Why small and new businesses fail in Nigeria

7 Causes of New Business Failure In Nigeria and What to do When Your Business is in Trouble

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Last Updated on: 15th September 2020, 11:43 pm

How many small businesses fail in the first few years? Did you know that 80% of new businesses and startups will fail within the first three (3) years of getting started? – Forbes. What could be the reasons why small businesses fail? What are the causes of New Business Failure In Nigeria

A business is an establishment for generating income. Usually, a business requires a capital that is used to purchase goods for sale or machines and facilities to render services, e.g. saloon, spar, malls, hotels, etc. However, mismanagement of this capital could spell disaster for the business.

Being optimistic about a business is no doubt a good thing, but ignoring possibilities like business failure, for example, won’t do any good. Having the right information or knowledge of the dos and don’ts of a business will keep you on the right side and also help you get the most out of that business.

In this post, we share with you 7 reasons why new small businesses fail in Nigeria. These are some of the causes of new business failure. If you are new on this blog, please consider subscribing here to get notified as soon as we publish useful content like this.

7 Causes of New Business Failure In Nigeria

Reasons why a startup or new business fails in Nigeria include but are not limited to:

1. Misuse Of Time

Causes of New Business Failure In Nigeria and What to do When Your Business is in Trouble

Where a business is run or managed by one person, poor planning, and not giving sufficient time to your business might cause a downfall of that business. Missing work will give the customers the impression that you might not be available even if you are, thereby causing you to lose customers. This in turn could be the reason your business fails.

This makes you unpredictable, as no one will confidently recommend you for business as they are unsure if you are around or not. Some will argue that mobile phones are available for communication. But not everyone will have the patience, nor be willing to spend extra to contact you for a product or service they can get elsewhere without stress.

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And after calling you multiple times and being told you are unavailable, they will not be willing to call you the next time they have a need. This is true, especially if they find another business to satisfy their needs. This is one of the major causes of New Business Failure.

2. Impatience

Causes of New Business Failure In Nigeria and What to do When Your Business is in Trouble

The inability of a business owner to build the business gradually can cause such a person to lose hope in the business, causing it to fold up in no time. This is because there is no enthusiasm to dedicate time and effort to the business any longer.

Though some businesses grow big in a quick time, some might need a little more patience. In an area where a business owner has a monopoly of the business or is the only one offering a particular service, the business might grow fast.  Whereas, in a location where the competition is moderate or high, it might take a little more time for the business to grow.

Impatience is one of the traits of companies that failed to innovate. This is one of the bad leadership examples in business.

In business, it might take time to gain the trust of the customers. It is therefore advisable to remain patient and consistent. When you learn to be patient, you are evading one of the causes of New Business Failure.

3. Bad Customer Service

Poor customer service because of the attitude of the business owner (e.g. coming late to work), or the attitude of workers (e.g. waiters, salespeople, etc.) might destroy your business and your brand in the long run. It is one of the obvious causes of new business failure.

Good marketing might help to bring in many customers, but it takes great customer service to keep these customers. With the kind of communication technology we have today, it takes just a few bad reports about your business and customer service to bring down your brand. Remember also that these days, customers are quick to take their grievances to the Internet.

A very important thing customers observe is their waiting time. If the customer waits for more than he/she expects or waits for more than necessary, there is bound to be a negative review.

Another thing to avoid is getting into a heated argument or quarreling with your customers, this should be prevented at all costs as it can be regarded as a bad customer service by other customers or prospective customers.

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Bad customer service can also include a dormant contact address that never responds to any complaints from customers or that which takes forever to reply. This is a big turnoff to most customers or prospects who desire to make inquiries about your product or services.

Since people don’t like to be ignored, responding to your customers will help you not to fail in business. In essence, ensure that your customer attendants are not of questionable character. This way, you’ll avoid one of causes of new business failure.

4. Poor Choice Of Business Location

Poor business location is also one of the causes of new business failure. The location of a business should go in line with the type of business you are into or intend to go into. Opening a candy shop in a location where there are no kids or selling an air conditioner in a freezing region is a poor business location choice.

For one to choose a location for his/her business, one has to consider factors like:

  • The closeness of the business to the customers, i.e. can customers take a walk to your business location?
  • Accessibility (e.g. by train, bus, etc. if the business is a little farther from the customers)
  • The existing competition in such a location i.e. what is the population of people selling your exact type of goods or offering the same services as you. Siting your business where you have people selling similar goods as yours can bring you more customers. Nonetheless, when the competition gets too much, there could be a huge drop in sales and a tendency for you to drop prices to attract customers which might hurt your business.

For perishable goods, a poor business location will not only lead to failure of the business but also lead to a loss of capital. You do not want your startup to be included in the list of failed businesses.

5. No Clear Line Drawn Between Religion And Business

Bringing or mixing religion and business can narrow your target audience. It is one of the signs that an organization is failing. Some people will even refuse to patronize you because of religious beliefs. Separating business from religion widens your target audience.

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Considering the location of your business, using religion can be a big turnoff for some people or prospective customers. Hence, it is advisable to be neutral and make your customers and staff feel important irrespective of their religious beliefs.

  • Also, there is a tendency of reduced productivity in your business when members of staff can no longer work as a team because of religious sentiments.

Wondering what to do when your business is in trouble?

To get the most out of your business, being neutral is best. If you really want to get things done, it’s time to leave religion out of your business.

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6. No Integrity

According to the Cambridge dictionary, the quality of being honest and having strong moral principles that you refuse to change is called integrity. A business can keep its customers with integrity, because with integrity comes trust, and with trust comes a prosperous business.

A business with integrity sticks to its policy and helps to create a lasting relationship with the customers. Without integrity, your business may collapse quickly.

It is a known fact that customers are also advertisers for your business, so if your customer does not trust you enough to recommend your business to others, then there is a problem. No customer would like to recommend a business that he/she has no trust in, as this can undermine the integrity of such a customer.

7. Poor Housekeeping Standards

This is a huge turnoff for many people. Poor maintenance of your business environment will limit you to a certain grade of customers. Some customers don’t want to associate with such a business where dirtiness is the order of the day.

Have you ever wondered why people will drive for minutes just to purchase products in malls at higher prices, when the same goods can be gotten from a roadside shop or a local market? It’s because of the good housekeeping standards, class, and packaging.

For someone running a hospitality business, poor housekeeping can lead to diseases and negative reviews from your customers. When such information spreads, your business might get shut down by the Health Department or even lose customers who might fear getting diseases.


Try as much as you can to overcome the reasons listed above. If your business has failed already, consider addressing these issues before re-launching. If your business is still up, avoiding these mistakes would go a long way in optimizing the productivity of your business.

If you have questions or contributions, kindly comment below.

Remember to share this post with others. You could save someone’s business.

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