Why businesses fail in Uganda

Posted on June 11, 2015 12:02 am

They say, that ”working smarter, not harder is not just a throwaway line.”In Uganda, entrepreneurs take plenty of risks when starting a new business.However, from first hand experience as a person with interests in the country, failure is by far the most daunting.The rate of failure in new small businesses is something many Ugandans profess to know a lot about. Like a series of Uganda crane bird, the statistic has grown wildly and is bandied about to all those who dare start a new venture in major towns like Mbale, Entebbe, Jinja, Mbarara, Kampala, Gulu and Masaka. Despite the gross exaggerations, research reveals just 19 per cent of Ugandan businesses close within their first year. Statistics from data analytics and credit information firm from United States that I read through recently, show the real trouble spot for small businesses is not in the early days.The firm conducted study to understand how best to assist budding Ugandan businesses.

In Uganda, it’s more common for businesses to catapult in their second or third years. The biggest risk isn’t in the first year, but in the years they have to be brave and grow, according to the study.The key problems are cash flow, trying to secure new leads and pay off debts.If you can make it get through the first four years, your chances of survival increase significantly in Uganda.The study found 72 per cent suffered poor strategic management, 46 per cent fell victim to inadequate cash flow or high cash use while 51 per cent went under because of trading lossesThere are varied reasons small businesses comes undone, but one of the researchers told your blogger that most can be avoided with the right advice and planning.Ugandans whose businesses fail have no one who has shown them how to run a business.A lot of Ugandans go in and try to learn it as they go along. They just try to wing it.In Uganda like most other developing countries, business aims change daily, weekly,and monthly.

Ugandan entrepreneurs need to be adaptable and update their business plans or they are flying blind.Working on the business means building a plan and strategy for the direction of the business.A lot of people think it’s a luxury and never do it, so they keep working year in, year out without a plan or a vision or what they can achieve.Losing control of the cash is a pitfall for many business owners in Uganda especially those operating in informal sector, particularly those with little experience in bookkeeping and account management.Few Ugandans have learned how to delegate tasks and roles that aren’t in your skill-set.Ambition of Ugandan business class can be a double-edged sword for entrepreneurs.Just the right amount will see the business grow when it’s ready, but too much sees business owners getting ahead of themselves and expanding without the right building blocks in place.Most of them are in Kikuubo and Kiseka markets.Growing too quickly happens when no one has shown business owners the correct steps in the process.It comes from not having the right advice around them or they have advice from others, but they are not the right source.

Contador Harrison