According to the Bureau of labor statistics, 20% of businesses fail in the first year. The percentage increases to 30% in the 2nd year, and by the 5th year, 50% of the business has been closed down. By the 10th year, 70% of the business was closed down.
And we understand these can be scary statistics sometimes. Don’t let them stop you from starting your dream business.
You can still start your journey towards being a business owner and succeed. However, you need to choose the right business. Worse, this overlooked step could be the difference between business failure and success.
But what makes a business suitable or worst to start in Kenya? How will being cautious when starting help you improve your chances of success?
In this article, we’ll answer your questions on the worst business to start in Kenya so that you can avoid them. We’ll also explain why we think they are the worst.
Bonus Tip: If you have already started any of these businesses, don’t worry. We shall give you ways to mitigate the risks and challenges.
Here are the Worst Businesses to Start in Kenya
Here are some of our picks for the worst businesses to start in Kenya:
- Movie shop
- Liquor store
- Tendering to the government
- Clothing boutique
- Cyber cafe
- M-pesa agent
- Money lending
- Charcoal selling
- Retail shop
. Movie Shop
A movie shop traditionally sells movies on CDs and flash disks. In 2023, a movie shop will be one of the worst businesses to start in Kenya because it has been phased out by technology. No one is buying movies stored in CDs and other storage forms anymore.
With the expansion of the internet and in most parts of the country, people stream movies directly from their preferred streaming platform. There are over 200 streaming platforms, and people are now much more connected to the internet than ever.
In addition, smart televisions are becoming more affordable. Unlike analog or digital TVs, smart TVs can host streaming applications, eliminating the need to store movies on CDs and flash disks.
If you have already started a movie shop, you can remedy that by adding other services to your portfolio or moving to spaces where people can play video games like FIFA. Unlike movies, people prefer competing when gaming and must pay a fee every time. It’s a better, smarter investment compared to selling movies on CDs.
2. Liquor Store
Coming second as the wort business to start in Kenya is a liquor store. Our judgment is based on the increasing government restrictions surrounding licensing and operation. Before starting a liquor store in Nairobi, you must meet licensing and control requirements.
These requirements are challenging, so only a few businesses survive this first phase. And there are more challenges!
Worse, your operating hours are limited, so you have only a few hours to make sales. What is even more annoying in starting up a liquor store, you have to give bribes now and then to officers on patrol to stay in business.
If you have already started this business, make sure that you keep up with the regulation and licenses. You will run your business efficiently without harassment.
3. Tendering to the Government
Tendering to the government is becoming a challenging and high-risk business in Kenya.
First, getting a tendering contract with the government is an uphill task. It’s often a hard task because there are many kickbacks during the tendering process. One of the greatest kickbacks in government offices is requesting bribes, and more often than not, you end up losing the money.
Even worse, after approval and supplying the goods and services to the government, there are many delays in payment processing. In the last few years, this has made supplying goods and services to the national and county government very risky for entrepreneurs.
According to standard media, as of June 2022, county governments had pending bills totaling sh 153.02 billion. The pending bills are spread across 18 counties in the country.
If you decide to do business with the government, you should understand that you might wait longer than usual before receiving the payment.
4. Matatu Business
Once one of the most lucrative businesses in Nairobi, the matatu business is now the worst business to start in Kenya. The industry has shown a lack of professionalism or code of conduct. As a result, running and managing a matatu business has proven very difficult.
If you have never been in the matatu business, this business might turn out to be your worst nightmare.
Like any other business, you must learn how the industry works. Often, new investors in the matatu industry are tricked by their employees.
You need proper planning if no one can change your mind about investing in the matatu business. First, you must give your employees daily targets. In addition, save up for repairs and servicing your matatu. Hire a driver and a conductor who doesn’t need micro-managing.
For beginners in the industry, keeping track of everything can make running the business overwhelming.
5. Clothing Boutique
For the last decade, a clothing boutique business has been one of the most popular businesses in Kenya. Unfortunately, it is now one of the worst businesses to start in Kenya. Competition and lack of uniqueness is the main challenge with this business.
Anyone thinking about starting a business in Kenya today thinks about a clothesline. Consequentially, most clothing boutiques sell the same thing, so there is a lot of competition. Worse, the price margins are also competitive, thereby reducing the profits.
That notwithstanding, there are dozens of boutiques that are doing well. But most of these boutiques specialize in offering products to a specific gender or age group.
If you have already started this business, make your store stand out. Niche down to a specific product and maximize quality. For example, Divine Collection, one of the most successful clothing in Kenya, focuses on men’s official clothes.
6. Cyber Cafe
A cyber cafe is one of the businesses that have been passed by technology. Many people have computers and the internet in their homes so they do not need to go to a cyber cafe to browse the internet. The traditional cyber cafe model does not work anymore.
However, it is possible to improvise the business by offering government services application. You can help people to apply for birth certificates, driving licenses, and even business registration. It is a better model since many people still do not know how to do things like fill for KRA returns.
7. M-Pesa Agent Business
The M-Pesa business is slow due to low rates. It is not sustainable to operate an M-pesa business and pay rent for the premises since the commissions are low. This business is being threatened by conning that happens when depositing and withdrawing money.
Theft and robbery at gunpoint are also a threat to this business. A lot of factors threaten this business making it impossible to sustain it in the long term.
Money lending is one of the worst businesses to operate because it is not regulated. If you decide to start lending money, you need to be ready for all the risks that come with the business. In case someone does not pay, you do not have any clear channels for getting the money back. It takes time to be licensed by the government so once you start the business you are technically operating an illegal business.
9. Charcoal Selling
Selling charcoal is facing a lot of regulation from the government. The government is encouraging the move to green energy and discouraging the cutting of trees. If you decide to start this business you need to understand that you will always be on the wrong side with the government.
Many people are switching to other methods of cooking so the demand for charcoal has greatly reduced in the last few years. You might not get enough customers to keep your business afloat.
10. Retail Shop
A retail shop looks like a good business but it can be challenging to operate. Once you start this business, be ready for long working hours and little profit.
The profit margins for a retail shop are so low that it becomes difficult to make anything substantial unless you are doing huge sales. If you decide to employ someone to run the business you still have to closely monitor it.
We considered some ideas the worst to start in Kenya because they are too common and challenging to stand out. However, do not let this stop you from starting a business that you are passionate about.
If you have the required skills, experience, and passion, you can turn the worst businesses into success. But before you do, check out our guide to the best businesses to start in Kenya.
Need more? We also have a guide on the best businesses to start with 10K
Have a question you need clarification on based on this article? Don’t hesitate to leave a comment.