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7 Signs That Your New Business is Destined to Fail
Money Management

7 Signs That Your New Business is Destined to Fail

For small business owners, many indicators can be used to determine success: your revenue and profits are increasing, you have a loyal customer base, and you are miles ahead of competitors. While monitoring your business for success is important, recognizing signs of failure is more vital.


This is simply because there are far more businesses that are failing than those that are succeeding. According to Business Daily, there are 7.14 Million SMEs in Kenya, and 70%


More often than not, the signs of failure are usually discernible yet go unnoticed. This article examines seven signs of a business destined to fail and how they can be reversed to ensure stability and success.

Read Also: How to Start a Business; Step-By-Step

You Don’t Have a Business Plan 

A business plan is a written tool that helps business owners outline the path they want their business to take. It is a roadmap that shows how you intend to achieve your business objectives and includes information about your company, product/services, finances, marketing strategies, market analysis, and budget. It can guide you when starting or revamping a venture.

Starting a business with a business plan doesn’t guarantee success. However, according to a study by Havard Business Review, entrepreneurs who write formal plans are 16% more likely to achieve viability than otherwise identical non-planning entrepreneurs.

Starting without one can have financial consequences. It has the potential to cripple your business, depleting valuable resources and making success more challenging. And without a solid direction, you can waste time and money repairing damages until you run out of both. 

Fortunately for you, you can give your new venture a sense of direction as you can create a business plan for an established company. 

Start by defining the products/services you are selling. Next, analyze your industry, demand, target market, and competition. Use your research and analysis to prepare a marketing, growth, and risk mitigation strategy. All this can help change the tide and prevent your business from failing.

Read Also: 10 Strategies to Help You Grow Your Business in Kenya

You Lack a Marketing Strategy 

Just as a business plan directs your business operations, a marketing strategy/plan guides your marketing operations. If you don’t have one, you risk running into budget problems, low customer volume, and, ultimately, the failure of your business.

A marketing strategy is a comprehensive action plan that guarantees the time, effort, and resources invested in marketing your business yield optimal outcomes. Creating one allows you to focus on your business goals and determine the best direction to take in order to achieve your objectives, such as increasing sales and turning a profit. You can measure performance, keep up with competitors, and attract new customers.

If you want to change the projection of your business and set yourself up for success, you need to develop a marketing strategy. 

Start by identifying your goals (e.g., increase sales), perform a marketing analysis to understand the industry you’re operating in, create marketing techniques and channels, set a marketing budget, and start your campaigns. Remember to constantly analyse performance to discover what works best for your company.

Read Also: How to Make Your Small Business Competitive In 2023

You Have A Cash Flow Problem 

Your new business can face a cash flow issue when its cash outflows surpass its inflows. When you are just starting, you are likely to invest a lot of money in your new venture, you’ll have inventory overstock, and you will likely have to invest significantly in marketing to grow your business. If you don’t properly manage your spending, all this can leave your cash reserve empty.

Cash flow problems typically manifest when you struggle to pay rent for your premise, suppliers, your employees, and if you have a business loan, you will risk default. If you don’t fix the problem quickly, your business may face several problems, including debt, supplier issues, employee dissatisfaction, reputation damage, and ultimately business failure. 

To fix cash flow problems in your business, you first have to identify the causes. For instance, if your customers are paying you late, you should consider invoicing promptly to reduce delayed payments. Or, if you are struggling to break even in order to pay bills and avoid debt, you can consider improving profit margins with vendor discounts or by raising prices. And if the problem is overspending, cut costs by identifying waste or reducing expenses by cutting your workforce.  

Read Also: How to Separate Business and Personal Finances

Your Industry is Shrinking 

According to statistics from The Business Registration Service (BRS), a state cooperation that tracks the number of entities registered in Kenya, 86,618 business names and 56,763 private companies were registered in Kenya between July 2022 and June 2022. Some may be innovative ventures, while others might be entering declining industries.

One of the significant challenges business face is remaining relevant in their industry, especially when that industry is shrinking. The truth is businesses come and go. But what happens when you invest in an industry that is dying, i.e., experiencing a decline in its overall size, output, or economic activity? 

Several factors can contribute to an industry shrinking, from economic downturns and technological advancements to changes in consumer preferences and changes in government regulations. The main indication that your industry is shrinking is when demand for your products/services and those of your competitors keeps dwindling despite your marketing efforts. 

If you don't reverse course fast, you might be forced to close up shop and count your losses. Here's how you can prevent that: 

  • Be innovative - Don't be afraid to try new things and experiment with new ideas. If you're unwilling to take risks, your competitors will quickly leave you behind.
  • Avoid getting set in your ways - The world is constantly changing, and so should your business. Be willing to adapt to new technologies, trends, and business methods.
  • Network with other professionals in your industry - This is a great way to stay current on the latest trends and learn from others facing the same challenges.

Read Also: How to Make Your Small Business Competitive In 2023

You Are Bad at Managing Your Employees 

Bad management can negatively impact employees and a company's operations. Incompetent managers and business owners may struggle with staff relations, motivation, budgeting, and crucial tasks.

Several indicators suggest you may be performing poorly in this role if you struggle as a manager. These signs include:

  • Inexperienced Hiring: Hiring the wrong people can result in a team that lacks the necessary skills and expertise. You should hire people on merit and avoid staffing your friend and family in vital positions they can’t hold.
  • Favoritism: Playing favorites among employees can create resentment and division within the team. This can decrease productivity and drive talented employees to seek opportunities elsewhere.
  • Micromanagement: Constantly being on employees' necks can stifle their creativity and hinder their ability to make independent decisions or innovate.
  • Poor Communication: Lacking effective communication skills can lead to misunderstandings, conflicts, and a lack of clarity in your company.

Recognizing these signs is crucial because bad management can cause irreparable damage to a company, including failure.

To improve your management skills, consider taking a management and leadership training course. Such a course can help you better communicate, build trust with your staff, and enhance your decision-making abilities. 

Additionally, if you feel overwhelmed by the responsibilities of management, consider hiring an experienced manager to take charge of the business, allowing you to focus on areas where you excel.

Read Also: 7 Things to Know Before Starting a Business With Your Family 

You Are Struggling To Retain Customers 

One disastrous mistake that new businesses often make is focusing solely on growth opportunities and new customer acquisition and overlooking customer retention strategy.

Customer retention involves maximizing the value of your existing clients. For any business, customers become more profitable when they keep coming back. A low retention rate can lead to a decline in sales and negatively impact your business. This is because repeat customers have a higher lifetime value and tend to spend more.

If your business struggles to retain customers, it's crucial to take action before it's too late. You should work on improving your customer experience, introduce a customer loyalty program for repeat clients, seek customer feedback, make necessary changes to keep them engaged, and actively look for ways to create ongoing relationship opportunities. These include introducing new products and staying in touch with them regularly by maintaining communication channels. 

When you focus on customer retention as much as acquisition, your business can build a stronger foundation for long-term success.

Read Also: How To Successfully Start An Online Business In Kenya

You Haven’t Created a Pivot Strategy Despite The Red Flags

Sometimes things can seem not to be working out in business, despite all your best efforts. This is when you, as a founder, face a crucial choice: either close up shop or start contemplating a strategic pivot into a new direction. 

Typically, there are red flags that can show you that pivot should be considered. They can range from losing passion and dissatisfaction with growth rates to the inability to retain customers and financial challenges. 

If you see these red flags and think your business is at risk of failure, you should consider creating a pivot strategy. 

To pivot means changing your business's direction when you realize the current model, plan, products, or services aren't meeting the market's needs. The main goal of a pivot is to change strategy to increase revenue, survive in a competitive market or find new growth opportunities, all to avoid failure. 

To pivot your business successfully, you first need to know your customer and your industry. This will help you develop new approaches to solving customers' problems, stay relevant, and compete. So ensure to do customer research and industry analysis. Finally, develop a flexible and agile mindset. Pivoting can require minor changes in your business or a complete overhaul.

Read Also: 9 Ways New Small Kenyan Businesses Can Save Money


As a  business owner, you will inevitably face moments of doubt and insecurity. Entrepreneurship inherently carries risks, so paying attention to your instincts is essential when you sense things might be wrong. Don't dismiss those feelings, but refrain from making hasty decisions in the heat of the moment. Take the time to understand your business thoroughly; if there are warning signs or red flags, address and rectify them sooner rather than later.

Remember, entrepreneurship is a journey filled with ups and downs, and resilience is key to navigating its challenges successfully. Mistakes are an inevitable part of entrepreneurship. Instead of fearing them, you should embrace them as valuable learning experiences. Every setback offers an opportunity for growth and improvement. 

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Farah Nurow is an experienced Content Writer who enjoys writing creative and educative articles meant to provoke readers' thoughts. He loves sunny weather and thick books. You can connect with him on LinkedIn.

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