Small to medium enterprises (SMEs) have a notoriously high failure rate, and if you run a small business, you’re in danger of becoming another statistic. According to the Small Business Association (this is a Western statistic), 50% of all small businesses and start-ups fail within 5-7 years of conception, and only 25% make it past the 15th year mark. Place this in the Zimbabwean context, and factor in harsher economic environment and inconsistent government policies.
However, across the divide, there are common mistakes that seem to plague entrepreneurs and small business owners. In order to avoid these mistakes, it’s imperative that you know the mistakes and how to navigate them.
1. Lack of adequate market research
The hostile economic situation in Zimbabwe has created a forced culture of entrepreneurship. Anyone with an idea who needs to make a living has turned to starting a business. Whilst the entrepreneurial spirit is encouraged, it often means people starting businesses jump to create and sell a product or service without any meaningful research.
Market research is crucial when planning to launch a business. Without adequate research, it is easy to launch a product or service that no one really wants, or finds to be useful, which means no customers. It is also common for founders to launch a product or service in an already saturated market, then have difficulties standing out and attracting customers. This happens quite often in Zimbabwe, with people jumping on a wagon that seems to be gaining traction. Which means markets are quickly saturated. Failure to adequately research the market could mean failure for your business.
2. Poor marketing and advertising strategies
Marketing and advertising announce your product to the public, allowing potential customers to know of your existence. Almost anyone can market a product but effective marketing is a different ball game altogether. A well marketed product or service draws in customers and raises brand awareness.
With businesses wanting to cut costs, especially in Zimbabwe, they often do not employ an adequately knowledgeable or experienced marketer, and soon add to the already existing noise in the marketing and advertising space. The demise of SMEs is often abated by lack of effective marketing strategies and people in place.
3. Lack of digital presence
If your business is based in urban areas and has no web presence, the chances of failure are high. Urban Zimbabweans seem to love the internet, and the high usage of social media can be clearly observed from the popularity of the #ThisFlag movement that happened during Mugabe’s rein. Majority of customers often turn to the internet for information and easy communication with brands, and without a website and social media presence an SME will find it very difficult to compete. It’s also much easier for businesses to communicate with clients via the internet because of its affordability and convenience.
4. Lack of human oriented design for product or service
When a product isn’t designed with easy or friendly use in mind, it’s hard to launch. It might simply not appeal to the market. Failure to realize this can be the downfall of a small business. Businesses that fail to test and retest, then refine their product face the possibility of closing because the product might not make adequate sales.
Additionally, the lack of consideration for how consumers will use the product, even when well designed, is another challenge. It’s particularly evident when a company tries to launch a product that relies on the continued presence of another, such as electricity. Trying to sell standard desktops in rural areas is a bit unrealistic, because a large portion of rural Zimbabwe isn’t electrified. Failure to consider user friendliness and access to other impacting factors often contributes to the failure of a business.
5. Unrealistic expectations
Businesses take a lot longer to turn a profit and remain profitable than most founders are prepared for. Expecting your business to become profitable very quickly and expand just as fast can lead business owners to act in accordance with that expectation. This can often result, unsurprisingly, in failure. This isn’t to say there aren’t businesses that have become profitable very quickly, there are, but most businesses don’t. Moreover, expanding too quickly can also pose as a problem for a business. Nevertheless, most business owners have unrealistic expectations of how their business will grow which can often lead to poor decision making, that result in failure.
There are numerous reasons why small businesses fail, and these are just the tip of the ice-burg, but also tremendously important. A different combination of reasons, or possibly just one (the first one most likely) can lead to the demise of a business. It is up to you as a business owner to ensure that all factors that contribute to the success of a business are present in your business.