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Key Factors Behind Startup Failures in Africa

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Running a business has never been an easy task. However, it is something that has to be done, as it plays a significant role in economic growth and poverty eradication.

The average start failure in Africa keeps increasing as the years go by which means that out of 1.5 of 3 businesses that have been launched in Africa end up failing.

Below are the factors that contribute to these failures so whether you are a business owner or you are looking into venturing into business these are the things you need to look out for.

Poor Market Research

Market research is about getting the necessary information about what the customers want, what is highly sorted for, and what the market lacks. Conducting market research can help you identify opportunities and new business strategies which increases the chances of survival. Some startups fail to conduct good market research, which leads to bringing a product that is not needed in the market or meets the market standard. For instance, Dash, a Ghanaian fintech startup, despite claiming significant user and transaction volume growth, faced challenges due to financial impropriety and misreporting by the board.

This leads to financial losses which can lead to business failure.

Limited Capital

Building a successful business depends on the capital. Any startup with a capital problem always faces financial issues. This makes access to capital to be one of the most significant factors to consider before any startup. For instance, 54gene as reported by TechCabal, a Nigerian genomics startup, began winding down its operations after securing substantial funding but faced multiple controversies and financial struggles.

For instance, 40% of Nigerian startups fail due to inadequate funding, poor management of capital, and lack of investors. This is why it is highly advisable to have enough capital or investors, especially in the early stages of your startup.

Limited Access to proper guides and networking

Having people direct and guide you especially when you are new is one of the crucial parts of a startup. Building a healthy and meaningful relationship with experienced people in the industry who can provide valuable guidance and support as you navigate the world of business. The lack of good and well-established mentorship networks can leave many startups feeling left out and isolated. Float, another Ghanaian fintech, is currently dealing with issues related to the mismanagement of funds, showcasing the importance of proper guidance.

Poor planning

Having a good business plan is the first thing that should be considered before any startup. Business plans provide all the necessary information on how that business is supposed to be run. It helps get insights into how the business world works, what to expect, and what to avoid. A good business plan helps prepare you for future challenges that might come your way. A well-laid-out plan increases the survival of your business which makes any business without a proper plan to likely fail.

Poor Disaster Recovery Plan

Another factor that leads to the failure of most startups in Africa is poor recovery strategy after disasters. While creating your brand, marketing your products, and acquiring customers should be at the top of the list. Most owners neglect the part of creating a proper DRI, they put their whole effort and funds into production, which leads to a  failure of business in the case of a disaster. Patricia Technologies experienced a major setback when it fell victim to a cyberattack, leading to the loss of depositors’ funds, highlighting the importance of security in the digital marketing realm.

Conclusion

Failure is a familiar word in startups but it is essential to avoid it totally which is why it is highly important to understand the market, get all the necessary information, and conduct proper market research before startups. Additionally, investors, government, and entrepreneurs should work together to create a more conducive environment for start-ups. Helping with the issues of funding, adequate infrastructure, and proper planning for disasters. By addressing these important factors, it can help improve and avoid these startup failures.

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