PROBLEMS AND FAILURE OF SMALL BUSINESSES. 1

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Most small businesses fail as soon as they are started. Many reasons could be attributed to this phenomenon. It must be understood that large-scale businesses have their own problems but these problems are not as harsh as those problems associated with Small businesses.

Some of the problems that hinder the successful operation of small businesses in Nigeria and which have resulted in the death of some of these businesses include the following:

1. Under-capitalization/Over-capitalization: All businesses need capital. In fact, the capital requirement of small business even extends beyond the business. There is always the need to provide for family upkeep so that the capital meant for business activities, especially working capital, would not be spent prodigally.
   If a business is started with too little capital required in the industry, such business may likely fail especially is hit with unexpected losses due to incidents such as a natural disaster. The danger of under-capitalization is as serious as that of over-capitalization. Starting a business with too much money would not allow the manager to know when the business is making losses or profit. In such situations, the manager may be caught unaware when unnecessary expenses begin to erode the business capital.

2. Lack of/or Insufficient Experience: Every business undertaking requires its own peculiar skills, abilities, and basic experience. Entering into a strange line of business without experience is like testing a river depth with both legs. Most small business owners that have excelled had prior experience in their lines of businesses.
   There are only two ways of solving this problem: The would-be business owner should work for others in a similar line of business for experience and skills acquisition, or should enter into a partnership with one or more persons who had acquired the experience.

3. Poor Record-Keeping: Record-keeping is very vital in any business. Records whether financial or non-financial are important for keeping the owner-manager in the true picture of the business at all times. Since the numbers of employees are few in small businesses, financial records should be emphasized. Records such as sales-book, cashbook, stocks, receivables, assets, and liabilities should be kept.
   These records are necessary to regulate cash inflow and outflow, stocks levels, sales trends, credit sales and collection dates, and general expenses such as payables.
   The benefits to be derived from record-keeping far outweigh any reason for not keeping them.while some small business owners argue that their failure to keep records for the purpose of avoiding taxes.
   Records help businesses in planning and controlling function therefore, should be taken seriously. For example, if records of debtors especially receivables are not kept, there is every tendency to forget. These would certainly mean losses.

4. Poor or Wrong Location: Several factors must be considered before siting a business in any place. These factors as would be seen later include the availability of market, good transportation, regular supply of electricity and possibly water and security. Most small businesses in Nigeria are located in the wrong places where there is virtually no market. Others in places that are not easily accessible due to bad roads.
   The wrong location may mean increased expenses such as transportation, fuelling of power generators to the business owners. It would, in most cases, mean low patronage and insecurity to the business property and stocks. The impact or the effects of the wrong location can go a long way in killing a business.
   

   That's all for now, stay tuned for more.