Major Reasons Why Many Startups And New Businesses Fail and A Tips to Overcome it.

New startups are coming up all over the country, with Lagos, Abuja and Kano being the Silicon Valley of most of these start-ups. Ahead of Kenya, South Africa & Rwanda, Nigeria has the biggest start-up ecosystem in Africa. There are many positive things, but the truth remains that 80% of these fresh start-ups and companies fail within the first three years of start-up.


Venture-backed startups have been around in Nigeria for half a century now, but there has not yet been a substantial breakout success in the ecosystem. Despite the reality that Nigerian startups ' market value has grown considerably over the previous few years owing to the country's population and the total addressable market.

It’s unforgiving yet a reality. There are various reasons why startups fall flat and in the wake of experiencing a significant part of the web. Here are my reasons why the majority of startups fail in Nigeria

Poor Marketing.

The effect of marketing on the success of a startup or business cannot be overemphasized. There is this old saying that says “If you build it, they will come”. Which is the no longer the case. Most Nigeria founders (especially in the technology scene) are more fascinated by building a great product rather than finding a way to sell it.


Knowing your target audience, knowing how to get their attention and convert them to leads and ultimately to a customer is one of the most important skills of a successful business. As much as you need a great product to win, you also need a great marketing strategy to convert that product into a continuous source of revenue.
  • Tip: Today’s digital technology has opened a broad spectrum of avenues for marketing in the form of electronic, print, online, mobile, and video advertising. Startups more than ever need to be adept at creating innovative marketing plans, placing advertisements, and letting people know the worth of their products or services. To put it simply, a good marketing strategy has vision, mission, and business goals. It should be able to explain the position and role of a business’s products or services in the market.
Building the Wrong Product.

Building a product without really validating if that is the right product for the market is a total roadmap to disaster. When building your product, you have to greatly consider who your potential users are, what skill sets do they have and what are the existing solutions they are familiar with.

For most startups, it is almost impossible to build a perfect product from the start. This is why you have to adopt the Lean Startup Methodology that says Build ~ Measure ~ Learn. First, build a Minimum Viable Product (MVP), push this product out to a few users and measure how they interact with the product. From your learnings, you are able to determine what the user really wants and prevent your startup from burning excess cash building a sophisticated product that nobody wants.
  • Tip: Using targeted products entails efficiency with which customers are approached and encouraged their future loyalty towards the product or service. Technology giant Apple Inc. is successful because of its unique marketing strategy that makes its products user friendly and highly intuitive. Steve Jobs had the vision that people will not use Apple’s products, they will experience them.
Running Out of Cash or Investment Offers.

It doesn’t matter how much cash you raise, without revenue generation you will eventually run dry. A typical Nigerian startup founder believes raising money is a key determinant of success. Even though raising money can provide you with a much longer runway for your business, mismanagement of this funds is the key reason why major startups fail in Nigerian.


When a Nigerian startup gets a VC fund, the first thing that comes to mind is setting up a fancy office, scaling the team too quickly and paying for unimportant PR. Cash isn’t everything when it comes to starting a business, but when you run out of it, there’s not much that can help. Many startups that have failed in Nigeria, aren’t insolvent or even unprofitable, they just ran out of cash. The biggest mistake to be made is carelessly spending money on features that are not needed or spending your marketing budget with no control in measuring what you are getting back.
  • Tip: As a rule of thumb, startups should always find ways of minimizing their costs. Invoice factoring is another way of speeding up the account receivable processes in startups. In this digital age when invoice payments are made through mobile phones, there is no harm to request immediate payments from clients. It is also very important to secure credit before any business needs it as they can easily find out how much cash they will likely need to survive. Finally, using accounting software to keep tab on money coming in and out of the business is also a good idea.

Thinking Short Term and not Long Term.


Take it or leave it, building and running a credible business is one of the most difficult things you can do in your lifetime (on average it takes longer than expected). Business Owners and Startup Founders need to know that they have to be able to stay persistent, committed and not lose focus too early in their entrepreneurship journey to be successful.

Most founders get started with one of these intentions;
  • Been titled as a CEO.
  • Make quick money within a short period.
  • Escape working under a difficult boss.
Very few founders start because they are passionate about solving a problem that no one else is willing to solve. Hence, when things are not working as forecasted within the first few months of starting, they easily lose focus and passion needed to carry on.
  • Tip: Almost many founders face such slap at first, all it need is focus and patient. You can once succeed without getting some challenges, and keep in mind startup is not a quick money scheme.
Weak Team and Poor Leadership.

Another common business killer is a not having a great team or the leadership experience to assemble one. A typical example of a poor leader is one who cannot recruit and motivate the most talented people for the jobs on which the startup’s success depends.


Accessing good talent in Nigeria is difficult that is why as a founder, you have to be able to sell yourself and your idea for people to come work for you. The best talent out-there prefers to work for a standard corporation than working for a startup with a 20% chances of success. The simple reality is that if you are not a great leader, it is hard to learn to become one.

Moreover, the leadership skills you need to get a business to 10 employees are different than what a 100 person business requires.
  • Tip: A dedicated team with a diverse skill set is very important for the startups to grow and succeed. There should be a proper synergy, coordination, and communication among the members of a team. Any team is formed by the individuals who have different range of capabilities with identical focus. This arrangement allows the members to help each other, learn from each other, and put a concerted effort in order to achieve success. Diversity and dedication of a team drives innovation.
Conclusion.

Avoiding the above-listed mistakes, making extensive research and finding the right business mentors, will go a long way to ensuring your business is able to survive the early death trap most startups find themselves in.

If your startup has lasted the first three years, you’re lucky. You’ve been able to do something that 80% of new businesses haven’t been able to do.


The challenges and problems are inevitable as far as the success journey of a startup is concerned. They need to be resilient and focused towards keeping their values intact no matter what the circumstances are. It is, therefore, to anticipate difficulties and pitfalls beforehand.

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