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Challenges in Starting a business in Tanzania

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Last updated: July 11th, 2019.

Starting a new business can be both exciting and frightening. There are many practical things to consider — location, size, employees, quality control, etc.

And then there are the anxieties and concerns: “Will I make it?” “Am I in over my head?” “Where do I start?” This implies that starting a new business is highly challenging and the following is some of the common challenges:-

1) Developing the Vision and Business Idea.

2) Limited support institutions targeting new business start-ups.

3) Lack of awareness about business opportunities available, limited awareness about business policies, regulations, and taxes.

4) Lack of systematic mechanisms aimed at developing new businesses.

5) Lack of growth programs that provide counseling and support for quality control, marketing, and technology upgrading to new businesses.

6) Lack of needed infrastructural facilities for new businesses start-ups.

7) Lack of collateral to facilitate loan application – Most banks and other financial insist on immovable assets.

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8) Lack of diversified sources of income/capital/ lack of credit or finance.

9) Unfavorable legal and regulatory framework/Bad laws and regulations.

10) High compliance costs tend to reduce the resources needed for new business investment.

11) High operational costs which results into in-competitiveness of domestic products both in internal and external markets.

12) Difficulties in attainment of Premises and equipment at start-up period.

13) Lack of all types of transport facilities makes it difficult and costly to move goods from one point to another within the country and adds up to operational costs.

14) Lack of reliable and sustainable sources of power/energy.

15) Poor or less exposure to international markets and internationally required business skill.

16) Adapting to modern technology an issue of concern.

17) Balancing economic and social Objectives.

There are also some major causes of business failure in Africa that includes:-

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1) A poor management team with insufficient experience and/or the wrong skills mix for the needs of the business.

2) Poor financial management/Poor Money Management (Extravagance).

3) Over-investing in fixed assets.

4) Failure to develop an appropriate business plan.

5) Lack of Vision (Short-sightedness).

6) An absence of business records or poor record keeping.

7) Insufficient capital or undercapitalization leads to bankruptcy.

8) Narrow customer base and inadequate marketing skills (Unplanned and uncontrolled growth).

9) Poor product and service quality.

10) Inappropriate location.

11) Lack of inventory control.

12) The business has borrowed too much money in relation to the owner’s investment in the business (high debt/equity ratio).

13) Under or overpricing of products and/or services offered by the business.

14) Failure to identify and manage risks/Fear of failure (Risk-Averse).

Business Owner Can Avoid Common Pitfalls By Doing The Following:

  • Knowing their business in depth.
  • Developing a solid business plan.
  • Managing financial resources.
  • Understanding financial statements.
  • Learning to manage people effectively.
Also read:   Legal Procedures When Starting Business in Tanzania

Factors to Be Considered During Business Establishment:

i. Nature of Business: A businessman should decide first what type of business to start. This requires considerable knowledge, experience and foresight.

ii. Form of Business Ownership: A business can be started in the form of sole proprietorship, partnership or a limited company. Each of these forms of business organization has its own advantages and disadvantages.

iii. Finance: The availability of finance determines the scale at which a business can be started. If large amount of capital is available then a business can be started at a large scale arid vice-versa.

 

iv. Location of Business: the place where business should be carried on and the site where business establishment should be located.

Further read: Legal Procedures When Starting Business in Tanzania

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