Business Failure in Kenya: Causes, Solutions & New Update
There is indeed, an entrepreneurial gene nurtured and developed amongst the Kenyan people and this can be attested to by the many and numerous new business establishments here in the country every other day. But here’s the kicker – most of those tend to fail. The causes of business failure in Kenya is a topic that is not only fascinating but also very important for anyone who is daring to venture into business in the country.
Introduction to Business Failure in Kenya
In this post, we are going to analyze the challenges that impede the progress many of the Kenyan businesses in the recent past. We will focus upon the reasons which make some of them falter, the consequences that follow thereafter and most importantly, the best practices to be adopted to avoid making those unnecessary mistakes. No matter if you have never owned a business or have owned quite a few already; this piece shall assist you in learning how to approach the Kenyan business environment.
The Reasons Most Small Businesses Fail In Kenya
Let’s face it: no one ever said that running a business is easy. Several factors can trip any such ventures in Kenya. Here are the main culprits:
1. Inefficient Financial Management
Imagine this: You have a brilliant business idea. However, your business account is not a sacred place because you behave therein like a kid in a candy store. Inevitably, that is not going to end well. One of the hurdles for many Kenyan startups encounters is treating their business finances as personal finances. What’s the end result? They can’t manage their cashflows, don’t pay bills on time, and can’t afford investments.
2. Neglect of Market Research
For starters, picture this: A high-end sushi restaurant is opened in a region where the majority of the people do not even know or eat raw fish. It sounds ridiculous. But, this is a no. Of course, some businesses do fail because they do not pay attention to their market. They go headlong into crowded markets providing nothing tangibly different, or even more lamentable, design goods no one required.
3 Insufficient Business Planning
Looking up a business with no plan is as good as going for a general purpose road trip with no map whatsoever. Sure you may have a lonesome suggestion of the general direction you wish to take, but chances are high that you will get lost. A business plan is not an unnecessary formality; it is quite essential as the pursuit of victory is fraught with many pitfalls without a firm plan. It allows one to formulate aspect objectives, perform analysis of the targeted market and analyze probable hindrances they may face.
4. Regulatory and Legal Barriers
If it is any consolation, one can say that affiliate marketing in Kenya is like a blindfolded person attempting to walk through a very complicated maze. There are licenses to obtain, taxes to pay, and labor laws to follow. There are a number of requirements that a small percentage of the businesses many people find difficult to meet. It could be bad, very bad consequences for non-compliance, be it in the form of monetary fines or in the complete closure of the business.
5. Limited Access to Capital
There is a popular saying that ‘money makes the world go round’, and it is very true for any business growth. However, in Kenya, physically touching that money seems to be the bigger challenge. Banks have stringent lending policies which a majority of the small businesses are not able to comply with. In the absence of suitable funding, companies find it hard to publicise and market themselves, grow or even maintain their activities in lean times.
6. Poor Location
Location, location, location – this is a popular saying attributed to real estate agents. For many firms especially retail and service oriented establishment, location of the business either makes or breaks the success. A shop located in the back of an alley or a restaurant without walk-in customers is fighting a losing battle from the very first day.
Consequences of Business Failure in Kenya
When a business fails in Kenya, it’s not just the owner who feels the pinch. The ripple effects can be far-reaching:
1. Financial Losses
Not surprisingly this one is self evident, but it is still necessary to include. In such circumstances, it is not unusual for the business owner to incur losses that go beyond the amount of equity that was put into the enterprise initially. There could be an outstanding amount of loans that are to be settled, there could be some suppliers who have to be compensated, and even some personal property may be under the threat of seizure. Failed business owners are not often surprised to find themselves deep in debt.
2. Job losses
Every time one business shuts its doors, there are more people losing jobs. It is even more frustrating in a country where unemployment is already a problem. It’s not just about statistics – each greedy job makes a family who has to put bread at the table.
3. Loss of confidence and morale failure
In a business, failure is one of the difficult consequences that will be faced by the owner. The entrepreneurs who have undergone failure understand this depression feeling and lower their levels of confidence over their worth. As an example in Kenya, due to some negative esteem of failure, this is more difficult. Others may not be able to do so, which will deprive the economy of those businesses that are bound to be successful in the future.
4. Negative impact on the economy
Job losses have a negative consequence on the economy. In this way, while those job losses do occur within a business, they have an effect on the economy as a whole. When businesses go under, the economy tends to go down as well. There’s diminishing economic activity, diminished revenue generation in positive taxes and there is general stagnation in the economy. And in turn, it can foster a negative cycle that would lower new investment and new ideas coming in leading to stagnant growth.
Preventing Business Failure in Kenya: Practical Solutions
Now for the good news – there are practical steps you can take to curve these tendencies:
1. Managing Investments Efficiently
Always dedicate respect to the first business funds regardless of how little they might seem. Invest in accounting software in order to monitor every shilling earned and spent. It is advisable to hire and pay an accountant for a few hours a month. They will give you perspective on your finances and decisions.
2. Conducting Detailed Market Research
Before you launch your business, try and be best friends with the prospective customers. Conduct surveys, hold focus groups, or do online research using Google Trends to ascertain what goods and services people desire. Keep an eye on your competitors also- which approaches are working well for them, and which ones are they failing in?
3. Planning for the Growth and Sustainability of the Business
Consider the business plan as a GPS system of your business and company. Be sure to give an account of your aims, outlines of the market, points that distinguish the company from its competitors, what marketing tools are suggested and the approximate amounts of finances. But on the other hand, the ideal GPS system changes its route when you finally hit the wrong way. There is also no business expansion or adoption of new strategies without amending of the development plan.
4. Handling Compliance and Legal Issues
Although it might not be the most interesting thing, it’s important not to ignore the legal stuff. It would be wise to consider looking for legal assistance. You can take part in Library workshops or semi
Learning from Business Failures: Turning Setbacks into Success
If your business does fail, it’s not the end of the world. In fact, it could be the beginning of something even better:
1. Reflecting on Failures
Take time to analyze what went wrong. Was it a problem with your product? Your marketing strategy? Your financial management? Be honest with yourself, but don’t be too harsh. Seek feedback from others – customers, employees, even competitors if possible. Their insights can be invaluable.
2. Embracing Failure as a Learning Opportunity
Remember, some of the world’s most successful entrepreneurs failed before they succeeded. Failure can teach you resilience, problem-solving skills, and innovation. It’s not about falling down; it’s about how you get back up.
3. Planning for a Comeback
Use what you’ve learned to refine your business idea. Maybe you need to pivot to a new market, improve your product, or completely change your business model. Stay positive and open to new opportunities – your next venture could be your big break.
Conclusion
Engaging in business within the confines of Kenya is not a walk in the park, so to speak. There are challenges at every turn and every avenue, from the financial constraints to the regulatory red tape. However, with the correct information and even preparation, you can overcome these obstacles and reach greater heights.
You see, it is never the objective of explaining the reasons for business collapse to discourage pessimism, rather it is meant to equip you with ways to win in the future. There are factors that make it possible to make it, and some of them include operations with heads clean in finance, right research of the market, good preparation, and learning on the way.
And what if you happen to fall? Get up again, shake your body, and do it once more. There is no new idea in business that cannot be turned over by the failure of a particular venture today into the ideal million-dollar venture tomorrow. Be resolute, be knowledgeable, and keep moving. The commercial environment in Kenya is difficult, but it is not all doom and gloom as one can manage to not only cope but flourish.