Reasons why small businesses fail in developing countries

Small Business in Kenya – Small Business Ideas in Kenya

Small businesses are independently owned and operated partnership, privately owned corporations or sole proprietorship that is limited in size and in revenue depending on the industry

Lack of reserve capital.

When small business entrepreneurs lack reserve capital, in case of emergency such as shooting in commodity price, the entrepreneur will not be able to sustain his/her business

Stiff competition.

Large and more established businesses have a wider market than small businesses because they sell at lower prices which attracts more customers. There is also competition from other small businesses firms selling the same commodity and this may lead to failing of some small businesses.

Ineffective market strategy.

Poor advertisement resources by small business firms creating unawareness among the customers of their commodity thus leading to less customers receiving their services.

Poor choice of location.

Some small business firms are not accessed by potential customers due to poor transport means for example undeveloped roads. Small business also locates at the same place which creates competition.

Inadequate managerial training and experience.

Most of the small business entrepreneurs lack managerial skills to operate their businesses.

Change in technology.

Inability to access new and improved technology due to less finance makes the small business lose their customers which leads to their failure.

Failure to track their finances.

When small business entrepreneurs lack to record their expenses, profits and others they are at high risk of failing due to not recognizing when they make profits and losses.

Unfavorable government policy.

The government may increase taxes on some commodities in order curb their use for example tobacco. Small business entrepreneurs may be challenged as this will lead to rise in price of tobacco leading to decrease in profits.