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Causes of small business failure in Uganda

Causes of high small business failure rate in Uganda.

At least 70% of all small businesses that start in Uganda fail in the next 3 to 5 years.

Causes of high small business failure rate in Uganda
A woman in thoughts

This rate is alarming and discouraging to entrepreneurs who want to start up their own businesses here in Uganda.

But what really are the causes of the increased small business failure here in Uganda?

What causes a high business failure rate?

The high small business failure rate today is caused by;

  • Choosing the wrong business idea.
  • Poor business planning
  • Inflation
  • High Competition
  • Giving Up Quickly
  • Poor marketing
  • Mismanagement of business resources
  • Employing wrong workers

Choosing the wrong business idea

Wrong business ideas selection leads to many headaches for business owners as they face the reality that their business is not feasible in the area where it is located.

Most entrepreneurs today spend less time thinking about the business they intend to startup and more about starting as fast as they can.

A business won’t work in the wrong place no matter how well it has been planned.

Just like one trying to sell alcohol products in Muslim territories, that is how hard the small business starting today are facing to sell their products.

No one is willing to buy what he doesn’t want.

If you are a business owner, you have nothing to do but close down your business.

Poor business planning

A lot of small business owners are starting businesses now as hobbies, not serious businesses.

They run their businesses as they want without following the required procedures to make a lasting business.

Few entrepreneurs today have legit business plans. Many entrepreneurs today open a business without any business plan or incomplete business plans.

Few if any consult financial advisors and other business owners.

Starting a business without a plan is fatal. It’s like building a house without a plan. That house will never end since it has no end picture.

So failure to have a business plan prior to opening your business is a cause of a high small business failure rate.

Due to poor business planning, most small businesses face two major problems. First is too much demand for the products the small business provides.

If not planned for this increased demand leads to business failure since it can’t supply all the demands.

Second is a low demand for the products supplied. This affects small businesses since they don’t have a market for their products.

This is due to a lack of proper market research which would have shown the business owners about the lack of market for their products in this place.


Inflation according to Wikipedia is a sustained increase in the general price level of goods and services in an economy over a period of time.

When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and a unit of account within the economy.

Since most small business owners have limited capital, prolonged inflation affects their ability to restock the products and the services they need for the business to progress.

This is a disadvantage to all the starting small business owners due to their limited capital reservoirs.

Inflation affects customers too. Few people buy products during inflation sessions which is a nightmare for a starting business.

High Competition

It is a proven fact how hard it is for a starting business to outcompete the already-running businesses.

This is due to the customer base. The already-running businesses have man customers compared to the starting ones.

High competition means low sales for small businesses.

Low sales turn into debts for the small business from their suppliers and also some products are perishable if not sold in a given time frame.

This affects small businesses so much.

To outcompete the already established businesses may become a hurdle too big to climb for some small businesses.

Small businesses are closing today due to low or no sales at all.

Giving up quickly

This is the number one cause of the high small business failure rate. Most small business owners today are so impatient.

Small resistance in their business is all they need to throw in the towel.

This is not entrepreneurial at all since it is not always a perfect start for all the currently thriving businesses today.

Giving up quickly has resulted in many small businesses closing their doors today due to the failure they have faced in their business.

Running a successful business is not a bed of roses in the beginning.

It requires patience and hopes from all startup entrepreneurs in order to build a thriving business.

Poor Marketing

Marketing is a must-have for all businesses today.

Most small businesses today lack the good marketing needed to propel their businesses forward.

There is no single best marketing strategy, but no matter which method is used, if done poorly it will cost the business.

Some starting small businesses want to go for high-charging advertising services like TV, newspaper, and radio which may be expensive and not of much use to the business owner since they are not yet known much by people.

Starting small in the marketing world and letting your customers know you by word of mouth slowly is a good and cost-effective way of marketing your business.

Others don’t advertise at all which leaves their businesses unknown for a long time.

This leads to low sales which in turn leads to a high small business failure rate as the business owners will close their businesses.

Mismanagement of business resources

Most entrepreneurs still struggle with when is the right time to start getting out money from their business.

Some business owners are not patient with their business revenues, they use the money as fast as it comes into the business.

This is so fatal to the life of the started business, since it may run out of funds sooner before it is able to fund its processes.

Poor managing skills like this have resulted in many failed small businesses.

Other small business owners have a habit of using the business properties which is never recommended in any starting business.

Employing wrong workers

Last but not least on the causes of high small business failure rate in Uganda is hiring the wrong employees.

Employees play a huge part in the raising and failure of a business.

Having an untrained workforce in your starting business is not good at all since they hugely affect your success rate.

Read: How to Hire Employees in Uganda

A high small business failure rate is brought about by a small business not training its employees to run the business properly.

Poorly trained employees show their lack of expertise in running a business.

Most workers don’t care about the welfare of the business like how the business owners do.

They aim at getting their salary at the end of the month at the expense of the business.

Your Turn…

Those are the causes of the high small business failure rate in Uganda.

What point has touched you most?

Share with Us in the comments section below.

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