Worst Business to Start in Kenya

One of the most critical decisions you will ever make is starting your own business. If you are an upcoming entrepreneur, it is easy to assume that any business is viable and profitable in Kenya.

Choosing the right business idea in Kenya is crucial. Aspiring entrepreneurs need it for success in the challenging market. With numerous opportunities and challenges, it’s essential to navigate them effectively.

We will look at the worst businesses to start in Kenya, among others. By understanding the challenges and exploring options, entrepreneurs can make informed decisions.

The Kenyan Business Environment

Entrepreneurship culture is the emerging trend in Kenya. It is characterised by a growing economy as well as a young population eager to seize opportunities. However, starting a business in Kenya comes with its share of challenges.

Market research and knowing consumer trends are vital. They help new businesses gain a competitive edge. Without prep, entrepreneurs risk entering saturated industries. Or, they may invest in ventures with little growth potential.

Worst Business to Start in Kenya

1. Taxi business using expensive loans

The taxi business in itself is lucrative. However, starting the taxi business by acquiring an expensive loan is hugely detrimental. Kenya has many expensive loan providers or predatory lenders. We term them as expensive loans because of the high interest rates involved.

Lenders prey on individuals who start a taxi business. They do this by offering expensive financing when buying the vehicle. Besides this, costly add-ons such as car trackers are included in the initial cost.

This drives up the initial costs, making it even harder to repay the loans.

Additionally, any delays in the monthly installment repayment result in punitive penalties. It is for this reason that we rank this as the worst business to start in Kenya.

2. Bodaboda business using expensive loans

This business is like the taxi business mentioned above. Many predatory lenders target the motorcycle or bodaboda business in Kenya. They take advantage of the illiteracy of most of the motorcycle riders in Kenya. They offer loans with high interest rates that borrowers must repay on a daily basis.

Most lenders expect you to repay Ksh. 300 every day towards your loan settlement. It represents a bigger portion of the daily earnings generated by the riders. This makes it a tall order to repay these loans.

Additionally, any delays in daily repayments result in penalties. Most of them even repossess the motorcycle. This results in the rider losing their money and their ability to earn a living.

3. Small matatu business(11 – 14 seater matatu)

The matatu industry is vibrant in Kenya, but there is a caveat to this statement. Most people who start matatu businesses also buy them on credit. Unlike the bodaboda and taxi businesses, which often obtain loans from banks and SACCOs, most of these loans are not expensive or predatory in nature.

However, after obtaining the vehicle on loan, there are many other hidden costs. Some of these include branding, SACCO registration fees, car trackers, and seat installations. These hidden costs increase the initial acquisition costs.

Additionally, once the vehicle starts using the intended routes, a new problem arises. Matatu Saccos prioritizes vehicles owned by the Sacco leadership. Your vehicle may be in line to ferry passengers, but a car owned by the Sacco leadership will be prioritized ahead of yours in line.

It happens even if they arrive later. This reduced the number of trips your vehicle would have taken, thus reducing the income.

With less income, loan repayment also becomes a challenge. This is why we rank it as one of the worst businesses to begin in Kenya.

4. Money lending business

The money lending business in Kenya has many challenges. First is the regulations placed by the Central Bank of Kenya(CBK). CBK has strict rules regarding players involved in the financial sector.

The low-performing economy of Kenya is another challenge in this business. Kenyans have lower liquidity and lower purchasing power as a result.

This makes it harder for them to repay money lent to them on time, leading to friction and inconveniences in the money-lending business.

5. Charcoal business

The charcoal business is another challenging business to start in Kenya. The primary reason for this is the stringent Kenyan laws regarding deforestation. Ferrying charcoal from production areas to consumers is difficult and expensive.

You may be forced to pay hefty bribes to go past the cash-hungry police officer at our roadblocks. This tends to reduce the profit margins, thus ranking it as one of the worst businesses to start in Kenya.

6. Reselling Generic Clothing

Several vendors in Kenya have entered the clothing market by offering similar products. Reselling generic clothing often results in low profit margins and struggles to differentiate itself from competitors.

Besides settling for the generic clothing market, entrepreneurs can explore niche fashion segments. They can also offer unique designs tailored to local preferences. A startup tried to enter the generic clothing market.

It struggled to attract customers. The market had fierce competition. They pivoted to designing and selling eco-friendly fashion clothes.

7. Opening a General Store in a Saturated Area

Populated areas in Kenya attract many general stores, and this means there is high competition. This makes it hard for new entrants to compete. High competition and low profit margins may hinder the success of a new store.

Entrepreneurs can consider unique niche stores. These stores address the specific needs of their consumers.

8. Luxury Car Rental

Luxury car rental involves a large investment in high-end vehicles and associated maintenance costs. The market is limited, with few potential clients.

Entrepreneurs can explore cheaper transportation options and new mobility solutions. They can do this instead of renting a luxury car. These cater to a broader audience.

Example:

The luxury car rental business experienced challenges in attracting clients due to limited demand. They added cheap chauffeur-driven cars to their portfolio. This expanded their customer base and profits.

9. High-End Jewelry Boutique

It’s worth noting that operating high-end jewelry boutiques requires a significant investment in inventory. It also requires a deep understanding of the industry. The market for luxury jewelry in Kenya may be niche, with limited demand.

Entrepreneurs should not focus on high-end jewelry. They can also explore affordable accessories or custom jewelry for specific groups.

A high-end jewelry boutique struggled to generate sales due to limited demand. They shifted their focus. They now design and sell custom jewelry for weddings and special occasions. They found success in a small market.

10. Fidget Spinner Store

Fidget spinners became popular as a fad item. But they lost market share. Investing in a fidget spinner store may result in outdated inventory. It may also lead to low demand.

Entrepreneurs can explore trends with long-term growth. Or, they can focus on timeless products with enduring popularity.

Example:

A startup invested in a fidget spinner store but struggled to sell inventory as the trend faded. They added educational toys and games to their products. This drew a broader customer base and boosted sales.

11. Movie shop

Content platforms reduced the need for movie theaters. Moviebox and Hulu have, too. This was also experienced in Kenya. They can do this from the comfort of their own homes. This has affected the movie shop businesses, making them struggle to attract and keep customers.

This has resulted in a decline in revenue and profits. But there is a percentage of people who can’t afford to pay for online streaming services plans. Depending on the location of your movie shop, you can still get customers.

12. Niche Consulting in a Specialized Area

Niche consulting in a specialized field requires expertise and credibility to attract clients. The market for niche consulting services in Kenya may be small. Few potential clients are willing to invest in specialized expertise.

They should not focus on niche consulting. They can explore broader consulting services. Or they can explore niches with more demand and growth.

Alternative business ideas to start in Kenya today

Affordable real estate investment in Kenya

Real Estate is a lucrative industry in Kenya. There is a growing demand for homes and offices. Entrepreneurs have many chances to invest in real estate. They can buy and sell property, build affordable housing, or manage rental properties.

Health and Wellness Services: 

The industry is expanding in Kenya. It has a growing focus on fitness, mental wellness, and holistic health.

Agribusiness:

The agricultural sector in Kenya is vast, presenting numerous areas and opportunities for exploitation. There is a growing demand for organic and locally grown food. Starting an agribusiness can be profitable. Opportunities are also available in dairy, horticulture, and poultry.

Technology Services: 

Information Technology boosts a thriving tech arena characterized by increased demand for tech services and solutions. You can make money by starting a business. Profitable areas are not limited to software or app development, IT consulting, and digital marketing.

Frequently Asked Questions

Why do most businesses in Kenya fail?

It is through the following;

1. Lack of thorough market research

2. Poor planning, management, and execution

3. Limited access to funding

4. Regulatory challenges

5. High competition in the industry-specific sector

6. Infrastructure and logistical challenges

7. Economic instability

8. Lack of skilled workforce

9. Cultural and social factors

What are the five causes of business failure?

1. Lack of proper and precise planning,

2. Insufficient funding, ineffective marketing,

3. Poor management,

4. Failure to adapt to market changes

5. Legal issues.

How do you revive a struggling business?

1. Adjust your mindset.

2. Set goals.

3. Learn why customers are leaving.

4. Understand your target audience.

5. Performing a SWOT analysis.

6. Monitoring your finances, i.e, income and expenditure.

Conclusion

Considering well-conducted market research and planning, aspiring entrepreneurs can experience growth opportunities. They can then chart a path towards success. It’s key to stay adaptable, and ideas can be obtained from reliable sources.

It’s essential to be open to exploring new business ideas.

Businesses must fit with market trends and consumer needs. With grit, entrepreneurs can turn their business dreams into reality. Kenya has a vibrant startup world.