5 Mistakes: This Increases Your Business Failure In Africa

5 Mistakes: This Increases Your Business Failure In Africa

Have you ever wondered how to minimize business failure in Africa? Especially as someone from the Diaspora coming from the outside in? …Possibly entering a terrain which is not really that familiar to you?

I want to shed some light into these valid worries and the potential risks in today's post.

And above all, I want to let you know how you can avoid them.

You see, yesterday I was listening to a Podcast on how a Nigerian woman (her name is Ijeoma) who grew up in the United States utterly failed with her business venture in Nigeria. She has since returned to the US. The podcast platform itself is a new business venture lead by another Nigerian-American entrepreneur, Iveoma Okparaeke, who is a member of my Africa Business Academy, and she too, just returned from Nigeria last week. So I had an even greater motivation to listen in.

 

[You can listen to this very insightfrul Podcast interview here at the Iveoma Show]

 Iveoma show.png

What I heard was as story of financial loss, huge emotional struggle, and utter disappointment by someone who wanted to build something in Africa.

It is really sad.

But it did not shock me.

I have heard similar stories so many times before. From clients who contacted me asking for urgent advice and help, from followers of my blog who got in touch, from people I met during Africa business conferences, and even from my very own friends (this is before I became an Africa business coach).

It just confirmed to me why the work we are doing here is so important: We need to educate and empower our own people and friends of Africa to make sound and informed business decisions, before they dive in and take massive action.

Because here is a fact: Most of the struggles of Ijeoma and most others I have engaged with in this regard, could have been avoided. It's almost like one could have foreseen the huge potential for failure.

When I listen to Ijeoma's story – I counted some of the typical Diaspora mistakes she made. I am so glad she recognized some of them on her own, acknowledging that it was not really Nigeria's fault, but mostly her own. But sadly this was in retrospect and only after she had lost everything; including her precious energy and motivation, stating she had no desire to go back to Nigeria and that she would stay in the US.

Let's have a look at her story.

 

 

How a Nigerian-American left the USA to start a clothing business in Nigeria

Ijeoma left the US in 2013.

She followed a tip by her older sister in Nigeria that money was to be made selling Western clothing.

She spent all her savings to buy stock, ship it to Nigeria, lease a property for one or two years, work on the interior, organize a great opening party, and then started her boutique in Enugu, Nigeria.

Two days later she received a notice out of the blue…two months later the building was demolished by bulldozers. Reason: There was a plan to widen the road.

Ijeoma lost her life savings and her dream. And during this time of desperation she felt she was also let down by her connections and acquaintances in Nigeria, forcing here to return to the USA.

It is a very interesting story she has to tell. And if you have 30 mins I suggest you listen to it right to the end. You will get so many hands-on insights up to the final minute of the interview.

While Ijeoma recognized a few of her mistakes in retrospect. I want to let you know about some of the typical mistakes she made, so you can be aware of them and avoid them.

In fact, my upcoming Africa Business BootCamp 2017 trainig in the US and UK will teach you the exact step-by-step success strategies to use instead. And how exactly to go about it hands-on. No matter where you are based.

But now, let us look at some typical mistakes to be avoided…

 

This Increases Your Business Failure In Africa

African business boutique

1. You make emotional business decisions

Ijeoma chose Nigeria, simply because it was home. But she did not really inform herself about the business climate and risks in her target market. As a result she overestimated opportunity – and underestimated risk.

Further, she followed the advice given by her sister who lived in Nigeria and trusted that her sister would know since she was on the ground. But her sister was a professor! She had no business knowledge or experience and she was not an experienced player in the industry they chose. She was simply another African woman with a dream. In the Diaspora we are very prone to making such 'emotional' decisions when we engage in business in Africa and sadly, it is a re-ocurring pattern and a reciepe for failure. 

 

2. You are not aware that you chose a high risk market in Africa

Yes, opportunity in Nigeria is absolutely huge. But fact is also that Nigeria is a high risk market. It falls under my category of high risk/high opportunity market and that increases your failure rate significantly as a new comer from abroad. There are many ways to mitigate those risks in Nigeria (I can't go into all of that right now), but another option and strategy could also have been to get started in one of Africa's low risk/ high opportunity markets – because they exist! You can always expand into a higher risk market later if you wish, once your cash flow is secured and you have a much better understanding of your business.

 

3. Your industry of choice is not on a clear upward trend

There are industries in each African market that are on a clear upward trajectory. So much so that you could basically jump on them and ride the trend. 'The import of clothing' is certainly not among that. While it can be lucrative, fact is that African governments are very busy cutting down on imports making them more difficult and expensive. In fact, East African Community member states have just recently (in 2016) announced a ban on all imported second hand clothing, which Rwanda has already enforced. This meant that many importers were suddenly out of business. African manufacturing or exports (for example, just to name a couple) not imports are on a clear upward trend offering you generally a much more sustainable business model for Africa.

 

4. You touch a high-risk industry within a high risk market 

Ijeoma needed a constant address of a property for her boutique to be successful. The property industry however is a higher risk industry and you will always be very much depending on licences, contracts, permits, planning decisions from third parties including government. This can cause an acute risk potential in high risk markets such as Nigeria where red tape, corruption, and lack of transparency and accountability is given. It does not necessarily mean to give up on your plan, but to approach it with diligence. 

Look at this venture: Chris Folayan, the CEO of the now hugely successful Mall for Africa who is also a Nigerian – American and who also wanted to tap into the demand for Western clothing in Nigeria has his main store online and his main warehouse in the US and is now shipping the items into Nigeria via mail order. Which means the risk factors above are not really affecting him that much. Although he uses warehousing, he is more flexible and can easily divert his business model to another African market.

 

5. You did not research your target group to understand their pain points

Ijeoma just assumed that what she offered is what the market wanted, and how she offered it (boutique) is the way how the market wanted it. She dived in without understanding how her business model would meet the requirements of her local market and her ideal customer.

Africa is full of problems, needs, and demands, and yes, this is precisely why it presents a huge pool of opportunity.

But: those new African entrepreneurs who became hugely successful building million Dollar businesses within a few years did not make assumptions: They either personally experienced or closely witnessed a true challenge and then they provided a solution to that particular challenge or they provided a solution that was better than the one already out there.

And: They tested their idea and concept on a small-scale before putting all eggs into one basket.

In short: Ijeoma did not have the road map how to do business in Africa. But ten really, most of us don't because it is not the kind of information that is widely accessible out there…(this is where I come in :)).

In closing, however, I really want to thank her. Because it takes real guts to share your story of failure with the world. And in doing so, Ijeoma can be a great role model, too. Instead of felling ashamed she openly shared her lessons, so others could make better decisions. So thank you, Ijeoma, from all of us and we hope you will find a new dream to pursue very soon.

 

Get the Road Map to Success in Africa

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If YOU want to make sure you get the right road map and you want to follow a proven system with clear steps to take to significantly increase your success rate in Africa, I invite you to my Africa Business BootCamp 2017 in the USA and UK.

You can start a business you love, build a lifestyle you crave, all while contributing towards Africa's development. And I would love to show you how to do that, no matter what your budget is or where you are based. REGISTER HERE and I hope I will meet you in person and work with you towards your African business dream!

Did you experience failure or know of similar stories? Our online community would love to hear from you so we can draw lessons. Thank you so much!

Dr. Harnet
Dr. Harnet Bokrezion is the Founder of africajumpstart.com and co-author of the book '101 Ways to Make Money in Africa'. She coaches individuals and consults existing companies assisting them to make smart and strategic business decisions in Africa’s new emerging markets faster and more confidently. Dr. Harnet also regularly writes for the renowned DHL powered publication howwemadeitinafrica.com. Get in touch to inquire how she can be of assistance to your own Africa business endeavors: harnet@africajumpstart.com

User Comments ( 4 )

  • Katongole Johnny

    Hey Dr Harnet thanks for this awesome  story similar to the difficulties,struggle i passed through to reach this level and this   goes   to those     who are ready to start any business  to  have a positive mental attitude which is the beginning of all Riches.

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  • Iveoma

    Thank you so much Dr. Harnet for writing this article. You really identified the classic issues that Ijeoma faced. Thank you so much for taking the time out and to listen to my podcast! 

    • Dr. Harnet

      Dear Iveoma – it was a great an insightful interview at your part. It was my pleasure to point some of the struggles out a little more, so we can all learn collectively. Thank you!

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