Internal and External Factors Impacting the Success and Failure of Startups and SMEs

Several factors impact how Startups or small and medium-sized enterprises fare within the first few years of their establishment. While the survival of a business is often analyzed within the lens of cash flow and management structure, it is observed that whether a business thrives or fails is also largely determined by the nature of relationship between its value proposition and implementation as well as its strength of communicating and relating with its stakeholders, internally and externally.

Findings have shown that when there is a gap between a business’ value proposition and implementation, this tends to aggravate internal problems, especially system and process related problems which invariably results in a weak resistance to external threats such as disruptive policies, inflation, insecurity and a sudden pandemic.

For instance, in the wake of the Covid19 pandemic was the global supply chain downtime which largely affected the operations of many companies across the world. It was a period of frantic uncertainty which triggered a lot of diversion and misappropriation of resources among many companies. In that momentary economic stop-gap, only the companies with high financial discipline and loyalty to their business model or those that could improvise resourcefully were able to survive the heat of the period.

Also, remote working which became incumbent during the lockdown at the heat of the pandemic developed so much hassle for many businesses which did not have a well developed workflow, automated system and KPIs.

Furthermore, implementing strategies that only give a lukewarm attention to the human angle of the business is another terrible accident waiting to happen. Analysis reveals that startups which focus on products or solutions while they neglect their human capital and the end users of their products or solutions develop problems with regards to how they can effectively deliver and capture value.

In the midst of crisis and implementing crisis management strategies, companies with strong communication and Public Relation are more likely to survive and come back stronger than their counterparts.

A report on the analyses of customers’ reviews of some Nigerian agritech companies which have been defaulting with investors’ returns reveal that most of the negative sentiments against these companies on Google business and across their social media platforms were due to their inability to effectively communicate their challenges with investors. These companies have low public communication in terms of constant engagement when they have internal/external issues and the impacts of the external challenges on their processes, people, technologies and products.

It is suggested that for companies to continue to attract positive public sentiment while forging through the crisis impacted by microeconomic and macroeconomic forces, they need to be more open and efficient with their communication and engagement with their shareholders and other stakeholders.