Statistics have shown over time that across the world the survival rate of small businesses is quite slim. In developed countries where challenges are minimal, about 70 per cent survive the first five years of existence, a figure that quickly drops to 30 per cent by the 10th year.
For a country like Nigeria where challenges are more, the survival rate is even more minimal with only about three to five per cent of small business able to survive the first five years of existence. The business environment in Nigeria has proven to be challenging for many enterprises, particularly those that are micro, small, and medium.
The inflationary pressure that the country has been experiencing for some time now has left many small businesses struggling to stay afloat, as they fight to keep their heads above water and avoid being categorised as one of the countless micro, small and medium enterprises that go under before their fifth year.
Small businesses face various challenges, and there are several pitfalls they should avoid to increase their chances of success. Here are some common mistakes and challenges that small businesses should be cautious about.
Whilst many business owners have excellent business ideas and kick off strong, some do not have a well-thought-out business plan which can lead to poor decision-making and a lack of direction. To avoid going down due to lack of long term planning, businesses should develop a comprehensive business plan that includes your mission, target market, competition analysis, marketing strategy, and financial projections.
Some also fall into the pit of failing to understanding target market and ignoring industry trends, thus resulting in a product or service that doesn’t meet customer needs. To avoid this there is need to conduct thorough market research to identify your target audience, understand their needs, and stay informed about industry developments.
Finance is a major hammer that brings down many businesses in their early years. Whilst lack of finance poses one challenge poor financial management such as inadequate financial planning, failure to budget, and mismanagement of cash flow can lead to financial crises. Small businesses are enjoined to keep detailed financial records, create realistic budgets, and monitor cash flow regularly. Consider consulting with a financial professional.
Even big and established businesses sometimes fall into the trap of ignoring or underestimating competitors which can leave your business vulnerable to market changes. Thu there is need to conduct a competitive analysis, stay updated on industry trends, and continuously assess strengths and weaknesses in comparison to competitors.
As the business gain ground, there is always the temptation to grow bigger faster. Small business owners should avoid overexpansion as rapid expansion without a solid foundation can lead to financial strain and operational issues. Rather businesses should focus on steady and sustainable growth. Expand only when the business is financially stable and ready for increased demands.
Whilst it is easy to grow with good referrals from satisfied customers, a negative review from an ignored unsatisfied can easily bring down a business, thus businesses should actively seek and listen to customer feedback, and use it to improve products, services, and overall customer experience.
Failing to identify and address potential risks can lead to business disruptions, leading to the need for business owners to develop a risk management plan, assess potential threats, and have contingency plans in place.
Hiring the wrong people or not investing in employee development can hinder business growth, business owners need to implement thorough hiring processes, provide training and development opportunities, and foster a positive work culture.
By being aware of these potential pitfalls and proactively addressing them, small businesses can enhance their chances of long-term success.
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