Last updated on March 2nd, 2024 at 05:39 pm
List of 30 Worst Businesses to Start in Kenya
According to the Bureau of Labor Statistics, the journey of entrepreneurship in Kenya is riddled with challenges, with 20% of businesses failing in the first year, a number that spikes to 50% by the fifth year. Fear not, aspiring business owners. In this guide, we delve into the worst businesses to start in Kenya and offer insights on how to navigate the landscape successfully.
Venturing into your entrepreneurial dreams in Kenya demands strategic decision-making. Your choice of business can be the linchpin between success and failure. In this article, we explore what makes certain businesses ill-suited for the Kenyan market and how cautious decision-making can tip the scales in your favor.
What are some of the worst businesses to start in Kenya?
Some of the worst businesses you can start in Kenya include the following: cybercafé, DVD rental shops, car wash, mobile money transfer shops, photo studios, printing and photocopying shops, second-hand clothing shops, movie theaters, video game shops, traditional print media, pet shops, bridal shops, bookshops, betting shops, tender businesses, political blogging, music shops, shoe shops, internet cafes, offline taxi businesses, insurance companies, software companies, shylock businesses, liquor businesses, matatu businesses, and travel agencies.
Some of the worst businesses you can start in Kenya are:
1. Internet Cafe Business/Cyber Cafe
The Internet cafe, or the traditional cyber cafe business, is one of the worst businesses to start in Kenya. The main reason is that many people today in this digital environment have access to affordable smartphones and affordable internet connections. For instance, many Kenyans now own personal MIFI, which is provided by mobile service providers such as Safaricom, Faiba, and Airtel, just to name a few. The mobile providers provide competitive and affordable internet data bundles to their subscribers, which becomes a direct challenge for internet cafe business owners.
Another reason why internet cafes lose relevance is because many luxurious places offer free access to WiFi. The main alternative business for a cyber cafe is offering government service applications—aiding people in tasks like obtaining birth certificates and licenses and filing for KRA returns. This updated model addresses the evolving needs of those who struggle with online processes, ensuring sustained relevance and potential profitability.
The main alternative businesses for internet cafes are WIFI installations and CCTV installations.
According to a case study by Mwita Michael Marwa, he aimed to identify barriers to the quality of services provided by Internet cafés in Nairobi’s Central Business District (CBD). The study revealed that cybercafés in the CBD face challenges such as frequent raids by authorities, outdated devices, high expenses, and unrealistic government regulations contributing to cybercrime.
The study emphasized the importance of a sound telecommunications infrastructure for the growth of Internet cafés. And recommended refraining from purchasing obsolete devices, investing in power backups to address electrical power breakages, and urging telecommunications stakeholders to design more Swahili websites to boost internet usage.
2. DVD rental shops
In Kenya, DVD rental shops, similar to cybercafés, are rapidly becoming obsolete. The popularity of USB-compatible TVs, streaming services like Netflix and Showmax, and the prevalence of YouTube movie uploads have led to a sharp decline in DVD rentals. Investing in a DVD rental shop is discouraged due to low demand. Alternatively, for movie enthusiasts, creating and monetizing movie recaps on platforms like YouTube offers a more lucrative and contemporary business opportunity.
According to Wikipedia, the widespread embrace of video-on-demand and streaming services like Netflix during the 2010s significantly diminished the earnings of major rental chains, resulting in the shutdown of numerous outlets. With the substantial decline in demand, only a handful of rental shops have persevered into the current era.
As of 2022, the limited remaining stores typically serve cinephiles interested in classic and historical films, art films, independent films, foreign language films, and cult films that have limited availability on streaming platforms.
3. Car washes
Starting a car wash enterprise in Kenya may appear lucrative initially, yet it involves notable challenges. The establishment of car wash businesses in Kenya demands a substantial investment encompassing equipment procurement, ensuring an adequate water supply, and securing rental space.
Furthermore, the car wash industry in Kenya is characterized by intense competition and market saturation, featuring both well-established entities and emerging players. This competitive landscape poses difficulties for new ventures in terms of customer acquisition and retention. According to financialbuddyblog.co.ke, the location of a car wash is important to its success.
4. Mobile money transfer shops
Starting a mobile money transfer shop, similar to popular services like M-Pesa in Kenya, is a good idea; however, it can be risky and the worst idea at the same time. The M-Pesa business faces issues due to low commission rates, mainly if you are in a less populated area, making it hard to sustain.
For Airtel money transfer agents, this business is now tougher because the mobile service provider has scattered users throughout Kenya. Besides, operating such a shop becomes even tougher when you have to pay rent for the premises.
The slow business pace adds to the challenges, making long-term profitability unlikely. On top of that, there’s a risk of fraud during money transactions, and the threat of theft and armed robbery makes the whole venture more vulnerable. Considering all these problems, running a dedicated mobile money transfer shop seems difficult in the long term.
According to 31-year-old entrepreneur Peter Gikungu Chege, interviewed by Standard.co.ke, one of the biggest challenges one has to deal with in an M-Pesa business is fraud and robbery. He adds, “I have learned that perseverance is one of the key traits of a great entrepreneur. I take every challenge as an opportunity to learn and grow.”
According to my expert advice, I would recommend you venture into some other business before entirely depending on the mobile transfer business.
5. Photography Business
The photography and photo booth business in Kenya has many challenges. Because of the challenges that surround it, it can be one of the worst and hardest businesses to run in Kenya. Therefore, running a photography business in Kenya would require a lot of hard work and some skills to succeed. Sales is one of the most important skills you will need. The ability to network with as many people as possible. The main reason why photography has become one of the worst businesses to start in Kenya is the emergence of smartphones with better cameras (the Samsung Galaxy A23 and OPPO A57 4G, among the few). Because of these affordable and portable smartphones, Kenyans can take high-quality photos from their homes.
Another reason why the relevance and demand for photographers and photo studio services have decreased is that photographers are paid low wages despite purchasing expensive photography instruments. The photography business in Kenya faces challenges in making reliable profits because of modern smartphones and free digital photo editing tools such as GIMP and Adobe Photoshop Express.
To achieve success in the photography industry, it is crucial to possess top-notch equipment and effective marketing skills to distinguish yourself from competitors. Additionally, consider expanding your range of services by incorporating videography or focusing on specific markets, such as weddings or corporate events, where the demand for exceptional images is particularly high.
6. Printing and photocopying business
The photocopying and printing business is among the worst and most risky businesses one can start in Kenya without doing proper research. For instance, if you start a printing and photocopying business in places where government offices are not located, you will have a hard time making any profit and fail. In Kenya, the printing and photocopying business is still dependable, mostly in busy areas. To succeed in the printing and photocopying business in Kenya, doing thorough research is the most important step. This is because if you fail to understand the demand for such services, you will have a hard time making any profit.
Another reason why the printing and photocopying business might be the worst business to start is because of the recession. When there is a recession in the economy, normally most people will stop using their money to access such services. Therefore, your business might fail because you cannot maintain expenses such as house rent and utilities such as electricity. Another reason why printing and photocopying businesses can be frustrating to run is that when global pandemics such as COVID-19 or Ebola come into play, people will not need your services anymore because they will be forced to go into hideouts.
Photocopying and printing are seasonal businesses. The main alternative is to diversify into other stationary equipment such as pens, stamps, printing papers, and so on.
7. Movie theaters
In this digital age, the traditional movie shop has become obsolete with the rise of streaming platforms and affordable smart TVs. To salvage an existing movie shop or rethink this venture, consider diversifying into video game spaces or other entertainment services.
The story of Kenya’s cinema industry has very interesting storylines, complete with new characters, a beginning, and an end. In 2010, one of Nairobi’s landmarks, the Kenya Cinema, run by Fox Entertainment Group, was closed after it went out of business.
The closure was attributed to movie piracy, advancements in home entertainment systems, and improvements in broadband and the internet. In 2011, Nu Metro closed its five movie theaters, citing movie piracy and a dwindling market that preferred to rent movies and watch them at home.
The film industry is thriving in various regions globally, encountering common issues like piracy and adapting to emerging technologies. Kenya, characterized by a burgeoning middle class, offers a potential market for diverse cinematic offerings. Despite the financial capacity of this demographic to subscribe to television services or rent movies, there exists untapped potential for the growth of a vibrant cinema culture. Success in this endeavor merely requires a touch of innovation.
8. Travel agency
The travel agency is another bad business to start in Kenya. According to Tuko.co.ke, a travel agency is a frustrating and expensive business to manage. However, many people still use travel agency services. The risks associated with it are the main reasons to consider it the worst business you can start. Apart from a travel agent being liable for the accommodation and security of the travelers, travel agency businesses can easily get hit by recessions and global pandemics and therefore lose a lot of customers and make no money for a long time.
A travel agency is a risky business to start in Kenya, especially if you are just starting. Because of the market share competition, bigger brands such as Booking.com, Agoda, and Travelocity have dominated the niche, and it has become hard to get a stable business up and running. According to Bizhack.co.ke research, we noticed that the introduction of online services offered directly by the company has slowed down the travel agency business. Therefore, trust is also a factor in the failure of travel agency businesses.
The main alternative business to a traditional travel agency is investing in an online travel agency business, but you will need to invest heavily in marketing and gaining trust as fast as possible.
9. Video game shops
The video game shop business is not a profitable business to start in Kenya because, in this digital age, many users will prefer playing mobile games on their phones rather than visiting a video game shop. Video game shop businesses receive direct competition and challenges because, according to Stastica’s report, the mobile games market is expected to reach 14.3 million users by 2027. This means that video game shops are becoming less profitable because most people prefer playing games on their personal devices, such as computers or mobile phones.
Most video game developers have realized the opportunity and are now developing mobile-friendly games such as Dream League, Candy Crush, etc. The best mobile-friendly phones that can support most video games, such as GTA, are the Asus ROG phone 6 Pro and the Asus ROG phone 7 Ultimate.
10. Traditional print media
According to the Media Council of Kenya, the main sources of news are television (47%), followed by radio (36%), then social media (10%), family and friends (4%), the internet (2%), and newspapers (1%) in that order. From this research, the traditional print media which is newspapers, takes 1%, which means it is not frequently used as an information source.
The main reason is the tough competition in the traditional print media business. From Bizhack.co.ke research, we found out that the most-read newspaper in Kenya is the Daily Nation (75%), followed by The Standard (43.1%), Taifa Leo (12.4%), The Star (5.9%), The Nairobian (5.5%), The People Daily (4.5%), and others. As you can see, beating the most trusted brands can be hard in the long run.
The main alternative business idea to replace traditional print media is investing in digital media because there is a much higher opportunity to grow and succeed with less cost. However, a good plan is still an important factor.
11. Betting shops
In Kenya, despite the high demand for betting services, starting a betting firm presents formidable challenges. These firms, locally referred to as betting shops, operate in a market fraught with risks and stiff competition. Dominant players like Sportpesa, Betika, and Betpawa control a significant market share, leaving limited profit margins for new entrants. Moreover, the Kenyan government’s stringent regulatory environment adds to the complexity. Firms face heavy taxation, and there’s always a looming risk of abrupt closure for non-compliance with regulations. This was evident in 2019, when Sportpesa faced closure due to taxation issues, alongside other shops like Bunga Bet and Betyetu which were banned for license renewal failures.
Given these challenges, entrepreneurs with the capital to start a betting firm might consider alternative ventures. A promising option is the Sacco business, which enjoys high demand and profitability in Kenya. Unlike the volatile betting industry, Saccos offers a more stable opportunity with the potential for gradual growth. This shift not only mitigates the high-risk factors associated with betting firms but also aligns with a more sustainable and regulatory-friendly business environment.
12. Pet shops
Starting a pet shop in Kenya faces challenges due to limited demand and intense competition from online platforms like Kilimall. Alternatively, establishing an agro vet aligned with everyday needs could be more profitable and practical. Strategic placement is key to success in this broader market. According to Taha Mohamedali and Tariq Karmali, the owners of Petstore, here is their view on pet stores in Kenya and the lesson they learned:
Over the last two years, Mr. Mohamedali says, PetStore Kenya has met a few challenges occasioned by the fluctuating exchange rates, the pandemic, and other international scale challenges that have led to sharp spikes in prices of products, which sadly have been transferred to buyers in part for them to remain in business.
Taxes have also been on a constant rise, and he finds this punitive, especially for people in the import business of pet products.
“The supply chain was greatly affected when the pandemic happened; it bent the business severely. That and the ever-changing dollar exchange rates have been a major source of headache for our pet shop business,” he says.
So, why not manufacture the said products locally? A reporter asked.
“We could eventually, but a lot must be done to ensure there is a good business environment whereby manufacturing locally will not eat greatly into our margins and eventually make our products very expensive.” He concludes.
If there is any lesson he has learned in the pet business, it is to avoid the debt burden.
“Overborrowing affects your operations in the sense that you start working to pay back more than you work to make profits.”
13. Bookshops
The physical bookshop business is one of the few businesses you can rely on in Kenya. A study by the Kenya Publishers Association in 2016 indicated that more than Sh10 billion was lost to teachers and unscrupulous booksellers every year. The main reason why bookstores in Kenya are risky businesses is because of seasonal purchases of book products.
Other challenges associated with bookstore owners include labor shortages, supply chain confusion, rising rents and interest rates, higher costs of goods, and an imminent recession that could drive down consumer spending. For instance, the Kenya Publishers Association Chairperson pointed out that the current high cost of living has led to low purchasing power, hence the low uptake of general reading materials.
Another reason why a bookstore business might fail is that the government of Kenya prefers to buy textbooks directly from publishers rather than from bookstore owners, mainly because most of the textbooks sold from bookshops tend to have fake information and also have copyright issues. The bookshop business is also dying because of technological advances and digitalization.
Amazon is the leading ebook seller in the world, with a market share of around 67%, according to writer Max Lakin from Magnolia. Barnes and Noble is the second-largest ebook seller behind Amazon.com, with a market share of nearly 25%, according to Magnolia. According to EastAfrican, about 37.6% of internet users read, buy, and download books from Amazon therefore directly decreasing the relevance of the bookshops in Kenya.
14. Music shops
Music shops are one of the worst businesses that one can start in Kenya. According to a few music shop owners Bizhack.co.ke interviewed, we tried asking why their music shops were closed and ventured into other things. The main reason why music shops are no longer good businesses to start in Kenya is because they are outdated and music services such as selling CDs are not in demand anymore. Another reason is the rise of online platforms like Spotify, Boomplay, and Apple Music. These are the platforms both musicians and music lovers can use to listen to music for free.
The main alternative for music shops is to set up a music studio instead. Another alternative is selling musical instruments. Setting up a phone repair business is also another alternative.
15. Political Blogging
Political blogging involves the process of researching, writing, and sharing politically related topics and news articles. Political blogging in Kenya is one of the worst businesses you can start in Kenya. The main disadvantages of political blogging are frequent kidnapping, blackmail, arrest, and personal threats from politicians and the Kenyan government in general. The political landscape is often sensitive, and expressing opinions can lead to controversies, defamation claims, or even legal actions.
Political blogging in Kenya is profitable because it is easy to scale, has a high gross margin, and generates a lot of traffic. However, political blogging is still risky, despite all the pros. Another reason I would not advocate for political blogging is that when you monetize your blog through AdSense, it is easy to get banned by Google AdSense because, if you read the Google AdSense guidelines, it does want to monetize content that provokes other people. Politicians and celebrities can request an account ban, which is a disadvantage for blog owners. Examples of such victims are Robert Alai of Kahawatungu.com and Cyprian Nyakundi of Cnyakundi.com.
To mitigate risks, bloggers should thoroughly research and fact-check information, maintain a balanced perspective, and consult legal experts to ensure compliance with laws.
16. Insurance Company
The insurance company guarantees payment for an uncertain future event based on policies and agreements made with the insured customer. The insured basically pays a smaller premium to the insurer in exchange for the protection of that uncertain forthcoming circumstance. An insurance company is one of the worst businesses one can start in Kenya. The main reason is that it requires high starting capital. Inflation, digital transformation, and climate change stand out as the top 3 biggest challenges of the insurance industry.
According to Tuko.co.ke, the challenges that start-ups face when starting an insurance company in Kenya are high startup costs (for instance, the registration fee for an insurance company in Kenya shared by ira.go.ke is (a) KES 150,000 for an insurer, (b) KES 150,000 for a micro insurer, and (d) KES 250,000 for a reinsurer). (These amounts shall be payable to the Insurance Regulatory Authority, with high completion from multinational insurance companies in Kenya.)
For example, according to the Stastica report, Britam Life is the largest insurance company in Kenya, with a market share of around 228.49 million U.S. dollars in 2022. ICEA Lion Life and Jubilee Insurance followed with market shares of 6.68% and 5.76%, respectively. Therefore, competing with such companies can be tougher, especially when you are starting.
Another reason why most startup insurance companies might fail in Kenya is because underwriters collude with customers for claims that are not legitimate; hence, the business loses cash. Even if the claims for insurance money are legitimate, customers tend to exaggerate the figures. Because of a series of such situations, the company faces difficulties staying afloat.
The best alternative to an insurance company startup in Kenya is a consulting firm.
17. Offline Taxi Business
The offline taxi business is another worst business in Kenya that faces tough competition from ride-sharing apps that offer convenience and lower prices. Additionally, rising fuel costs, traffic congestion, and vehicle maintenance expenses can eat into profits. To reduce risks, taxi operators should consider offering unique services like luxury or specialized transportation, maintaining their vehicles well, and exploring digital platforms to reach a wider customer base.
18. Software Company
While the software industry has potential, it’s competitive and requires continuous innovation to stand out. Challenges include piracy, intellectual property theft, and the need for skilled developers. To minimize risks, software companies should invest in strong cybersecurity measures, protect their intellectual property, offer unique and valuable solutions, and diversify their product offerings.
19. Shylock Business (Loan Sharks)
Engaging in a money lending business without proper regulations and ethics can lead to legal issues and harm to borrowers. The shylock business often has negative associations and can damage your reputation. To mitigate risks, consider becoming a registered lender, following legal interest rate limits, and adopting transparent lending practices to ensure fair treatment of borrowers.
20. Tender Businesses
Tender businesses can be risky due to fierce competition, potential corruption, and payment delays. Winning tenders often requires strong connections and compliance with stringent requirements. To reduce risks, focus on building a reputable track record, ensuring transparent bidding processes, and diversifying your client base to avoid overdependence on a single contract.
21. Liquor Business
Starting a liquor store in Kenya poses significant challenges due to regulatory restrictions, health concerns, and potential social issues. Specifically, it ranks as one of the worst businesses to start in Kenya, considering the changing laws and policies that directly impact alcohol sales. Government restrictions, particularly regarding licensing and operation, make it a daunting venture in places like Nairobi. Fulfilling licensing and control requirements is a crucial but challenging aspect, leading to the survival of only a few businesses in the initial phase.
Furthermore, operational challenges compound the difficulties, such as restricted operating hours that limit the window for sales. Additionally, entrepreneurs often find themselves compelled to provide occasional bribes to officers on patrol, adding an undesirable layer of complexity to maintaining operations. If you are already in this business, navigating through these challenges requires a constant commitment to staying informed and compliant with regulations and licenses. This proactive approach is essential for running your liquor store efficiently and minimizing the risk of harassment.
Relatable Story: Tabitha Karanja
The story of Tabitha Karanja’s resignation as the CEO of Keroche Breweries sheds light on the challenges faced by the liquor business in Kenya, making it a fitting starting point for discussing the worst businesses to start in the country.
Keroche Breweries, a well-known name in the alcohol industry, has faced various hurdles during Tabitha Karanja’s tenure. The company is entangled in a protracted tax dispute with the Kenya Revenue Authority (KRA), which began in 2006. The classification of the company’s fortified wine products by the taxman led to a substantial tax assessment, causing financial strain on Keroche. This dispute ultimately resulted in a Sh1.1 billion tax assessment, creating a significant financial burden for the brewery.
The legal battle with the KRA has not been the only challenge. According to a BusinessDailyAfrica report, Keroche also faced an insolvency petition over a Sh233.7 million debt owed to a Nairobi law firm. These financial troubles have added to the woes of the brewery, making the liquor business in Kenya appear even more challenging.
Tabitha Karanja’s departure comes at a time when the company is grappling with these issues, and her exit speech suggests that the challenges extend beyond internal matters. She takes the opportunity to address the ongoing debate about the alcoholic beverage industry in Kenya, emphasizing the importance of regulating the sector without undermining its existence. Her mention of anticipated tax revenues exceeding Sh250 billion from the alcohol industry this year underscores the economic significance of the sector.
In summary, the story of Keroche Breweries and Tabitha Karanja’s resignation provides a poignant illustration of the difficulties faced by businesses in the liquor industry in Kenya. The challenges are multifaceted, from tax disputes to financial struggles, making it a cautionary tale for those considering entering this sector.
22. Matatu Business
The matatu business involves regulatory challenges, safety concerns, and fluctuations in fuel prices. Additionally, competition and traffic congestion can affect profitability. To minimize risks, prioritize passenger safety, maintain well-functioning vehicles, adhere to traffic rules, and explore partnerships with digital platforms for improved customer engagement.
23. Retail Shop
The retail sector can be challenging due to competition, changing consumer preferences, and economic fluctuations. Online shopping also poses a threat to traditional retail. To mitigate risks, focus on providing exceptional customer service, curate a unique product selection, adapt to evolving trends, and consider incorporating e-commerce options.
24. Charcoal Selling
Charcoal selling can contribute to deforestation and environmental degradation. Additionally, there might be shifts in consumer preferences towards cleaner and more sustainable energy sources. To mitigate risks, consider offering alternative eco-friendly products, promoting sustainable practices, and exploring partnerships with organizations focused on environmental conservation.
In conclusion, starting a business in Kenya is a challenging endeavor, and it’s important to choose the right type of business to invest your time and money. It’s important to consider market trends and competition before starting any business venture. The businesses listed above have either become outdated or are struggling to compete in the current market. As an entrepreneur, it’s important to stay informed and adapt to changes in the market to succeed in the long run.