Why Businesses Fail in Nigeria: 3 Critical Reasons to Learn From

All businesses, regardless of size or industry, have the potential to either fail. Recent research by the US-based Small Business Administration (SBA), shows that 47%- 51% of small businesses fail in the first 5 years of existence. This article will show you the 3 most critical reasons why businesses fail in Nigeria and what you must do to prevent this from happening to you. According to Tony Robbins, one key reason why businesses fail is that “they fall in love with their products instead of their customers”. This article will reveal more reasons and recommend what actions you must take to ensure your business stays safe from failure!

Why Businesses Fail in Nigeria
Your business can jump from Failure to Success if you implement these steps

The very nature of business is risk and the beginning point of every failure in business is human. The human factor centres mostly around the decisions and actions of the Founder, Employees and other stakeholders. Human decisions not properly analyzed create risks for the business. Risks can however be easily managed once they are identified and understood. The human side is however more complex and requires much deeper skills to manage.

Several factors contribute to the failure of businesses, but three (3) critical reasons stand out prominently. These are the inexperience of the founder; poor management and leadership. Other factors include poor employment practices; lack of accounting solutions and inadequate technology, poor marketing and sales skills and poor control practices.

  1. The inexperience of the Founder, Promoter or Owner can cause business failure

Many Nigerian entrepreneurs do not have adequate managerial, leadership and business experience to save their organizations from failure when the signs strike. As a business consultant, I have discovered that business owners kill their businesses faster than their employees and other factors combined. This is mainly due to poor people and resources management experience and skills of many entrepreneurs. It is easy to find entrepreneurs who are top achievers in employment but very poor at managing their businesses.

You don’t need to have all the experience before venturing into a business; but it is important to know something, no matter how little, about your current or potential business before venturing into any. Knowing “something valuable” in your business will help you to adequately manage many forms of risks that can easily cause your business to fail.

To have a firm grasp of the intricacies of any business, go for knowledge. Quality knowledge is everywhere these days and most times for free. To gain the required level of experience to help you avoid business failure, do this:

  •  Read up a lot about the business or take a course

In a recent Facebook post Strive Masiyiwa,  discussed how he read so much about the Telecoms industry when he wanted to venture into that sector. He knew nothing about the sector but leveraged other people’s knowledge captured in books and courses; of course, he succeeded.

If you do not have the time to read or take a course, engage the services of a business consultant. Consultants are experts in diverse fields.  There is a strong possibility that you will find one who will deliver what you want at the budget you can afford. You just need to do a little research.

Ensure to get a consultant that has solid experience in the area of your business interest. Check up on his past jobs/references to ensure he can handle the size and magnitude of your business. If he doesn’t have, check out for capacity to upscale and handle your kind of business. Knowledge can be leveraged. 

Success is always near to those who earnestly seek it. Take Action Now!
  1. Poor Management or Leadership can cause business failure

One key reason why businesses fail is poor management or leadership. Principally, you need to know how to manage the People and the Resources in your enterprise. Organizational leadership and management is all about People and Resources Management. The people component here includes:

  • You 

You must learn to understand yourself, your strengths and your weaknesses first. Self-awareness and mastery are fundamental to effective leadership. How you respond or react to situations, and communicate with yourself, especially when under pressure is a critical failure factor. Self-awareness is key to understanding yourself. Once you understand yourself, identifying areas of managerial deficiency and looking for help from others within your organization becomes easy. No one is an island unto himself and no one is a monopolist of knowledge. 

  • Your Employees

To prevent your business from failing, it is critical to understand your employees, especially your leaders and managers. Emotional intelligence helps a lot in this situation. Understanding your team will shape your communication and ensure that expectations are understood and can be properly implemented. 

3.   Inadequate Structures, Systems and Processes: Sure-bet to business failure

Effective management involves setting clear goals and developing strategies and tactics to achieve those goals. It also involves effective communication of those strategies to employees. Your ability to identify and address issues, develop and nurture a strong company culture will be tested.

Structures, Systems and Processes are the frame line upon which your entire business rest upon. They include your Human Resources Management System, your operations systems and processes, Accounting systems and Solutions e.g. Quickbooks, Inventory management system, Marketing and Sales Systems and Control and Audit processes and practices

  • HR Policy

To ensure your business does not fail, you need to have a clear employment policy. A clear employment policy will help in o many ways. Critical questions to ask here are:

  • How do I employ? 
  • Who do I employ and who should I not employ? 
  • Do I bring family members and relatives into the business? 
  • What strategies do I have to attract and retain good talents?
  •  What qualities should I look out for in potential employees? 
  • How do I pay them and when? 
  • Are there rewards to motivate hard work and achievement? 

These questions are some of the critical reasons why many businesses in Nigeria and Africa fail. No business should be too small to have an employment policy.

Obstacles are no match for your determination. Turn every obstacle into an opportunity
  • Operations Systems and Processes 

Another set of reasons that cause the failure of businesses is faulty Operations Systems and Processes. Poor use of accounting solutions, procurement and inventory control processes, and sales and marketing efforts that are target-driven are key failure factors

To help you manage your operations processes and structures adequately, do the following:

  • Buy a good Accounting Solution like Quickbooks

Quickbooks is an ERP that can help you manage your inventory and other business processes effectively if properly implemented. Keeping accurate financial records and tracking inventory are critical components of running a successful business. Many accounting solutions and technology products exist to help you handle this at budget prices. Getting a great accounting solution can help businesses make informed decisions about pricing, cash flow etc. Accounting software can help you  forecast future sales and identify growth opportunities. Take advantage of them.

  • Look into your Inventory Management activities

To avoid poor sales,stock-outs and other inventory-related issues that can easily take your business down into failure,  ensure to put in place solid procurement, logistics and supply chain management systems; also cut out a sound warehousing and inventory control processes for your business if you are a product-based business. A business that cannot accurately track its inventory can quickly find itself in a situation where it runs out of products and loses customers’ patronage and loyalty; this is a critical failure factor that must be addressed.

  • Poor Marketing and Sales Skills

Marketing and Sales are the bedrock of successful business endeavours. If you don’t want your business to fail, make sure you sell your products or services. and encourage others within your company to do the same. No matter how good your products and services may be, they will not sell themselves. A business that does not have a strong marketing and sales rep, team or manager is unlikely to attract customers and grow.

To be effective, your marketing and sales strategies must involve understanding your target market, developing a clear message for that market or customer segment, and communicating that message in such a way that resonates with potential customers.

If you or your team lack effective marketing and sales skills, your business will struggle and this might lead to failure in a short time. Don’t let this happen to you. Always Be Closing; it’s called the ABC of Marketing. Meeting customers’ needs through your product are the very reason why you are in a business


There are many fundamental reasons why businesses fail, but the lack or inadequate knowledge or experience of the founder or owner, poor management or leadership skills and inadequate structures, systems and processes,  are among the most critical factors. If you will invest time and resources to learn more about your businesses, develop strong leadership, people and resources management skills, and institute adequate structures and processes, you will increase your chances of success and avoid the pitfalls that lead to business failure.

Leave a Comment

Your email address will not be published. Required fields are marked *

WP2Social Auto Publish Powered By : XYZScripts.com
Scroll to Top