Most people dream of starting their own business. However, not everyone succeeds in doing so.
The motivation behind the idea differs from person to person. Some wish to be their boss, others
wish to make some extra cash while others just want the challenge of starting business in Kenya.
Whatever your motivation is, you need to understand some statistics about entrepreneurs. Out of
all small business startups, more than 50% of them fail within 5 years. Within 10 years, only
25% – 30% of the startups will survive.
This is an indicator only a few startups end up succeeding in the long term. However, this should
not discourage you from pursuing your dreams. With adequate preparations and analysis, you can start small and create a successful business.
Some of the common mistakes that lead to the failure of many startups include:
- Insufficient startup capital
- poor management
- Inadequate business plan
- poor marketing strategy
since you understand the main factors that could contribute to your business’s failure, you can
easily avoid them.
Key Factors to Consider When Starting a Business
1. Good Business Idea
Every business is born out of an idea. Have an idea in mind about what kind of business you
want. The majority of successful entrepreneurs take adequate time in this stage to come up with a
Although some people manage to conceive unique ideas, you do not have to reinvent the wheel.
Chances are that the business idea you think of already exists. If this is the case, your idea should provide better services than those on offer.
The primary characteristic of a great business idea is that it should provide a solution to an existing problem.
The best point to start is by observing the problems you face as an individual and thinking of possible solutions. There is a high probability that if you are facing these, millions of people have them as well.
2. Market research
This is the force behind a successful business idea. Through intensive market research, it is possible to identify the problems within your locality and base your business idea around this.
One way of performing market research is through questioning people around you. This is a key
approach that helps in identifying the existing gaps.
Starting a business is all about survival for the fittest. As shown by the statistics, only 25% of
startups make it to ten years of operations. Hence, you need to get competitive with the ability to
remain relevant in the future. Through market research, you will also identify the relevant target market for your business.
3. Business Plan
After getting the right idea, you should proceed to develop a business plan. A business plan helps
to define the business objectives that are key in achieving the business goals. It acts as a guide on how to run the business by clearly defining what needs to be done.
A well-done business plan helps you attract potential investors compared to a business without a business plan. Ideally, you should review your business plan every few months to make some adjustments and check whether you have met your targets. Doing this helps maintain focus on the long-term goals for the business.
- Some key components of a good business plan are:
- An executive summary
- Products and services
- Market research
- Competitive analysis
- Marketing strategy
- Financial analysis and projections
In case you can’t draft this on your own, you should engage the services of a professional. All these will give you a plan to follow when your business starts its operations. Although you should follow your plan, always leave room for adjustments in case the market conditions change.
Every business has its potential competitors. Identifying them beforehand helps you to prepare
adequately. Although competitors pose a risk to the business, they are also key in promoting innovation.
Since your competitors offer almost the same products and services, you can learn from their successes and failures.
Observing your competitors could help you with decision-making. To beat them, you must provide better goods and services. You should also factor in other elements such as pricing and convenience. Some of the ways that your business competitors influence your business are:
- Business location
- Pricing strategy
5. Start up Capital
Inadequate startup capital is the major cause of most startup failures. Some entrepreneurs underestimate the capital requirement leading them to challenges immediately after starting a business in Kenya. A good entrepreneur should have the business revenue and costs estimations within a given time frame.
The hardest time for a business is the startup stage. Getting it off the ground takes time and effort. However, it becomes better as the business grows and the market share expands. Although some entrepreneurs prefer using their savings to finance the business, sometimes it is inadequate leading to challenges at the startup stage.
The process of acquiring investor funding can be difficult for a startup business. However, businesses with better plans have a higher chance of acquiring funding compared to those without. Investors and lenders respond well to a startup with a good business plan as it signifies seriousness and good planning.
Pricing is a key element in managing business cash flow. You should always base your pricing in such a manner that it factors the costs, competitors, and profit margin. Most startups tend to price their goods and services lower to attract customers. This is an ideal approach but it could also come at a cost.
The use of pricing to gain a market edge should be well planned to avoid draining capital in case
the business is operating in losses, Lowering the price of your goods and services also reduces the amount of income. If the income is less than the expenses, the business will high likely fail in the long term. Hence, price should be a systematic decision supported by facts.
7. Legal Documents
There are some legal and statutory requirements that you require when starting a business.
However, they differ depending on the type of business. One of the key documents is the single business permit that is issued by the county governments. Learn more on requirements you need when starting a business in Kenya.
It shows the business has the authority approval and is operating legally. Businesses in some industries require special permits that are unique to the industry. A key is example is businesses that deal with foodstuff. They require a food handling certificate.
A document that is only specific to this industry. Hence, you should do adequate research to understand what is required before starting your business. For further clarification, you can visit the local council offices.
Most of these permits require annual renewal for validity. Failure to do so results in their revocation.
Compliance ensures your business is operating legally. Hence, the chances of harassment by authority are minimal.
8. Business Knowledge
Knowledge is a key requirement for starting a business in Kenya. It helps in ensuring you understand your industry and no surprises will come your way once you are already in.
Before launching your business, you should ensure you have at least a basic understanding of what’s required to run it. This may cover areas such as permits, taxes, and employment guidelines.
With the increase of technical institutes and online courses, there is easy access to information at
a small cost that you can enroll in case you need to learn more. With proper training about a specific business model, managing and training your workers becomes easy.
A key factor to consider before starting a business is whether you have an interest in that area. This is because it is easier to succeed in a business you have passion about than in something you don’t like. An example is starting a business because your peer is doing it could be a bad approach.
Contrary to various beliefs, entrepreneurship is not an easy undertaking. It requires experience
and time to master. However, if you have the passion, it pushes you to do more even when the environment is tough.
Lack of passion makes it difficult to keep going when things don’t go according to plan. However, it is easier to keep going if you have the passion even if things don’t go as per the plan. Passion also drives innovation and growth.
10. Business Location
The choice of business location is a key element to consider when starting. This is because it ensures customers can locate it easily and you are at an advantage point compared to your competitors. The nature of business dictates the location. A key example is a petrol station that is ideal near major highways.
Some of the factors to consider when choosing the location include:
- Your target market location
- Proximity to the raw materials
- Competitor’s location
- Availability of labor
11. Business staff
In the early stages, the business owner can manage all the operations it is a small business. However, when the business scales and increases its operations, the need for more staff arises. This could be either on a full-time or a part-time basis. Failure to employ a team of qualified staff could result in business failure.
The qualification of staff is dependent on the nature of the business. In case you can’t get the right staff, you can engage third-party firms that specialize in staff management. It not only makes the staffing process easier but also ensures the business has the right staff for its growth.
These elements are critical if you are considering starting business in Kenya.