In Kenya, it is estimated that 46% of all SMEs will fail within the first year of founding with an additional 15% in the next year. This has been attributed to the lack of funding and one other reason I find very disturbing: SMEs are not serving a big enough problem for their target market.

This is because an entrepreneur will have a great idea and believe that everyone will like the idea as much and buy either their product or service only to find out in a few months that their solution is not solving a real problem. This shows that there is very little research done by entrepreneurs before starting their businesses.

The lack of planning beforehand is also another reason. You need to put your idea down on paper, literally. Develop it to its logical conclusion and then ask yourself, would I buy this product or service given the chance? Most people will not even come up with a simple business plan, a useful tool in making business projections.

In my experience, I have seen small businesses who had a business planning process, started out great only to fail due to lack of innovation. The entrepreneur hopes that the original idea will do great in future and hence fails to seize the opportunities that come to improve the product or service fearing it may cost a lot.

Others still, will have dysfunctional teams because of the need to keep labor costs low. Most of these businesses will go semi-skilled employees and shoulder the burden of managing the business themselves. As a result, the owner is unable to manage the business in terms of finances, sales, marketing and production at the same time.

Most small businesses cannot manage to set aside 6-12% of their revenue to marketing and this impedes growth of their brands greatly. However, with the growth of social media and the internet, this is becoming a thing of the past.

SMEs also face challenges in inventory and cash flow management making it difficult for the owner to track the money. With time they begin to incur higher operational costs and lower revenues and in turn, business failure becomes inevitable.

If you want to start and sustainably run your small business, you must be able to prove that the need is actually real and the solution you are offering is viable and practical enough for your target market.

It is also important to define your ideal customer in terms of age, income, occupation, geographical area and preferences. This helps you determine if your target market actually exists and is looking for your product or service. Better still, it answers the question of whether they are willing to pay for your service/product.

Get a professional to run critical functions of your organization like finance, inventory and sales if you do not have time. Either hire them full time or outsource these services.

Take time to grow the business by developing an easy and affordable way to reach your target market by investing in marketing. Find out what works for your business and use it. Platforms like your website or social media can really help with this.

If you must source for funding, make sure that the business model you have chosen will be stable enough to take over the facility as soon as possible, i.e., will it be able to make more money soon enough? Otherwise the business may fail, leaving you with a loan to service.

Finally, innovate, a lot. This may sound like a capital intensive affair but it really isn’t. It may be something as simple as changing the way your team handles customers, improving your social media strategy or changing the packaging of your product. Whatever it is, make sure that you are finding new ways to impress your customers.


Monica Muchiri

Sales and Marketing Lead & Cofounder at Haladari Management Consultants.

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