Top 5 causes of Business Failure in Kenya
Top 5 causes of Business Failure in Kenya – Have you heard of the saying that goes like, “Entrepreneurship is like a man riding a lion. People look at him and think, this guy’s really got it together! He’s brave! And the man riding the lion is thinking, How the hell did I get on a lion, and how do I keep from getting eaten?” The saying is more real today since many businesses are facing a tough time due to the pandemic.
In order to survive and eventually succeed in the market, businesses owners have been forced to relook into their strategy, become more efficient in service and product delivery and also work on some of the business silent killers. The current situation has also led to a more cautious approach by people looking to start new business. New business founders are now turning to Business consultants, Coaches and advisors for support in Business Registration in Kenya, Business Planning, Strategic Planning, Hiring and any other relevant support to make sure that the business on the right footing.
Reasons why Kenya is a haven for Startups and Investors in Africa.
Kenya has in the recent past been attracting a lot of interest from local and foreign investors looking to do business in Africa. Here are the top reasons behind it,
- Gateway to East and Central Africa; Most Imports and Exports from the East and Central African Countries pass through Kenya and hence making Kenya the transport and logistics hub. Kenya is also regarded as the financial hub because most financial institutions have set up their regional offices in Kenya to serve both local and multinational companies operating in Kenya
- Macroeconomic Stability: Kenya has enjoyed relatively high GDP growth year on Year.
- Supportive Demographic Dividend: Kenya has a young population with increasing disposable income and growing demand for goods and services,
- Improvement in Governance: The Kenyan Government has enacted key political reforms that are strengthening governance.
- Security: The political climate in the country has eased, with security maintained and hence business has picked up.
- Ease of Doing Business: It is considerably easier and quicker to do business than it was 10-years ago, with business opening up further to regional trade, and supportive infrastructure. The Government has also greatly improved the process for Compliance and Business registration in Kenya
- Investment in Infrastructure: There is a lot of investment in infrastructure including roads, rail, education etc.
Here are the most common causes of business failure in Kenya and the possible solutions
1. Lack of Sufficient Capital
More often than not, businesses rarely surpass the revenue projections in their budget and that’s why experts recommend that business owners should have good budget to cater for the capital expenditure and the recurrent expenditure to last the business for at least 6 Months in case the revenue falls short of the initial plan. Businesses that are already in operation are advised to keep their banks and other non-banking institutions close for ease of getting both short-term and long-term credit to help them weather the storm when the business is not able to generate sufficient working capital to keep the doors open.
2. Poor Business Management
A Business is as good as its managers. Poor Business management is a major cause behind business failure in Kenya because it is the work of the business owner and the management to put in place efficient systems to manage the crucial components of a business, which includes People, process and systems. Having a well-trained management team is important because they remove the focus from the business owner and the business can easily thrive even in the absence of the owner.
3. Poorly Visualized Business Plans
Lack of a proper business plan or the implementation of a poorly visualized business plan often leads to business failure in Kenya. A proper industry analysis is important for you to avoid making the same mistake players in the market made. Without a proper plan, a business owner is also highly like to have the shiny object syndrome and lose focus on the reason as to why they started the business in the first place. Investing time in a new venture before the original one is stable is a recipe for failure.
4. Poorly Planned Marketing Campaigns
A well-executed marketing and branding campaign is important because it helps you address your potential client’s pain points and hence important in the client acquisition process. Marketing also improves the brand value of your business making you stand out from the crowd. A proper marketing campaign does not have to be expensive and one way to do this is to make sure that you are speaking to the right audience so that you can easily get a good return on investment. Be keen to define your buyer persona to be sure that you are barking at the right tree.
5. Wrong Business Setup
It is important that you set up the right entity from the beginning to avoid costly compliance issues later. Most new business owners assume that business registration in Kenya is straight forward and hence do not give this important stage some good thought or seek counsel from the experts. You have the option of either registering your business as a Business Name, Partnership, Limited Company or a branch company depending on how you want to structure your operations. Setting up in the wrong category often leads to costly compliance issues that often lead to the business owner closing down the entity in order to start over again on a new slate.
In summary, Kenya is one of the best countries to invest and do business in Africa. Business owners need to be careful not to fall into the pitfalls described above in order to reduce the chances of business failure in Kenya.
Free free to reach out to us for business support to ensure that your business is set up for success.
