5 Reasons Why Businesses Fail in Malawi


Running a business is like keeping an egg. All you need to know is to have that knowledge and skill to keep the egg in a form and place that will guarantee you happiness in future dates.  There are a number of stages in business, but our focus is for those businesses in operation. Start-ups can also borrow a leaf from this article to avoid mistakes other businesses have made in the past years.

In recent years, I have an opportunity to talk to not only business individuals, but happily business owners. This was a group of those who were making money from their sales and they never wanted to acquire knowledge or acquire services from other individuals as they believed that “if buying and selling is taking place, then all is well”

Having witnessed the fall of some of those business and dwarfness state of other businesses of the same category, I came up with the reasons why some businesses fail in Malawi.  This article focuses much on the side of records.

  1. Mixing of Personal & Business Funds and activities

This is a serious problem in Malawi and plays a larger part on the falling and dwarfing of businesses. This contributes to the failure to track the performance of the business. Many people enjoy the mix of funds and they take the business money as their bank account. It then encourages the owner to live above par thinking that he/she has money. Money for the business is not yours until the business decides to pay you through profits, as salary or if you have opted to make drawings for personal use and the business has accepted.  The business needs to be consulted first if it has enough funds before you do your drawings.  Businesses fond of mixing personal and business funds faces cashflow problems frequently.

  • Fire Fighting Approach (compliance, business requirements etc)

Consultants can understand this to the core and more businesses in Malawi suffer from this disease. First of all, let us get an understanding of compliance in the context. This refers to being in good books with regulatory bodies of your business and our focus on compliance is our inland Revenue Authority. On monthly basis, consultants receive numerous emails and calls from business individuals looking for Tax registration, Tax Clearance Certificate and preparation of financial statements. This occurs only when the business has seen a bid that requires compliance. Imagine you are handling bids and you have seen a business which has been operating for 7 years with tax registration certificate bearing a date of the previous day, what can be your interpretation.  Imagine reaching an extent of having no financial statements and only ask accountants to prepare when you want to get a loan or something else. Most of these business approach compliance issues only at the last minute.

  • Poor Human Resource

Most businesses have average or poor human resource. Some of the reasons I have gathered that leads to businesses to have a bunch of poor human resources are as follows:

  1. Employing friends and relatives. This bunch of people do not differentiate working to give good results and working to get paid. Anyway, the primary reason for employing family and friends is to give them something to do. Whatever decision you make in business, pays back.
  2. Looking for cheap labour. Most business don’t value a good employee who can also give good results and increase revenue for the business. Sometimes a good employee cannot directly increase income, but reduce expenses by having things done properly and as needed
  3. Lack of training for Employees: Employees need to be trained for them to give good results. This is ideal especially if the business has a clear idea of what it wants to achieve
  4. Lack of formal employment terms: Other businesses opt not to give formal employment contracts to its employees and that eliminates the appetite for the employees to work to their maximum. There is therefore a bunch of employees who just end up mismanaging resources of the business.

Business individuals need to build a rewarding employee. Julie Bevacqua said: “ In order to build a rewarding employee experience, you need to understand what matters most to your people”.

  • Poor Management

Having a business to run does not mean you are a genius or you have vast expertise. You need to listen to others including employees, customer and suppliers. The poor management here is characterised by the following

  1. Poor communication
  2. Lack of feedback
  3. Inability to listens
  4. Micro Management

Having a good management help to link up all other sectors like people management, financial management,

  • Poor Financial management

One thing people don’t understand is that having a good financial management helps all other sections of your business. Marketing, production, distribution, sales, administration are nothing if your finances are in shambles. Most businesses find it hard to be trained in financial management or hire a consultant to help them understand what is happening in the business. Most people just transact while keeping microscopic information for the business. They end up not making profits and they don’t even care as long as they have cash at the bank. In should be noted that cash is not equal to profit.


When running a business make sure you get things in its order. You can do that by getting trainings in different areas to cover up, hiring the expertise you are looking for or outsource from the pull of consultants in different fields until you grow. You should be able to measure the value of each service or expertise or training against its cost. You need to address the five problems highlighted and move on with your business.

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