By Beatrice Nakibuukia
Failure is a topic many entrepreneurs shy away from. It is discouraging, often shameful, and rarely discussed openly. Yet ignoring its existence or failing to recognise warning signs only accelerates the alarming rate of business closures in Uganda. Despite government interventions like the 2015 Micro, Small and Medium Enterprise (MSME) policy aimed at supporting SMEs for sustainable wealth creation and socio-economic transformation, the sector continues to grapple with numerous challenges that threaten its survival.
A recent report on entrepreneurship in Uganda, launched by the Ministry of Trade in collaboration with MasterCard, IPSOS, and other partners, paints a bleak picture: only 8 per cent of businesses survive beyond 15 years, while over 80 per cent fail within their first two years. This high attrition rate underscores the harsh realities faced by local entrepreneurs.
Several factors contribute to the dismal survival rates of Ugandan businesses. These include high operational costs, a rigid tax regime, limited access to financing, and a relatively small customer base. However, deeper systemic issues such as poor planning, lack of adaptability, and inadequate execution exacerbate these challenges.
Poor planning, cash flow challenges
Monica Kavuma, a financial advisor at Financial Fitness Spa, identifies the absence of a clear vision as a major cause of failure. “Many entrepreneurs dive into business driven by passion or necessity but without a structured plan. Without a business plan serving as a compass, it becomes easy to lose direction when challenges arise,” she explains.
She also says that entering industries without assessing their profitability is another common pitfall. While passion fuels ambition, it cannot sustain operations in the long term. “Entrepreneurs must critically evaluate whether their chosen market offers sustainable returns before committing resources,” she advises.
Inadequate financing coupled with inconsistent revenue streams leaves many businesses unable to weather lean periods. Kavuma warns that reliance on personal savings or informal lending, common among Ugandan startups, often leads to financial exhaustion before businesses can gain traction.
Failure to understand customers
Understanding customer needs is vital for survival. Many Ugandan businesses falter because they lack clarity about their target audience or fail to align their products or services with market demands. This disconnect makes it difficult to attract and retain customers.
A well-defined value proposition is crucial for differentiation in competitive markets. Kavuma emphasises that if customers cannot immediately see the value in what is being offered, they are unlikely to engage with the business.
Many businesses lack strategies for engaging customers effectively or incorporating feedback into their operations. Ignoring customer opinions can lead to lost relevance and declining sales over time.
Also, small businesses frequently build their operations around one major client or contract, leaving them vulnerable if that relationship ends abruptly. Diversification of both products and clientele is critical for mitigating this risk.
Reactive rather than proactive strategies
Entrepreneurs who fail to anticipate changes in market trends, technology, or competition often find themselves struggling to stay relevant. In today’s fast-evolving world, marked by digital platforms and shifting consumer preferences, proactive strategies are essential for survival.
In an attempt to seize every opportunity, some entrepreneurs stretch themselves too thin, compromising on quality and failing to excel in any area. Focusing on a few core strengths often yields better results than trying to do everything at once.
Leadership plays a pivotal role in business success or failure. Poor management skills, whether in handling people, operations, or finances, often derail promising ventures. Kavuma notes that while many entrepreneurs excel at starting businesses, scaling them sustainably requires discipline and foresight that not everyone possesses initially.
Additionally, stagnation can be fatal in an era of rapid change. Businesses that fail to innovate or adapt risk losing relevance as customer behaviours evolve quickly.
Way forward
Despite these challenges, failure does not have to be final; it can serve as a stepping stone toward future success if entrepreneurs are willing to adapt and learn from their mistakes.
Michael Mugisha, a businessman, advocates for building businesses on purpose rather than solely focusing on profit-making. Understanding why a business exists and who it serves provides a strong foundation for strategic planning and decision-making.
Investing in people, adaptability
A successful business relies on empowered teams trained and trusted to deliver results. Mugisha emphasises that investing in human capital is essential for long-term growth.
Entrepreneurs must embrace change, whether through adopting new technologies, entering new markets, or diversifying product lines, to remain competitive.
No business operates in isolation; establishing relationships with customers, suppliers, and peers strengthens resilience during challenging times.
Failure is never easy but does not have to be permanent. By learning from common pitfalls and adopting proactive strategies, Ugandan entrepreneurs can avoid repeating mistakes made by others before them. Every challenge presents an opportunity for rethinking approaches and rebuilding stronger foundations.
