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  • Top 10 Causes of Business Failures in Africa

    Top 10 Causes of Business Failures in Africa


    It breaks one’s heart. According to USA Today, 80% of businesses fail within the first year of their operation. All those dreams of making it big, of turning one’s own story as a model for others to follow, and of turning one’s wildest dreams into reality come to naught for 8 out of 10 entrepreneurs within a year.

    But why? What do those failed enterprises do which leads them to the abyss? Or, to put the question another way, what steps do the remaining 20% of businesses take which allow them to bypass the trip to oblivion?

    There’s only one way for us to find out: by pinpointing why businesses fail in the first place.

    1: Being out of touch with customers

    Once an entrepreneur senses that they have a good idea, the next thing they do is to retreat into a cave – thinking it would be best if they develop it in isolation.

    Unfortunately, that’s one of the reasons why their business fails. They involve themselves so much with their idea that they forget understanding what their customer wants.

    2: Not adding unique value to the market

    As Entrepreneur.com tells us, there are more businessmen today than at any time in history. Depending on how you look at it, it’s a bad time to be an entrepreneur.

    For, where in past your idea had to compete with 5,000 people, now 50,000 of these guys will be at your throat. Unless your business is adding unique value, it won’t succeed.

    3: Not able to communicate better

    Most entrepreneurs fail because they are unable to communicate their value propositions in a compelling, concise and (most importantly) clear fashion.

    For the sake of example, if your customer is speaking Russian, why speak English with them? Learn the traits of communication and then apply them in your everyday conversations.

    4: Poor decision making

    Ever wondered why the likes of Lance Armstrong, Mike Tyson or Aaron Hernandez failed at the tail-end of their careers? Because of poor decision making.

    Self-sabotage through poor decision making is so common that we tend to ignore as something that is normal. However, as businesses who fail find out at the cost of their dreams, it is anything but.

    5: Unable to pinpoint a profitable business model

    Regardless of how good your idea is, your business will fail if its revenue doesn’t exceed its costs. You can resolve all of the abovementioned reasons, but this one alone might come to bite you.

    Therefore, whether you’re looking for business investment opportunities in Africa or looking to buy shares of a little known company in Asia, make sure your business model is profitable.

    6: Inadequate market research

    You might not believe it but a surprising number of new CEOs don’t give enough attention to market research.

    That deprives them of key knowledge i.e. size of the market, its dynamics and the role they can play in it, thereby leading their business to the abyss.

    7: Poor financial management

    Apart from having incorrect cost models, many CEOs turn to optimistic financial projections and pay little to high overheads which are plaguing their enterprise

    Unsurprisingly, such a lax attitude towards the financial side of their business forces it to go south.

    8: Too much focused on externalities

    Externalities are events which no CEO – not even Bill Gates – can control. They include changes in tax policy, fluctuations in the exchange rate, and market crashes.

    Therefore, if you’re a CEO, you’d do well to pay less attention to market externalities and more to your business’s operations.

    9: Lack of proper planning

    When setting out your business’s goals, make sure you have a thought-out plan which would allow you to achieve them. Or else you’re just like a man who’s shooting in the dark.

    10: Absence of accountability

    If there’s no accountability in your business, you can’t hold anyone to account if things start to go south. Consequently, whether it is a partner or a low-level employee, everyone should be accountable for a business to succeed.


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