Poor price fixing
Some small business entrepreneurs ruin their ventures by overpricing their products or services. Experts note that young entrepreneurs must avoid competing with established firms when it comes to price fixing of similar products or services. They advise the small business entrepreneur to fix a price that will not just profit his venture, but will not overprice his product. A detailed study of the selected business by the entrepreneur will guide him in price fixing, experts say.
Poor product or service
The absence of a viable market for the product or service is another great killer of a small business. The entrepreneur must understand the needs of his customers and seek ways to meet these needs via the product or service which he offers to the market.
According to experts, no product or service is worth buying if the consumer finds no reason to buy it from the small business entrepreneur when compared to the corporate giant producing a similar product or service. They say until a small business offers something that the customer values, chances of its survival are quite slim.
Absence of an enabling environment
The need for an enabling environment for small businesses cannot be over emphasized, experts say. They note that an environment characterized with bureaucratic bottlenecks and unfriendly government policies will impact negatively on small businesses. According to them, on most occasions, a tough operating business environment lead to the collapse of small businesses, notwithstanding efforts put in by the entrepreneur to run his venture successfully.
The Director-General, Lagos Chamber of Commerce and Industry, Mr. Muda Yusuf, in an interview with our correspondent noted that an enabling environment would help reduce unemployment and make small businesses thrive. “Unemployment in Nigeria has to do with a bigger issue than the budget. It is about creating the right environment for small businesses to be able to generate wealth. So government really has a lot to do if they want small businesses to thrive in the country,” he said.
“The right policies have to be put in place so as to enhance productivity of the private sector, particularly the small businesses.”
Experts say a majority of the constraints in this category are attributed to political climate. They add that small businesses in the private sector are generally considered to be Nigeria’s driving force that will boost economic growth, ease poverty and provide more jobs.
The Managing Consultant, Simply Exponential Consult Limited, Mrs ‘Feyo Williams says, “Globally, Nigeria inclusive, small businesses have been the means through which rapid industrialization and accelerated economic growth have been realized.”
Though this may not be severe in some areas, experts note that it is also a factor that leads to the failure of certain businesses. According to them, the volatile security situations in certain parts of the country have led to the collapse of many small businesses. This, experts say, is usually not the fault of entrepreneurs but of leadership. They urge leaders, in whatever capacity, to help curb acts of violence in states with volatile security, stressing that this had impacted negatively on small businesses and had affected the overall economy of the country adversely.
Multiple taxation have its way of reducing the profits of small businesses, experts say. A situation whereby a small business entrepreneur has to pay taxes to various agencies may not mean well for such a business. Williams says governments have to streamline the taxes paid by small businesses. Experts say small businesses should be supported rather than heavily levied with taxes.
Over-dependence on certain individuals
As the small business grows, it is advisable to diversify its dependence, experts say. According to them, the continuity of a business should be paramount in the mind of an entrepreneur. This, they say, will be achieved when there is plan for succession as the business expands. They note that over-dependence on an individual may not mean well for an expanding business. The demise of this individual may mean the end of the business if care is not taken.
Finally, experts note that small businesses have some detrimental characteristics that make them require private and public support. Experts at Proshare, an investing firm, concluded that these characteristics, apart from limited managerial capabilities, include lack of economies of scale, lack of collective voice and influence on policy, frequent cases of market failures and their biases against small businesses.
Others include weak financial capacity to undertake research and development or procure other costly support services such as Business Development Services, and huge knowledge gaps, as most small business promoters don’t know what they need to know but which they don’t know. Experts note that when these public supports are not available, chances of failure in business can be very strong.