Why Failure Rate of Businesses in Dubai is Getting Worse

The answer to the question of why failure rate of businesses in Dubai is getting worse may not be very simple as imagined or surmised. This is owing to many of the several socioeconomic reasons that remain obvious. According to some findings, 80 percent of businesses fail within the first 18 months of start-up.

On the outside, the one reason we associate with business failure is that the business could no longer its operations or in simple terms, ran out of money.

But on a broader scope, the failure of any business results from a build-up of bad business decisions and mistakes, which comes from under-looking or over-looking both critical or small aspects of the business from its foundation.

A lot of business founders are so excited about their ideas and its prospects as they imagined that they don’t pay attention to a lot of relevant details. There are so many reasons out there as to why businesses fail, from blogs by failed business owners to academic journal based on empirical evidence.

According to the Entrepreneur  Middle East, in the first year, 20 percent of businesses fail, in the fifth year, 50 percent and after ten years, 70 percent of businesses fail.

There are different statistics for reasons where business fail and different percentages of a business that fail given a time period, but one thing they all almost have in common is that about 80 percent of businesses fail in their first five years.

From entering a market that has no need for your product, or ineffective marketing and having the wrong team, or the running of money to poor leadership decision, or poor communication with customers, poor management finance, or overreaching/overachieving attitude, or owner’s ignorance, or poor partnership relationship, poor location?

The list is endless, every reason that contribute to the doom of your business was as a result of bad decision.

Why Failure Rate of Businesses in Dubai is Getting Worse

Some of these reasons why failure rate of businesses in Dubai is getting worse are listed below in simple English for you to read and then understand better:

Gender Gap

Gender disparity is a key concern and reason why failure rate of businesses in Dubai is getting worse at least in the region. Women in Dubai were only half as likely to be engaged in Total Entrepreneurial Activity as their male counterparts, the report found.

In Africa, Latin America and the Caribbean, in contrast, eight women were engaged in entrepreneurial engagements for every ten male entrepreneurs. Also, gender parity was stronger in Qatar and Saudi Arabia, where there were around eight women for every ten male entrepreneurs.

Dubai, by contrast, reported the widest gender gap, with fewer than three women entrepreneurs for every ten men. This could be one major reason for why most businesses fail because so many businesses require the influence of the women before they could thrive.

Read Also: Importance of Taking Risks

Economic Competition

The business world was at the heart of the plan that highlighted its importance in the economic growth of the UAE. This move, coupled with the industry’s lower entry barrier, led to a unique and lucrative proposition that attracted many investors and entrepreneurs.

As a result, competition in the sector skyrocketed, and the entrepreneur ratio increased disproportionately, resulting in too many service providers crowding the scene. In fact, the pace at which the number of tourists is increasing is unable to keep up with the rate at which businesses are getting started every day in the UAE, and the outcome is straightforward – too much competition.

While these countries range in economic development and show divergent levels of entrepreneurship, they almost all face common problems including job creation, low education and skills levels (especially among women) and access to technology. Across the region, the high rate of business discontinuance was a cause for concern, the report highlighted.

Environment as Bottleneck

The challenges to the natural environment today are immense. The UAE faces the impact of rapid development and the effects of climate change and global warming. Protection of environment and sustainable development are key topics which receive great attention from the UAE Government.

The UAE’s rapid economic development made the country face serious environmental challenges that arise from the high pace of population growth, the increase in the demand for energy and water and the fast-paced urban development accompanied with high level of GHG and other emissions in the UAE.

Desertification, land degradation and drought are global concerns affecting the lives of millions of people and pose serious challenges to sustainable development. They aggravate economic, social and environmental problems such as poverty, ill health, food insecurity, loss of biodiversity, water scarcity, reduced resilience to climate change and forced migration.

Weakness in Reporting and Analytics

Many businesses don’t have an appropriate reporting and analytics system, which can cause or increase the failure rate of businesses in Dubai. The reason is that without any data on the daily operations, it is tough to assess a business performance. Basically, even if you know that your business is incurring losses in the absence of proper reporting & analytics, you will not be able to determine the exact cause of the loss.

Post-Pandemic Troubles

Dubai has suffered as the pandemic has decimated air travel and tourism, as well as other sectors like construction and real estate. Ratings agency S&P estimates that Dubai’s gross general government debt will reach about 77% of GDP in 2020, a figure conflicting with that of the Dubai government.

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