Entrepreneurship growth is rapid in Nigeria, fueled by high unemployment figures, but only 20 percent of these startups survive. Unemployment rate climbed to a six-year high of 18.8 percent in the first quarter of 2018, according to the most recent data provided by the National Bureau of Statistics. Being an entrepreneur is rapidly being a first-choice career with 73 percent of adults perceiving entrepreneurship as a good career choice in nine Middle East and African countries according to a recent survey by Global Entrepreneurship Monitor (GEM). Despite this ambitious desire, only 40 percent of Nigerian adults have either started a business or have run one in the past three and half years according to the 2013 GEM survey.
With the high influx of business people into the entrepreneurial space, over two-third of them fail the survival test in their first few years of their operations. Perhaps Nigeria’s difficult business climate is unconnected from business failures. as the country ranks 145
Despite moving some 24 spots north in the last World Bank ease of doing business ranking, Nigeria ranks a lowly145 of the 190 countries in the database with a 52.03 distance from the frontier in 2018.New businesses have failed due to several reasons, whether it’s government’s failure to provide the requite infrastructure or the business owners’ poor decisions, according to Wole Oluyemi, an accountant and business advisor with about two decades’ experience from Arthur Andersen, KPMG and Chevron Corporation where he had diversified assignments spanning across Nigeria, Cameroon, South Africa, Ghana, Congo, Angola and the USA.
After working with the defunct Arthur Andersen, Oluyemi has worked with 300 clients from domestic to multinational – small to large scale, dying and dead companies, some of which were necessitated by their own doings or incapacities and others because of factors beyond their control. According to Oluyemi, most startups have always been found to be carried away by the anxiety of their new enterprise and have no reasonable financial systems in place to track the money matters of their businesses.
Based on an analysis of 101 startup post-mortems by Forbes and Statista, poor cash flow management was found to have been the second highest reason for startup failure.
In some other cases, startups run their businesses with a generic selling proposition or one that is not unique or cannot be properly differentiated. Unique selling proposition (USP) can be easily defined as what a business has that her competitors don’t. “With an ineffective USP to strategically gain customers, new startups face discontinuance in their operations,” Oluyemi said at seminar targeted at entrepreneurs. Having your business at the right place, with the right clients, at the right time and with the right price could be a reason for the survival of a startup. Business Location and timing is a significant contributory factor to the success of a startup. Locating a business closer to its target market increases the chance of the business gaining traction for survival.
According to a research brief from CB Insights, 17 percent of startup deaths have been caused by having a wrong business model. A business model simply defines how a company will generate revenues and make profit and doing this wrongly means having no focus for the business, hence, leading to its discontinuance.
Conclusively, other reasons for startup failure, according to Oluyemi, include but are not limited to, failure to deliver real value, lack of strategic and/or effective leadership, improper business policies and systems, failure to connect with the targeted audience, market invincibility amongst other factors.
Source: Business Day