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Is now the right time for starting your entrepreneurial journey? The answer is yesterday was the best time, and chances are that there may never be the right time to start a business with the current state of African economies. African countries are dealing with the ripple effect of world events, an example is the disruptions to global supply chains due to Russia’s prolonged invasion of Ukraine and a tightening of global financing conditions. Despite this, 22 percent of Africa's working-age population are starting new businesses, which is the highest rate of any region in the world. While starting a business in Africa might not be a walk in the park, statistics have shown that sustaining a successful one requires even more grit.
About 80% of Micro, Small and Medium Enterprises (MSMEs) in Africa fail within the first five years of their existence. These high failure rates can be attributed to several challenges and mistakes made in the incubation stage of the business.
It is well known that entrepreneurs face many hurdles, some of which are poor business management principles , unfavourable government policies, cultural factors, lack of funds and a host of other factors. Even with a great business idea and a solid plan, there are mistakes that entrepreneurs often make that may derail their success.
We will unpack some common mistakes made during the business creation process, ways to overcome these challenges, how to promote a business through marketing and networking, and lastly, some long-term strategies for maintaining a successful business.
Everything Rises and Falls with Processes
Entrepreneurs can increase their chances of success and navigate the path to sustainable business growth through conscious awareness of common pitfalls. To the trained eye, it is easy to spot these early on and our goal is to help you identify these, to increase your chances of success.
One common error is underestimating the importance of research and planning. Research has shown that one in two African businesses will fail because they lack proper market research. The solution to this is to launch any business or product with thorough market research. The first aspect is to check if a market exists for the product or service you intend to offer. A few key questions to consider are:
‘What is the total addressable market?’
‘Do you understand the peculiarities of the market forces, policies at play and regulatory environment?’
‘Do you have enough domain expertise to challenge existing competitors?’
Failing to understand the target market, customer needs, and industry dynamics can lead to a mismatch between the product or service being offered and what customers actually want. Conducting comprehensive market research helps identify potential competitors, customer preferences, and market gaps, enabling businesses to develop a strong value proposition.
It is essential to conduct thorough research and not just rely on personal experiences or assumptions because this research forms the basis for business plan development. So as a solution, businesses should invest time and resources in market research, using tools and methods such as customer surveys, focus groups, and competitor analysis. This information will guide product development, pricing strategies, and marketing efforts, ensuring alignment with market demands.
Funds, Cheques and Angels
Nothing keeps a business owner up at night more than keeping a business afloat and lack of funds are a major hindrance to growing or scaling a business. The funding challenge is a global issue and a reasonable amount of businesses fail because they run out of cash. Businesses often require capital investments to get off the ground, and entrepreneurs must secure enough funding to cover initial expenses and sustain operations until the business breaks even (I.e. the revenue the business generates is able to cover its expenses at the very least). The CEO of Zumi, a Kenya brand once stated while announcing the shut down of Zumi “The current macro environment has made fundraising extremely difficult, and unfortunately, our business was not able to achieve sustainability in time to survive”. Many businesses that face failure often fail to anticipate and factor in all the initial expenses required to commence operations and external factors such as inflation, leading to eventual business closure due to insufficient funds.
To curb this, entrepreneurs must create a comprehensive financial plan that considers all aspects of the business, including operating costs, marketing expenses, employee salaries, and potential contingencies. This plan makes it easy to approach potential angel investors who can see a clear breakdown of where funds will be utilised to grow the business. Seeking professional guidance from accountants or financial advisors is essential in accurate forecasting and budgeting. Entrepreneurs must also be careful not to overspend or mismanage funds, as financial mismanagement quickly erodes business value and impedes growth
Burnout
Finally, many entrepreneurs make the mistake of trying to do everything themselves; this often leads to entrepreneur burnout which hurts overall productivity, the innovation spirit needed to grow and create value and in some cases stifling growth. A practical example of what Burnout typically looks like is of Hadebe, the CEO of Eskom, a power utility firm in South Africa, who resigned while stating that the demands of work were taking a toll on his health.
It is essential to delegate tasks and build a strong team to ensure the success of a business as it has been established that failing to build a cohesive team, provide clear roles, or motivate employees can hinder growth and productivity.
To prevent this burnout and stagnation, entrepreneurs should focus on hiring the right people and building a solid team with complementary skill sets. The work environment should foster open communication, clear expectations, and provide regular feedback to strengthen the team and ensure its productivity. Creating a positive work culture and nurturing employee development will help in retaining top talent and maintaining team cohesion.
Handshakes and Hashtags
Marketing and networking are essential components of promoting a business and attracting customers. When thinking of marketing strategy, we cannot forget marketing campaigns like MTN’s “I don port”. Coca-cola’s “share a coke" Ad. It is widely agreed that these ads for their respective brands increased their visibility as well as their revenue.
A comprehensive marketing strategy that includes a mix of online and offline tactics is essential for a business in the digital age and crucial to improve visibility and top of mind awareness for your brand. It is not just enough to deploy digital marketing, search engine optimization, and targeted advertising for your product and service but there must be a unique approach to promoting your brand. To effectively promote your business, it is essential to develop a compelling brand identity and build a strong online presence through a professional website and active engagement on relevant social media platforms.
While adopting a comprehensive marketing strategy, establishing networks and connections is paramount. One of the best practices for this is to attend industry events. Attending industry events and conferences enables networking with potential customers, investors, and partners while joining business communities and industry associations offers access to resources and collaborative opportunities. Seeking partnerships and collaborations with complementary businesses will aid in expanding one’s reach and leveraging shared resources. It is essential to note that effective promotion requires ongoing adaptation, evaluation, and optimization to foster growth and build strong relationships with one’s target audience and industry influencers.
Long-Term Strategies For Maintaining A Successful business
Building a successful business is an ongoing process , and sustaining success long-term requires strategic planning and continuous adaptation. Businesses often face numerous challenges, from changing market dynamics to fierce competition. By implementing effective long-term strategies, entrepreneurs can ensure the longevity and growth of their business.
Firstly, prioritise a customer-centric approach by actively listening to customer feedback, adapting products or services to meet their evolving needs, and providing exceptional customer support. For example, companies like Zenith Bank over the years have earned their bragging rights as the best customer service brand, they have built a reputation for outstanding customer service by going above and beyond to meet customer expectations. They prioritise customer satisfaction, resulting in a loyal customer base and positive word-of-mouth referrals. By consistently delivering value and addressing customer pain points, businesses can build lasting relationships and secure a competitive edge.
Another point to note is that cultivating a culture of innovation within your organisation is crucial for staying ahead of the competition. Companies like Google for example have the 20% Time Policy. This policy encourages employees to dedicate a portion of their time to exploring new ideas and projects. This approach has led to the development of revolutionary products such as Gmail and Google Maps. By fostering an environment that embraces experimentation and rewards creative thinking, business can continuously evolve and adapt to changing market dynamics.
In addition to the foregoing, investing in talent acquisition and retention is vital for building a strong team that aligns with your business's vision and values. For example, companies like Paystack prioritise hiring individuals who embrace their mission. They are known to invest heavily in the development of their staff members. Recently, it became a thing that most of the employees who exit the company often launch their own startup. One of such, Femi Aluko the founder of Chowdeck once said “Every single era in Paystack prepared me for the problems I’m solving today”.
Furthermore, strategic partnerships are instrumental in fueling growth and expanding a business's reach. For instance, In 2018 Domino’s Pizza Nigeria partnered with Cold Stone Creamery to launch a new ice cream flavour called Baby Cakes alongside a squad meal that matches family lifestyles in Nigeria, till date, anywhere you find Dominos in that region you will find Cold Stone Creamery. This partnership enabled both companies to tap into new customer segments and create a unique and enhanced experience for users. By identifying opportunities for collaboration with complementary businesses or industry influencers, businesses can access new markets, leverage shared resources, and increase their brand visibility.
In summary, although 8 out of 10 businesses will fail, yours should not. To enhance the likelihood of surviving the 4-year prognosis, it is important to steer clear of avoidable errors, actively promote your brand through effective marketing and networking, and implement adaptive long-term strategies.
Do you have lessons to share from your business experience? Your thoughts could help many others in their entrepreneurial journey. Feel free to share feedback, or provide insights to aid business growth. If you enjoyed your read, stay tuned and consider subscribing to our newsletter here for relevant insights.
