To understand why small businesses fail, we must look and learn from real life examples around us.

The startup ecosystem is a breeding ground for innovative ideas, and among them, one business in the fintech industry stood out, garnering significant attention. The venture appeared to have struck a chord with the masses, solving a genuine problem in Africa. But what truly captivated people was the young founder behind it all.

This entrepreneur didn’t simply build their business in obscurity; they embraced media visibility and publicity, becoming a darling among budding startup founders. Their face seemed to be everywhere I looked, whether it was a high-profile interview with a popular YouTuber or imparting knowledge at a masterclass. Their charisma and talent inspired many from the Gen Z cohort, becoming a beacon of success.

They were the epitome of what parents yearn for in their children—a role model whose achievements would be used as a blueprint for guidance. They had mastered their craft and excelled at what they did.

However, despite the media frenzy, constant interviews, globe-trotting, and impressive networking, tragedy struck. News broke that the business had gone bankrupt. Unable to sustain its operations, they had no choice but to ask clients to withdraw their deposits. Witnessing this heart-wrenching downfall, I couldn’t help but wonder: Why do so many small businesses meet an untimely demise? Some don’t even make it past the five-year mark, while others falter before gaining significant traction.

In my quest for answers, I delved into the matter and uncovered some crucial insights on Why Small Businesses Fail:

  1. The Red Ocean Predicament:

How can one hope to compete with industry sharks when their entire annual revenue pales in comparison to their rivals’ weekly marketing budgets? How can they survive when these sharks have already devoured 60 to 70 percent of the market share?

The key to victory lies in carving out a niche. This concept, known as the blue ocean strategy, emphasizes finding untapped market spaces rather than diving headfirst into overcrowded waters. I cannot stress this enough: becoming a niche is the way forward.

  1. The Power of Distribution:

The most prominent brands we know today didn’t attain their status merely by being first to market; they succeeded because of their robust distribution strategies.

How did Dangote establish his products across various regions in the country? Distribution!

How did Coca-Cola introduce its beverages to Nigeria? Distribution!

To keep the lights on and ensure sustainable growth, a startup must prioritize sales, marketing, and a well-structured distribution system. The absence of this is one of the reasons why small businesses fail

  1. Embracing New Markets:

Refusing to step out of one’s comfort zone is akin to digging a grave for the business. It is imperative to penetrate new markets, even if it stretches the entrepreneur beyond their limits. The rewards reaped from venturing into uncharted territory will far outweigh the challenges faced along the way.

  1. The Crucial Need for Adequate Funding:

This, unfortunately, was the downfall of the entrepreneur in our story and also why small businesses fail. Unable to keep the lights on, they were forced to declare bankruptcy.

As a startup, channel your energy into sales and marketing. Sell until you surpass your own expectations. Success in business hinges upon these critical factors.

I implore you to take these lessons to heart. Let’s ensure your business doesn’t meet a similar fate. It is my sincere hope that these insights help pave the way for a thriving entrepreneurial journey.

Remember, your dreams are worth fighting for.

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5 thoughts on “Why Small Businesses Fail: How to avoid it

  1. This is quite revealing and it refers to me and my business before it went under. But with this it will reengineer my new perspective

  2. “…becoming a niche is the way forward.”

    This is so insightful. The journey has began for me in my pursuit of becoming a niche.