Introduction

In this article, we continue with the top 10 reasons why 1 in 2 businesses in Africa end up on the slow agonizing road to failure rather than prosperity. We examine failure reason number six on our list of most cited reasons for business failure in Africa – Inadequate business management & entrepreneurial skills.

It is one of the top 10 reasons why many businesses in Africa fail. Even in cases where business owners have the skills necessary to create and sell their product or service, if they lack the attributes of strong management or don’t have time to successfully manage other employees, certain aspects of the business can end up being mismanaged including finances, hiring or marketing. 

Examples of entrepreneurial skills include teamwork and leadership, communication, active listening, critical thinking, resourcefulness, problem solving, analytical thinking, strategic thinking and planning, etc.

Some of these may be inherent but many can be learned or outsourced. 

This is why the smartest business owners often outsource those areas they are weak in or do not perform well in, including hiring a strong management team or seeking professional market research services for strategic guidance, and insights that support decision making.

Top 10 Reasons why Businesses Fail in Africa - Inadequate business management & entrepreneurial skills (no.6)

Inadequate business management skills

Business management skills refer to the ability to carry out executive tasks inside an organization while avoiding crises or rapidly addressing issues that develop. Examples of desirable business management skills include emotional intelligence, communication, organization, time management, attention to detail, delegation etc. 

Managerial and entrepreneurial skills differ in one crucial way; management is all about administrational skill compared to the former which is about converting ideas into a business. 

Both skills are important for successful operation of business. While entrepreneurial skills convert ideas into profitable operations, management skills allow the operations to run smoothly. Effective management abilities are thus required for any firm to thrive and achieve its objectives.  

However, many businesses in Africa fail because of in inadequate business management & entrepreneurial skills, meaning many businesses are being started by people who cannot convert ideas into business operations or if converted, absence of managerial skills becomes an obstacle that dooms many such operations to failure.

Thus, a huge percentage of SMEs in Africa are failing as a result of weak management and leadership skills. Good management and leadership skills are a key attribute of successful SMEs locally and globally. A business run by skilled management is likely to survive over a longer period. 

This is because poor management can result in inefficient administration or the misuse of funds, mismanagement of employees, poor decision making etc., all of which can harm employees and an organization in the long run. 

If inadequate management goes unnoticed, it can create a bad and uninviting working environment that can affect employees' motivation to work, lower productivity and ultimately affect customer satisfaction.

Poor management and leadership can manifest in behaviour such as disrespecting employees, abusive behavior, throwing a temper tantrum, simply ignoring ideas, setting unreasonable expectations, or failing to lead by example. Work performance suffers as a result, which hurts organizational financial health and at the end, the business is most likely to fail.

Poor management can also lead to a damaged business reputation. One of the most difficult things to achieve in business is a good reputation, often taking years to build yet destroying it can take just days or even hours. 

Poor management can have a detrimental impact on company reputation in terms of negative effects on personnel turnover, and total earnings of a company. If unchecked, a high employee turnover deters star employees from applying to an organization. A business can have its reputation tarnished, for example, through negative reviews from former employees and other sources.

Beyond employee turnover, poor business management isn’t thus just bad for business reputation; it’s expensive, too and if an organization cannot competently deal with its effects, the business is likely to fail.

Managers on the continent can improve their management skills by actively learning and getting hands-on experience. A manager who improves his or her management skills becomes a valuable asset to any organization looking for commercial success in a competitive market.

Lack of entrepreneurial skills

A second factor behind high business failures in Africa in inadequate entrepreneurial skills. 

Africa has some of the most entrepreneurial people in the world and many countries on the continent are ranked as some of the most entrepreneurial in the world. For example, Uganda was ranked as the most entrepreneurial country in the 2016 by the Global Entrepreneurship Monitor (GEM). 

Yet few businesses in Uganda reach the global stage, become formal or even thrive locally. One would be hard pressed to find a multinational Ugandan business or a large population of self-made business leaders, despite the high entrepreneurial spirit.

Much of this comes down to a lack of entrepreneurial skills.

Entrepreneurial skills such as communication, active listening, resourcefulness, problem solving, analytical thinking, strategic thinking and planning, can be learned or outsourced. But many reasons, most cultural, have ensured that many would-be entrepreneurs on the continent enter the entrepreneurial race inadequately prepared. 

Entrepreneurial skills help an entrepreneur analyze problems, possibilities, and settings, as well as organize, manage, and take on the risks of managing a commercial operation. 

Because entrepreneurial talents can be applied to a variety of professions and industries, refining your entrepreneurship abilities may involve the development of a variety of skills including communication, problem-solving, decision-making and general good management skills. 

Entrepreneurial skills have long been recognized as critical because of the role of entrepreneurship as a crucial driver of economic growth, productivity, innovation, and employment in many countries. 

It is widely acknowledged that entrepreneurship has a significant role in driving economic growth and social development in Africa yet few would-be entrepreneurs take the time to study how to run businesses, which has increased the number of business start-up failures in Africa.

Entrepreneurs face a variety of risks, including bankruptcy, financial risk, competitive risk, environmental risk, reputational risk, and political and economic risk, all of which necessitate fundamental planning and budgeting. 

Entrepreneurs are expected to be able to anticipate such risks and devise effective strategies for mitigating the dangers that may arise. As a result, if one does not have the necessary skills at the outset, one is likely to fail. This is why the smartest business owners often outsource those areas they are weak in or do not perform well in, that can help entrepreneurs create more effective strategies for their businesses through our data-centered research.

This may include hiring professional market researchers and business analysts including those from Researchtec – a specialist market research company in Uganda.

Because of poor business management & entrepreneurial skills, many start-up businesses in Africa continue to fail. Much of this business failure would be avoided if entrepreneurs on the African continent could grasp the importance of capturing accurate research on their markets, consumers or competitors, before, during and after business launches. 

Successful businesses all over the world continually go through the process of pivoting and repivoting of their products, markets and value proposition, often using information and insights derived from extensive planning.

But effective planning cannot happen without incorporating market research. This is because business planning can help an entrepreneur define which products and services will be well accepted by the consumers, the right choices and preferences of a target audience, the right pricing, and other crucial market intelligence that can prove invaluable especially versus the competition. 

This way, effective market research reduces product and market risk early on.

Conclusion

Africa has some of the most entrepreneurial people in the world and many countries on the continent are ranked as some of the most entrepreneurial in the world. Yet this abundance of entrepreneurial spirit hasn’t translated into commercial success on the continent.

Because of poor business management & entrepreneurial skills, many start-up businesses in Africa continue to fail. Much of this business failure would be avoided if entrepreneurs on the African continent could grasp the importance of what makes a business successful or fail.

Often businesses fail because there is no market need, pricing issues, product, product mistimed or get outcompeted. But most of the reasons why businesses fail can actually be avoided by capturing accurate research on markets, consumers or competitors, before, during and after business launches. 

Successful businesses all over the world continually go through the process of pivoting and repivoting of their products, markets and value proposition, often using information, data and insights derived from strategic planning.

Your business could be in urgent need of informed decision making underpinned by robust data, insights and evidence clearly rooted in fact rather than guesswork.

Stop using intuition or outdated decision tools and start utilizing real market research processes such as trend analysis, market sizing, gap analysis, opportunity analysis based on sound data.