Business failures among Small and Medium sized construction companies’ in Abuja, Nigeria

Abstract

Purpose of this paper: Business failures are risks that exist in all the various types of industries. The Nigerian construction industry has experienced a high incidence of Small and Medium business failure which has impacted negatively on the local construction market environment. The main purpose of this paper is to explore the factors associated with Small and Medium Enterprise construction (SMEs) company failures in the context of the Nigerian construction industry. Design/methodology/approach: The study employed quantitative research approach using a well-structured questionnaire to elicit information from a purposive sample of 50 construction SMEs registered with Federal Housing Authority, Abuja. Findings and value: the study results indicate that the main causes of business failure are lack of access to capital and undervaluing of construction works, poor estimating practices, and lack of evaluation of project profit yearly, and dealing with high magnitude of project. The study further categorized the causes of the failure under five main headings: lack of managerial experience; poor business strategy; poor project management; poor organisational administration, and poor coordination; finally presents strategies to assist companies survive. Research limitations/implications: the study have some limitation which future research need to eliminate. The study relied on the use of cross-sectional data both from questionnaire survey of 50 SMEs in Abuja. Practical implications: The results of the study present here will be a huge advantage to owners as well as managers of SMEs construction organisations in growing their businesses and enhancing their chance of survival. It will inform SMEs of the need to put into considerations political and business environment risk in their estimate and the need to improve their managerial and financial abilities in order to tackle the challenges. Originality/value of paper: The results presented in this paper have important implications for the entrepreneurs who are contemplating starting a business in the construction industry and it also provides a clear signal of the potential business risk factors in doing construction business. Conclusions: the study concludes that the main causes of SMEs failures are political, and financial factors as well as lack of managerial ability which largely have prevented them from breaking even.