you. You must make all your decisions yourself.
Being Rigid: A rigid business will soon fade out. As a business owner, be flexible. Nothing is etched in stone; anything can be changed—product, service, team member or any part of the business. So be very flexible and be ready to change when it becomes necessary.
Understand the business environment: Once you don’t understand the policies that govern business operations in a country or particular industry, your business can hit the rock bottom. Always be close to the government so you can be aware of whatever business policy they are introducing. You are not an island, so don’t pretend to be one. Be proactive; know what the government is doing that is affecting your industry.
Lost in an age: Some businesses are trapped in the past age; they have refused to transcend into the new age. Some businesses are still trapped in the industrial age. And that is why they may extinct like the dinosaurs. You must be conscious of the age we are in and the new one that is fast approaching. Then, you have to position your business in such a way it will smoothly transit into the new age.
There are many more factors, but these should sustain y our business for as long as you want.
Alfred Ade-Ijimakinwa is Africa’s number one small business expert and the founder of BusinessIQ online magazine and mentorship. Visit: www.businessiqonline.com