Low Survival Rate of Businesses Worrying

Every day, hundreds of businesses are registered. Over the last ten years, millions of businesses were started in Kenya. According to Kenya’s Business Registration Service (BRS), 86,773 business names and 49,043 private companies were registered in 2020. These numbers show that in 2020, 135,816 businesses were registered officially. I believe that many others started without any formal registration. How many of these businesses are still alive? How many of those businesses started a decade ago have survived?  I do not know anyone who tracks the survival rate of businesses in Kenya. As such, I do not have specific statistics to answer these questions. Maybe the Kenya National Bureau of Statistics should track every business once registered.

Fortunately, there are some well-known global statistics on the survival rates of SMEs. Though these rates seem to borrow heavily from the developing nations, they indicate what could be happening in our start-up space. Survival within the first five years seems the most challenging. On average, only about half of the businesses survive their fifth year in business.  This is quite worrisome! It means that hundreds of small businesses are dying each day and that thousands are dying each year. Those that survive are not assured of celebrating their 10th birthday. If your business has clocked ten years, be very grateful, many others will not.

Small and medium-sized businesses make a major contribution to the economic development of every country. In particular, they create employment opportunities that offer livelihoods to many. Besides, their contribution to a country’s Gross Domestic Product (GDP) is significant.  In Kenya, the last decade has seen quite some efforts towards small business. I wish there were statistics to track these efforts and their role in preventing the death of small businesses. Preventing the death of small businesses should be a priority for every business owner, the government and the public at large. Most of the reasons why small businesses die are avoidable. I am certain that most of us have come across a small business that died.  Many small businesses die because they are unable to find a market for their services or products; others die because they run out of cash; others die because they are unable to put together the right team among other reasons that I have come across in the marketplace. What are we doing to prevent the death of a small business?

In July 2020, Kenya recorded the highest number of business registrations. According to the BRS records, there were 10,551 business names and 5,589 private companies registered during the month. July was four months after COVID-19 had been declared a pandemic. Many people had lost their jobs; there was a growing urge to start a business as an alternative source of income. I wonder how many of these businesses will be celebrating their first anniversary in July. Having worked with many small businesses over the last ten years, I know that it is not easy to run a business. Most business owners and entrepreneurs run their businesses single-handedly. My advice to every small business owner, look out for help before it is too late.

Dr Lucy Kiruthu is a Management Consultant and Trainer. Connect via Twitter @KiruthuLucy

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