The high failure rate of too many businesses calls for concern, introspection and much needed intervention from government and relevant stakeholders. To get a better grasp of the issue at hand, let’s take a cursory look at some alarming and worrisome statistics pre-Covid 19.
*A Harvard University study conducted by Shikhar Ghosh claims that 3 out of every 4 venture backed-firms fail.
*CISCO CEO, John Chambers said ‘’more than one-third of businesses today will not survive the next 10 years.’’
*According to the US Bureau of Labor Statistics, about 50% of all new businesses survive 5 years or more and about one-third survive 10 years or more.
*The Small Business Administration (SBA) says ‘’close to 66% of small businesses will barely survive their first 2 years. What this means is that about one-third of total businesses will fail during the first 2 years!
*Fortune Magazine believes that 9 out of 10 startups fail.
Now let’s domesticate the discourse. Ours is a country with poor record keeping and unverifiable data. Despite these deficiencies, it is extremely easy to predict the number of businesses that fold up on a daily basis in Nigeria. How you might ask? Recall that swanky boutique which opened barely a year ago in your neighborhood? Chances are either they have folded up or they have plans to move to another location courtesy of epileptic power supply, multiple taxation and galloping overheads.
Over the past thirty years alone, thousands of businesses have gone into extinction after only a few years on the business scene. Unlike Nigeria, it is common place in developed nations to see companies that have transited from one generation to the other. Hundreds of these companies started off as small family businesses before evolving into world-class Fortune 500 conglomerates. The Cable News Network (CNN) has for some time been airing a mini-series tagged ‘’100 Companies over 100 years’’ where it interviews their CEO’s to know the secret of their staying power of over a century and counting.
According to an investigative report published by the Bank of Korea in 2008, it discovered that there were 41 countries which had 5,586 companies older than 200 years .Of these,3,148 are in Japan,847 in Germany,222 in the Netherlands and 196 in France. As expected, Africa characteristically failed to make the list. Few years ago, a nationwide Japanese survey successfully counted more than 21,000 companies older than 100 years as of September 30, 2009.
The million naira question is why aren’t such feats replicated here? What’s the staying power of these foreign businesses that have enabled them witness one century to the other? What are they doing right that we are doing wrong? Finally, are there key takeaways that we can learn from these companies and businesses?
Not forgetting startups which tend to be worse hit with only just few stepping into their Eldorado. Many entrepreneurs begin with so much promise and after a while, take the steep plunge into oblivion. This article will explore possible and likely reasons why too many businesses in Nigeria and Africa experience high failure rates and what can be done to stem the tide.
To be continued…