10 Major Reasons Why a Dubai Business Setup Fails

by Zaara 28, Jul 2016

dubai business setup

If you are a company that wants to start or expand your business, or an individual who wants to set up shop in the Emirate, then this article is for you. The experts at Commitbiz business setup consultants in Dubai have listed down some of the most common reasons why a Dubai business setup fails.

Reasons for the Failure of Businesses in Dubai

Take a look at the indices before you start because forewarned is forearmed. 

1. Lack of experience or awareness

 Apart from providing the product or service, business owners also need to learn how to manage their finances, accounts, legalities, marketing, etc. They also need to know the local market culture and business etiquette to build trust and respect among people and stakeholders in a foreign country. 

2. Selling an unneeded product or service

One of the primary reasons why most businesses fail is because the product or service provided by an entrepreneur or a giant company is unnecessary by the market. Many business owners fail to conduct extensive interviews with their potential customers and find out what they need. 

3. Lack of working capital

It is important to stay realistic about costs. Many business owners overestimate the market size and underestimate the running costs. 

It takes a long time for any business to pick up and flourish, hence it is prudent that one tries to be as accurate as possible when seeking a loan. 

4. Unplanned expansion

The business may take off quickly, which can cause problems. If you are providing a service, you may have to keep customers waiting for too long, and they may find alternative suppliers. 

Suppose a product is being assembled and is in demand. In that case, more raw materials will need to be purchased, and more credit may have to be obtained from suppliers, as time will elapse between supplying the product and receiving payment. 

5. Slack management

Being complacent will derail you from your goal. Practice self-discipline and use your time effectively to avoid the downfall of your business setup in the UAE.

6. Credit problems

It is not easy to avail of credit facilities for a start-up for up to 6 months in Dubai, UAE. Once you cross the initial stages, keep your bank manager informed of your financial position. 

If you know that a cash flow problem is likely shortly, talk to him/her. It is better to do this early, thus demonstrating that you have control of your business. 

They will then be able to arrange further overdraft facilities.

7. Wrong location

Accessibility, parking space, visibility, and footfalls are vital for retailers, restaurants, and the like if the customer has to visit to make a purchase. Location is everything; ensure thorough research and planning before deciding on a location.

8. Controlling business from another location

Many companies or business owners want to set up a business in Dubai but want to operate it out of their headquarters in another country. This approach does not always work. 

Business in Dubai or Abu Dhabi is about building trusting relationships with potential customers, industry peers, stakeholders, and legal authorities. It is important to be seen frequently to give the members connected to your company a sense of your commitment.

9. Staff problems

This is a major stumbling block in large and small businesses alike.  Employees can be inefficient and disruptive and can cause other problems. 

A sound awareness of the tools and techniques involved in hiring and managing the right staff is necessary.

10. Vision and attitude

Expatriates start a majority of business setups in Dubai. And they sometimes do not have long-term plans to stay in the country. 

This makes their outlook short-term, and they come with preconceived notions about the market, which makes it rigid.

Thus, you have got a clear idea regarding the major loopholes. If you possess any of them, it is advisable to rectify them immediately before your company formation in Dubai. 

Contact us today for a piece of friendly advice.

 

FAQs

How does the lack of working capital leads to the failure of a start-up in UAE?

Most company owners undervalue the operating costs and overestimate the competition scale because it becomes critical to stay rational about the costs, and it takes time for any company to prosper.

Why is it important to choose an appropriate location for a UAE start-up?

This is because parking space, accessibility, footfalls, and visibility are essential to a restaurant, stores, and other similar places where people come to make a purchase.

Why the strategy of controlling your start-up from another location is not practical in the Emirates?

It is because you must build trustworthy relationships with business peers, potential clients, law enforcement, and stakeholders. So, you should be at the location to work with your business-associated members with dedication.

How can you be benefitted by choosing the right business license in the UAE?

You can run your business successfully, as obtaining a license gives you full authority without government intervention.

Why is the awareness of bank account charges required to avoid UAE start-up failures?

This is because every corporate bank in the country places charges on each account, and company owners must conduct a proper inquiry to avoid business failures.

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