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Most Common Reasons Why Youth Enterprises Fail to Get Funding

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Many youth enterprises fail to get funding year after year, yet there are many funding opportunities that they can take advantage of and grow their businesses. The funding options range from government-sponsored funding to NGOs, to microfinance, and even multinational corporations. 

Now, more than ever, young people can tap into these opportunities and scale their business. But the sad news is most youth enterprises fail to get these funds. The reasons are diverse, but on the bright side, entrepreneurs can rectify these setbacks. 

Lack of a business plan 

A business plan shows the financial, technical and economic feasibility of a business. It answers whether or not the business makes sense. Youth enterprises fail to get funding because the majority of them neglect this crucial factor. Young entrepreneurs have the entire plan in their head, and since the business is a one-man show, retrieving information from their mind is simple. But the problem comes in when a financier needs a business plan. And just like that, young entrepreneurs miss funding. 

A business plan shows all elements of the business. It acts as a guide on how the business operates. A business plan includes the business background, history, business model, product and services, market highlights, financial aspects, operations, customers, and goals, among other critical elements.

It makes it easier to identify the business opportunities, the resources needed, and even the timelines to meet specific goals. You can also refer to a business plan to ensure your business is going in the right direction. In a nutshell, a business plan helps investors better understand the value the enterprise brings to the table and its potential to grow. 

Lack of team spirit 

All parties involved in a business must share the same vision for the enterprise. However, most youth entrepreneurs come together purely for convenience. This makes it difficult to convince the financier that the team has what it takes to nurture the business. 

A bank, a microfinance or NGO funding will only offer funds if they are confident that the team behind the project has what is needed to implement the business idea, remain committed during challenges and continuously reinvest to match the changing market needs. 

Financiers know that when people with different skill sets and the same vision spearhead a venture, it will be evident in the day to day running of the enterprise and the chances of success are high. 

Lack of a market strategy 

Young people are ambitious. They are bursting with ideas and often go ahead and implement their business ideas without market research. Some of these ideas are great, but if the entrepreneur fails to articulate where the business fits in the market, then it becomes challenging to convince investors that there is a need for the product or service. 

Young entrepreneurs must identify the target market and clearly outline the characteristics of the buyer persona. One can only secure funding if the business targets the right market where there is a need. Also, the market strategy must show the business’ competitive advantage, scalability and the marketing plan. This is paramount when seeking funding, but most enterprises barely consider this factor. 

So with this in mind, if you failed to secure funding, it would help to reevaluate your market strategy and readjust. Perhaps your target market is too broad or too small. With a clear understanding of the market need, you can improve and reapply for funding.  

Not understanding the financial situation 

Eager to secure funding and push the business to the next level, young entrepreneurs tend to be unrealistic about their business financial situation. In some scenarios, it’s an exaggeration, while in others it is an underestimation.

It’s important to fill funding applications with statistics of the business financial status. This way, you can be sure of how much you need and how to invest it. Besides, investors want to know the scalability of the business but when you show a lack of understanding about your business finances, how will anyone else put in their money? Also, get the value of your business’ worth right from the onset. You can leverage the many online evaluation tools to determine the worth of your enterprise. 

Poor record-keeping 

The number of youth enterprises with clear financial records is negligible, yet this is a critical factor when seeking funding. Youth enterprises fail to get funding because they cannot tell how much they’ve invested in the business, the profits they are making, or business’ financial status. 

When they come up with some figures, it’s not on paper. Sometimes the cost of the business far surpasses the benefits. But since there are no records, an entrepreneur might still hold on and proceed to look for funding, yet they couldn’t produce results with the initial investment, worse they can’t account for it. Ultimately, poor records make it impossible to track the business progress. 

Also read: 10 Reasons Why Youth Economic Empowerment Projects in Kenya Fail

Mourine Odongo
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One response to “Most Common Reasons Why Youth Enterprises Fail to Get Funding”

  1. 122861 157015Its amazing as your other posts : D, appreciate it for putting up. 211756

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