10 Reasons Why businesses fail in Nigeria With Solutions

October 10, 2019

Business failure in Nigeria is a thing of concern. As a business owner or someone aspiring to have your own business, you need to address the 10 most common reasons “why businesses fail in Nigeria“. By doing so, you have given yourself a better chance of running a successful business. Also, we will look at how business failure can be reduced in Nigeria; that is to say, we’ll be looking at solutions to small business failure. In addition, I will take us through the solution to business failure in Nigeria.

Most businesses fail because of various factors as I will take you through in this article.

Major causes of business failure in Nigeria include:

  1. Starting a business for the wrong reason;
  2. Lack of planning;
  3. Insufficient funding;
  4. Poor management;
  5. Lack of focus;
  6. Lack of Market differentiation;
  7. Outsourcing can eliminate unnecessary spending;
  8. Mismanagement of business funds;
  9. Lack of business visibility; and
  10. Poor customer services.

So, let us take each of these factors responsible for high business failure in Nigeria; taking each heading one after the other. In addition, we will also look at the recommended solutions for each one.

In other to run a successful business in Nigeria, I will encourage you to read, digest and practice some of the things we have prepared for you in this article.

1. Starting a business for the wrong reason.

The first thing to remember is, why you are starting a business. You should be able to point out why you are getting int the business.

Many businesses are started for the wrong reasons you can think of. Did you start your business with the mindset of making lots of money? Do you think that you just want to get out of the 9 – 5 job? or your taught was to just be your own boos? Those are just benefits of having your own business, they should not be the foundation to lay your business.

Let me tell you, money comes with hard work. These benefits come after years of hard work invested in a business.


  • Do not start your business thinking of making lots of money immediately. The money will eventually come when you least expected. Just be focus and make good business decisions in all your dealings. With attention to details and good mindset, the money will come.
  • Start with a mindset of solving people’s problems (remember the “why”). By having such a mindset, you are eliminating the issue of “why businesses fail” in your business.
  • Love what you are doing and have a strong passion for it. For this reason, you are demonstrating a willingness to succeed.
  • Positive attitude towards the business and a drive to successfully plan an important role in your success.

    2. Lack of planning.

    Approximately 75% of businesses fail due to a lack of both short-term and long-term planning for the business. Although this may be true, with adequate planning, a business will succeed. In spite of these high percentage in failure rate, a company with adequate planning makes up the 25% that succeed.

    As a matter of fact, there is a common adage that you may have heard of; “he who fails to plan plans to fail“. This also goes for a business. Having a short-term plan will make your business stand the test of time while a long-term plan (strategy) will be the solid foundation that your business stands on.


    • Prepare a properly done business plan for yourself. Generally speaking, a business plan plays an important role in a business.
    • By all means, adhere to your plans. It is important to realize that, sticking to your initial business plan plays a great deal to the success of your business; although, you may tweet it as need be. The most important thing is for you to stay focus and be determined on success. I can surely assure you that hard work pays.
    • Uphold your business Mission and Vision statement. This should also include your business core value.

3. Insufficient funding

Business capital, operating funds, you name it….. plays a vital role in the survive or a business. Above all, funds form your business cash flow! It is a good practice by business owners to forecast how much money the business will need to move from one level to the other.

It is equally important for both entrepreneurs and business owners to ascertain how much the business is going to require in other to breakeven.

Although sometimes things may not work as planned, it is necessary to have a clear idea of what will be needed.


  • Point often overlooked – the power of leveraging. Depending on the type of business you are into, leveraging what you have to get what you want may be a better option for you to raise cash.
  • Seek support from family and friends. The ones that belief in you will go extra miles for you. You can also give them your word of giving them a small percentage of the business shares. Making them part-owners of your business.
  • In fact, use bank funds if you can. Inasmuch as it will not be too much liability on your business. You may want to know, successful business uses other peoples’ money to do business. Using other peoples’ money sometimes helps in providing solutions to the problem of why businesses fail in Nigeria.

4. Poor management

Management plays an important role in the survival of any business whatsoever. Additionally, the ability of a business management team to put things in order can actually determine the success of failure of a business. For example, a business entity should have procedures in place to guide them and their employees on a daily basis.

These procedures can be in terms of communication, standards and systems in the business; moreover, they are to help all employees to know what to do at any given time in any situation.


  • In view of the above, management should create operational guidelines. These guides are like a pointer that directs each employee of the organizational best practice.
  • Standards and Systems should be put in place – by having a standard set for your staff, you are given them a weapon to excel at what they do.
  • Lead by example: Leading by example in most times makes the difference.

5. Lack of focus

In addition, the lack of focus is one of the main business killers in Nigeria. It is a major killer of most businesses. In fact, its’ contribution to why businesses fail in Nigeria is over 50%.

In the first place, you had a vision when you were setting up your business; I guess I am right with that. But do you follow up on your vision? That is the main question you should ask yourself. In fact, being focus is an attribute of a successful business owner.

Although, some challenges may come up along the way; it is your ability to focus on the goals that will help you through.


  • As a matter of fact, being focused is an integral part of business success. Any business that wants to be in operation for years to come needs to be focused on its’ core values.
  • Paying attention to details is an important part of being focus.
  • Focus on those parts of the business that brings you good revenue; pay attention to those that are not doing as expected. By doing so, you will be able to analyze your business positively.

For example, the video “Untold story of facebook” below is a typical video of a business owner that is focused. I should believe that the successful story of facebook is not new to you.

6. Lack of Market differentiation

Another key point to mention is – Market differentiation. Successful businesses in this world have been able to do so using the “Market differentiation techniques”. They were able to differentiate their business, products, and services from competitors.

A business will always fail if the owner(s) can not pin-point some basic advantages that make their business different from others.

Many entrepreneurs and business owners fall short of this by not being able to create a good market impression of their products and services.

What is market differentiation and how can you apply it to your business?

When we talk about market differentiation, we generally refer to product differentiation. In another word, Differentiating your business is differentiating your products from others.


  • In detail, do a thorough analysis of your business. That is to say, analyze your strengths and weaknesses; improve your shortfalls and turn your weaknesses into strengths.
  • Identify your customers. Create a niche market for your business and turn your customers to loyal customers. Remember, repeat business is more profitable.
  • Market Analysis of your competitor. From time to time, I recommend that you do a general analysis of your competitors.
  • All in all, communicate your business uniqueness to your customers. Devise an effective way of communicating with your customers. Do this on a regular basis, it is very effective.
My advice to business owners and entrepreneurs:

Start with the smallest noticeable quality in your business. Small changes to some things can bring big business success to you. Your business will be more successful if you pay more attention to differentiating your business from others.

In addition to the above, regular auditing of your business performance is highly recommended.

7. Outsourcing can eliminate unnecessary spending

In the first place, do you keep tabs on your business spending? Or salaries and other things that take money out of your business account each month? This may include staff salary or other expenses.

You may not know, unnecessary spending contribute to business failure. For this reason, I recommend you put a check in place.

As an entrepreneur (or business owner), cutting down on spending money wisely will boost your chances of survival in this stiff competition era. from time to time, always audit your outgoing.

In the first place, how much are you paying some of your staff? Can you outsource what they do? If the answer is yes, I will suggest you do that without wasting time. Society of business managers and consultants in Nigeria find out that many businesses will save a substantial about of money when they outsource some of their jobs.

8. Mismanagement of business funds

Another key point – misappropriation of funds. It is another cause of business failure that can not be overlooked. As a matter of fact, a good business owner must know, where the money in the business is generated and what they are spent on.

9. Lack of business visibility

In addition, business visibility is key to business success. What impact is your marketing strategy playing in the success of your business? To begin with, you can learn more on best marketing strategies to boost business visibility.

10. Poor customer services

From time to time, we do encounter some rude receptionist, clerk or even a telephone customer service assistant who acts as if your inquiries are not important. Do you have such in your organization? If you do, just one can have a negative impact on your business.

Generally speaking, this type of employee are known as “Toxic Employees”. They bring your business down. Customers employer to your get affected by these employees’ behaviors.

In fact, poor customer services have been identified as an influencing factor to “causes of business failure in Nigeria”.

As shown above, all the 10 points mentioned can contribute to the failure of any business. Learn more to boost your business 

Conclusion on Why businesses fail and solutions to business failure

Truly, this is a remarkable example of someone that is focused. If business emulates some percentage of this attitude, business failure in Nigeria will reduce. In fact, we will be eradicating why businesses fail in Nigeria with. That is to say, all the factors responsible for high business failure in Nigeria will be reduced to the minimal.

I hope you enjoyed the article?

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