7 Reasons Why Small Businesses Fail Within The First Year

We hear many statistics about small businesses often, especially about their failure rate within the first three years. Those statistics have become very personal to me due to the fact that my small business struggled a lot last year and almost closed. I have also encountered at least three young entrepreneurs that I know, who have closed their businesses over the last year – and their businesses were less than a year old. Today I want to focus on seven main reasons why small businesses fail within the first year. I believe that knowing the reason why, will help small business owners avoid most of these pitfalls and keep their small businesses going, and it time, successful.Business closed sign

1.Underestimating capital requirements

A lot of small business start-ups don’t think that having a business plan is necessary, however; it’s imperative to write one, especially when starting your small business. A business plan not only helps you put down your business idea on paper and how it will be executed; it also helps you know the capital requirements required to start and run your business for at least six months. Some start-up owners get so excited about starting their small business that they don’t sit down to write the actual required cost of starting their business. They tend to find out when it’s too late and the business is failing already. Make sure you have a business plan for your small business if you don’t already have one or if you want to start your business.

Budget for your start-up accurately

Budget for your start-up accurately

2. Poor business store location

This is one reason I can testify to personally; especially when it comes to researching whether a specific location will match the products or services that you offer. It can be a great high traffic area, but your business may not do well because you do not offer what the customers in that area want or require. It’s necessary to always do product and market research in the area you want to start your business to see if your business has a fighting chance. If it does not, don’t start your business in that location; no matter how good the shop or area looks. Just be patient and keep looking for a better location for your business.

3. Poor Management of Business

This is a major cause of small business closure in Kenya; a small business owner may be very motivated and have qualities of an entrepreneur; however, you also need to have management skills to run your business as well. The day to day operations of a small business require knowledge on how to manage different aspects of your business e.g. cash flow management, how to hire employees, how to choose vendors, etc. It’s necessary for small business owners to either acquire basic management skills or to either partner or hire a  person who has the management skills required. This might not seem necessary to a start-up owner at the beginning; but trust me, it’s very necessary for your business to stay open in the long run. A great website for resources on running your small business is Kuza Biashara, they have blog posts and ‘How-To’ videos that assist small business owners in Kenya.

4. Lack of Creativity and Innovation

Whatever product or service your business offers, make sure you’re always innovating it. Every successful company has gotten there because they are constantly being creative and innovating in their business. A great example of innovation and creativity is a Kenyan company that manufactures energy saving jikos – Cookswell. They originally just sold jikos and charcoal ovens; but in time, they added barbeques to their product list. They then started creating barbeques in animal shapes such as boars or ostriches. This kind of creativity and innovation keeps your customers coming back and loyal to your brand since they’re curious as to what you will do next.

The Cookswell Animal BBQs - Great creativity & innovation!

The Cookswell Animal BBQs – Great creativity & innovation!

5. Poor Control of Expenditure

This is another major reason for small business closure, especially in Kenya. A small business could be bringing in revenue but if the owner does not have control over the expenditure of the business cash; the business could close in time. A major problem for the small businesses is also the mixing up of personal and business finances. It’s good to ensure that as a small business owner you separate your personal finances from your business finances. It’s also necessary for a small business owner to ensure that they are tracking all their business expenditures by keeping all the necessary accounting records necessary.

6. Theft, Fraud, Fire and Natural Disasters

Unfortunately for a small business other factors that may be beyond your control can lead to the closure of your business. The best way to avoid such factors or at least to survive them is by getting small business insurance. Insurance can cover you when either theft, fraud, fire and natural disaster strikes. Make sure you understand your small business insurance policy very well, get the insurance agent to explain to you what it really covers and what it doesn’t to avoid any misunderstanding. Small business owners tend to think that they don’t need insurance since they have small business; however, since there are things you cannot have control over; it’s better to be prepared instead.

Theft can occur in your small busines (Image: uca.org)

Theft can occur in your small business (Image: uca.org)

7. Poor or no marketing plan

This may seem obvious but I have noticed some small business owners seem to ignore this aspect of their business. Marketing is an activity that never stops as long as your business is open – I mean, look at Coca Cola, they have never stopped marketing and they are such a large international company. Marketing is what brings in sales into your small business; therefore, you should always ensure you have a marketing plan in place. Other small businesses also have a marketing plan, but it’s either very weak or not effective. In this day and age of social media and online search; you need to make sure that your business’ presence is felt. It is a very competitive business market out there in any industry and your competitor is probably still marketing to your target market whether you are or not.

Baking Class Poster - Never stop marketing your biz

Baking Class Poster – Never stop marketing your biz

I hope this seven points have helped you, as a small business owner, realize where your problem points could be and avoid business closure or failure in the future. If you have any other points you would like to share that can also cause business failure; please feel free to comment below.

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4 Easy & Economical Ways To Do Market Research For Your Product in Kenya

If you want to start a new business in Kenya or you already have a small start-up business in Kenya, it is important to always do market research. If you want to introduce your new product or service to the Kenyan market; you should do some local market research to establish whether your product or service is in demand and whether people will be satisfied with it or they don’t particularly like it.
As a small business start-up in Kenya, you most probably have a small marketing budget to work with; however, that does not mean that you should ignore market research entirely. The trick is to find an easier, more budget-friendly way of doing it. It is not wise to ignore market research in any aspect of your product or service; I have personally learned this the hard way. When I started my bakery business two years ago; I actually tested my baked products many months before I opened it officially. I would bake using my recipes and give my work colleagues, friends and family my baked products to taste and give me their honest feedback on what my products tasted like. When I opened officially, I didn’t stop testing and getting feedback from all my new customers. I even gave incentives for some free items for feedback on social media and other platforms. I was able to actually perfect my recipes through the feedback that I got from my online customers in Nairobi who were my target market.
On the negative side; when I expanded my bakery to an outside location (I’m currently home-based, we deliver to our customers), I focused on set up and stocking, but didn’t do any research for my products in the area where I was starting the shop. I just assumed that the same products would work for that local area. I however found out the hard way that it wasn’t the case. I had to adjust my menu and meet local demand as I was struggling to balance the new store and get it running profitably. I managed to meet half the demand to those local customers; but I wish that I had been more prepared and done some research before starting. So as a person who has suffered failure by not doing any market research; I urge you not to make the same mistake. If you want to start up a small business or want to launch a new product or service for your small business in Kenya; please ensure you do market research – no matter how simple. I have four easy and economical ways that you can do it to start with, if your budget is small. I guarantee they will be of great help to you and your small business in Kenya.

1. Test your product or service on your family, friends and neighbors

Whether your business will be offering a product or service; it’s best to start testing with people close to you. Create your product and then offer your family, friends and neighbors the product; you can start by giving it for free as a sample to try out then offer it at a price the next time. Depending on whether you are still in the creation stage of the product, you can offer the price at a discounted rate or you can offer at market price. This will give you a good idea of the product or service quality and whether you should improve it or not.

Test your products with family and friends

Test your products with family and friends

2. Test it at Trade shows or Field Exhibition Days in your target location
Most areas in Kenya have agricultural field days and various trade shows that occur in different industries. Some are new kinds of exhibitions looking for all types of small businesses to display their products or services and some actually target small business in specific industries. Even the local city council hosts some of the small exhibitions that run for two to five days where they invite local small businesses. Ensure that you are active in your area or know someone who has information on such fairs or trade shows. They are especially helpful if you are in the agri-business or value addition industry. You can also contact your local MCA (County Rep or Member of County Assembly) for information on such activities. You can either give free samples or sell your products and give incentives for people to either give feedback at a later date for a free or discounted item. You can also ask for the customers to sample your products there and give instant feedback as well. I personally found these avenues great for feedback when I first started my bakery.

Giving samples at the Cake Festival (Image: Cookswell Jikos)

Giving samples at the Cake Festival (Image: Cookswell Jikos)

3. Run contests or online giveaways and request for feedback from contest winners
This is another easy way of either testing your existing product or a new product you would like to introduce in your menu. You can run contests on social media platforms or your business location and give away a product or service as a prize. After the contest winners receives their prizes, request for honest and extensive feedback on the product or service. This is another method I have found effective not only for feedback but for attracting potential customers in the future.

4. Get honest feedback from your new customers the first three months of starting your new business
After starting your new business officially, make sure you request feedback from every new customer; record and review it weekly for any product or service adjustments. You will be able to track the response on your new products and business for those three months and make any adjustments necessary. You will also find that your customers will be happy to know you’re interested in their satisfaction and you’ll build brand loyalty from them.

Get honest feedback on your business from customers

Get honest feedback on your business from customers

Those are a few easy ways of conducting market research for your small business in Kenya. They are helpful and effective; any start-up entrepreneur in Kenya should never ignore the importance of market research, it could be detrimental for you small business.
If you have any other suggestions on other ways to conduct market research on a budget, please feel free to comment below, thanks ^_^

Remember to work hard and work smart.

5 Important Reasons Your Business Start Up Needs A Blog

As part of your inbound marketing strategy, it’s very important to have a business blog. A blog enables you to provide helpful information to your target audience and therefore, attract them to your brand or business. A lot of small businesses in Kenya have social media pages, some even have websites but have not started business blogs – they have the opinion that they don’t necessarily require a business blog. Some business owners are not sure what to discuss in their blogs; therefore, they do not start one. It is important to know that you NEED a blog for your small business, especially if you are online. I have found that it is not only helpful but necessary in my business. I love to share information about baking with people who bake in Kenya so I do enjoy writing in my bakery blog. I have also found that I attract people who want to learn how to bake, especially with charcoal ovens – which we use in our bakery. Since we offer baking classes now, I am able to attract and engage with potential customers who end up signing up to learn how to bake.

A business blog is important

A business blog is important

1. Your target customers these days are mostly informed buyers who search for information before making purchases for products or services
When you want to buy something or learn about a service you would like to hire someone for, what do you do? You most likely ‘Google’ it right? Well, so does everyone else who goes online. It makes logical sense then, that if you want your target market to find you; you should show up on the search results. They should find you in the first two pages when they search for your particular niche or product/service you offer. Therefore; you should create your blog and share information about your particular industry that will attract the kind of customers you are targeting.

Your target customer is already online

Your target customer is already online

2. It’s an effective inbound marketing method of attracting your target customers
As a small business that uses inbound marketing, having a blog is one of the most effective method of attracting your target customers. When done right, blogging can account for fifty percent and above, of your sales – it does for my baking classes. To succeed, ensure you offer helpful content and use effective blogging strategies e.g. keywords.

Blogging is a big part of inbound marketing (Courtesy: hubspot.com)

Blogging is a big part of inbound marketing (Courtesy: hubspot.com)

3. It’s a way of keeping your customers updated on your business events, news or updates in your products or services.
If you have a new service or product you have introduced in your business; blogging about it is a great and effective idea. You can explain the new product or service more to your customers and how it works. This can even attract potential leads, those who have never really purchased but follow your brand or business, to actual purchase a product or service from your small business.

It's a way to update your customers

It’s a way to update your customers

4. Improves your chances of being ‘found’ online by your target audience, especially if you have good, helpful content
A blog is not usually effective the first few months; you have to post constantly and consistently in order for your business blog to be effective. Therefore, the more you post, the more you increase the chances of your brand or business being found online. It should therefore make sense to get started now on creating your business blog.

Increase your 'findability' online

Increase your ‘findability’ online

5. Creates content you can share on your social networks e.g. Facebook, Twitter, Pinterest, LinkedIn etc.
If you have social media pages for your business but don’t have a business blog; you will find that you have an issue finding content to share on your social media pages. Blog content is perfect for that purpose. As much as having your blog found on search is a great way of attracting your target audience, sharing your content on social media is also as effective. It’s a great way of sharing new or previous content that your fans and followers may not be aware of. This will also help you be able to engage with your brand followers and get feedback on more information they might want or on the provided content. It also ensures that the more you post on your blog, the more content you will have to share on your social media pages.

Create content you'll share on social media

Create content you’ll share on social media

Those are a few of the top most important reasons you should create a blog for your small business in Kenya. They should be enough to convince you to create that blog as soon as possible if you don’t have one.
If you have more to share on small business blogging especially in Kenya, feel free to comment below.

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