Almost 90% of all new businesses in Kenya fail within the first year of operation. This is mainly because of the many challenges that startups face in the country. The only way to get your business in the top 10% list is by understanding these challenges and preparing well for them. Hence, let’s look at the challenges of starting a new business in Kenya.

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1.  Inadequate Capital

Capital comprises the necessary resources such as money and equipment to get a business started. A new business requires ample capital to support it up to a time when it breaks evens and can support itself.

Some of the major capital uses include payment of licenses, purchase of stock, and salaries payment. The challenge facing most startups is inadequate that can’t support the business to succeed. It takes an average of 6 months to 1 year for a business to break even. Hence, you need to have capital that can support it for this long.

This is rampant due to also limitations in financing by financial institutions, especially for small business people.

2.  Lack of Skills

Just like all trades, starting a business requires you to have specific skills and experience that are critical in increasing your chances of success. Skills can be learnt through formal training such as school or mentoring.

Through learning, you can acquire some useful skills such as business management, staffing, business planning, and control element.

However, you will find that most business people in Kenya don’t consider this when getting into the business. Thereafter, it becomes a challenge to sustain due to a lack of skills. An example of a lack of skills is making bad decisions that in the long-term results in business failure.

Hence, you should learn as much as you can about how successful people in the business start and run them to increase your chances of success.

3.  Expensive Licensing

The process of starting a business in Kenya requires a lot of permits and licenses that are expensive to get. This is already a challenge for most small businesses that lack the resources to get permits and still fund the business.

Some of the most common permits include business permits, fire license, MCSK license, and Health inspection permits. Learn More of Requirements to Start a Business in Kenya. All these come at a cost and hence you need to prepare well for them.

Other than these common permits, there are other requirements depending on the nature of the business such as a liquor permit if you are dealing in an alcoholic business.

4.  Competition

Competition remains a key challenge for most business startups. Most new businesses have to compete in the market with bigger and well-established businesses. A war that you most likely know the winner.

Some of this involves price competition and discounts. Under these conditions, new businesses find it hard to compete due to a lack of financial muscle and market leverage.

Hence, without any assistance, this likely leads to business failure. The best way to handle competition is through doing adequate market research to understand your competitors and their pricing.

You should also target to start a business with less competition to increase your chances of business success.

5.  High Financing Costs

These are the costs involved in getting loans. The interest rates in Kenya remain high with some averaging 20%. They are even higher if you decide to get financing from shylocks and lenders that are not controlled.

Access to finance is also a challenge, especially for those Kenyans who lack tangible security and have a bad credit history.


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