In Africa, there’s a culture of shame that makes it difficult for people to admit failure. Depending on how you see it, failure can either be good or bad. When discussing Small Business as a subject, failure is a key component.
From statistics, we understand that over 80% of Small Businesses fail before their Fifth anniversary. It means failure is inevitable and therefore the more we talk about it, people will begin to see it from a different perspective and possibly become better at what they do, employing lessons learnt from their previous failed venture(s).
Why Do Small Businesses Fail?
There are so many reasons. I can attempt to summarize my thoughts with these few points.
1. Lack of Clarity of Vision And/Or Purpose
Most Small Business founders started because they wanted to be ‘their own boss’. They realize very quickly that running a business is real work and if not properly planned takes away the liberty that brought them here in the first place. The result is dis-illusionment and ultimate death. A more serious and compelling purpose/vision will make the above difficult if not impossible.
2. Lack of Proper Financial Planning
A lot of the time, small business founders neglect to put in place a proper financial plan. They discover very late how much lack of planning cost their business and sadly most times, it’s reasonably beyond redemption. A simple financial plan (that includes a cash flow analysis and budget) will help you determine what you need ahead of time and help you put in place a strategy to meet your business financial goals.
3. Lack of Entrenched Organizational System
For a business to succeed, the founders must be able to define the tasks of staff members, break them into manageable modules which is then fit together to form a process. The process becomes a set of routines which makes up the system complete with organizational procedures. This system both confers on the organization an edge or a disadvantage over the competition and should be reviewed periodically for efficiency.
4. Lack of Institutionalized Support
Doing business anywhere is tough. It’s tougher in Africa. For Small Businesses to thrive there must be a mutually beneficial partnership between the Government and Small Business owners. If the business succeeds, they not only reduce unemployment, they provide fund for Government projects by way of taxation.
5.Lack of Attention to Client Acquisition & Satisfaction
A paying customer a day, keeps bankruptcy at bay – stolen from Victor Osaretin Asemota and modified by me. We already know that a satisfied customer will refer others. These should be the most important issues for a business owner to focus on. Surprisingly, a lot of Small Business owners leave these to chance with no clear cut plan on how to go about either.
6. Lack of Succession Planning
Due to how most Small Businesses were formed here in Africa, a lot of day-to-day responsibilities revolve around the founder. In the absence of the founder (for natural or un-natural reasons), the business suffers and often goes into extinction.
Characteristics of A failed Business
1. In ability to consistently meet their obligations to both staff, board, clients, creditors and community.
2. Inability to meet internal growth goals
3. Weak and unsustainable Cash Flow and financial liquidity
4. Weakened Balance Sheet and consistently posting of Negative Profit returns.
What You Should Do When Your Business Fail
1. Admit It.
Most Small Business owners live in denial and compound an already bad situation. Admitting failure doesn’t make you bad, rather, it helps you to quickly lose the failure tag, take stock and possibly see the clearer picture in order to rebound better and faster.
2. Do A Post Mortem
Go through your operations, strategies and decisions to find out what you did wrongly.
3. Seek Counsel
Most times, depending on our level of exposure and knowledge, it’s difficult to properly assess ourselves. An experienced mentor (that you respect) may be able to point out the errors and set you on a recovery path.
4. Carry The Team (Staff, Board & Creditors) Along
Depending on how you ran your business and the industry, you may run into more serious issues if you neglect any of these people.
5. Learn your lessons
Failure is neither bad nor good – it depends on you. It’s not bad if you learn useful lessons that help you succeed in your future endeavors. Everyone who succeeded at something, failed at some things in the past. The difference is – those who eventually succeeded, learnt and implemented their lessons. If you intend to start afresh, ensure to borrow from the lessons you learnt.
6. Share your experience
If you learnt lessons from your experience, share it so others can learn. Granted, no two experiences can be the same, but, Africa will be a better place if we can learn from and not repeat your mistakes.
These lists are in no way exhaustive – they are just my thoughts based on some experiences. Some points may need to be expanded, debated or even totally expunged, but, at least we can start a conversation around these topics towards a stronger, healthier Small Business culture and ecosystem for our nascent economy.