Indices That Lead to Startup Failures in UAE

by Zaara 29, Jun 2021

Indices That Lead to Startup Failures in UAE

Everyone wants to start a company in UAE, whether it's a long-term or short-term business goal, whether it's small or medium-sized enterprises. So if you're planning to set up a UAE company, you'll need to be sure of all and be more confident of everything that doesn't work.

Many people believe the only reason why their company fails is running out of money and capital. However, this is not true, and several important factors could be responsible for the company's failure.

Therefore this article includes primary ten reasons you can identify the indices that lead to startup failures in UAE -

Lack of Expertise and Awareness

In addition to delivering the product or service, company owners may also need to know how to handle their budgets, accounts, legalities, marketing, etc. To create trust and respect among people and stakeholders in a foreign country, they need to be aware of the local market culture and business etiquette.

Selling an Unwanted Product and Service

One of the primary reasons most companies fail is that the consumer unneeded the product or service offered by an entrepreneur or a giant corporation. Most company owners fail to perform thorough interviews to find out what they need.

Lack of Working Capital

Staying rational about the costs is critical. Many company owners overestimate the scale of the competition and undervalue the operating costs. It takes a long time for any company to pick up and prosper, so when seeking funding, you should strive to be as reliable as possible.

Unplanned Expansion

The company will take off quickly; it can cause problems, too. If you are delivering a service, you may have to wait too long for customers and find alternative suppliers. If a product is being manufactured and in demand, more raw materials will need to be acquired. More loans may need to be obtained from suppliers, as time passes between delivering the product and receiving payment.

Slack Management

Being defensive will lead you to ruin your goal. Practice self-discipline and use your resources wisely to stop your company from falling apart.

Credit Problems

The availability of credit facilities for a startup in UAE for up to 6 months is not easy. Once you have completed the initial stages, keep your bank manager aware of your financial status. When you know that there is a chance of a cash flow crisis shortly, talk to him/her. It is safer to do this early, thus showing you have control over your company. They will then be able to arrange further overdraft facilities.

Wrong Location

Accessibility, parking space, visibility, and footfalls are important to stores, restaurants, and the like when consumers visit to make a purchase. The place is everything; ensure extensive research and preparation are done before settling on a location.

Controlling Business From Another Location

Some businesses or company owners would like to incorporate a business in the UAE but prefer to run it from their headquarters in another country. The strategy is not always practical. Company in UAE is about establishing trustworthy relationships with potential clients, business peers, stakeholders, and law enforcement. It 's crucial to be seen often to offer a sense of your dedication to the members associated with your business.

Employee issues

It is a huge stumbling block for both large and small companies. Employees can be inefficient, destructive, and other issues can arise. There needs to be a solid overview of the resources and strategies used in recruiting and handling the right staff.

Vision and perceptions

Expatriates launch many of UAE's new companies. And they often have no plans to remain in the country in the long term. It makes their mindset in nature short-term, and they come up with predetermined market notions that make it rigid.

5 Reasons by Which You Can Prevent Your Startups From Getting a Failure

Researching and Awareness

UAE is often seen as the city of opportunities for people from various parts of the world. UAE is also a tax-free Emirate, and it encourages people to set up a company. Essential business people worldwide are keenly involved in setting up a business and rising in the UAE economy. However, the primary point is that many business people fail to understand the local market and the need for a business like that. Besides the needs of the nation's community, demography, and working style and the role, their company will play on the UAE market.

It is easier to frame a proper business strategy for this reason and document all the approved activities to get an office space. It is recommended that the company owners should be provided an office space before receiving a license.

Choosing the Right License

If you plan on setting up a UAE company, you must have visited the UAE 's official government website. It involves the method of integrating a company into the UAE. It also provides the seven business categories you can create in UAE. One of the necessary conditions for starting a company in the UAE is to get a license from the UAE Department of Economic Development. This license is almost like an authority to run the business without any intervention from the government.

A significant task is to obtain a perfect business license appropriate for your company. Many business owners do not have enough details to get a license that doesn't match the company's needs. These cases may result in severe business failures.

Bank Account Charges

A corporate bank account is of great importance to starting a company in the UAE. Like every country in the world, UAE has large banks both in terms of facilities and fees. Business owners must be mindful of the type of bank they want to open an account and the charges that the bank may place on its account. Proper inquiry on such fees should be carried on to avoid any business failure.

Suitable execution of the Sponsorship Agreement

UAE has created two significant jurisdictions where business owners are permitted to open a business. Mainland and Free Zone. If business owners want to move to the Mainland (which is a Beneficial option because it would include the critical market area), it will involve local sponsors with substantial shares in the company. Thus, an explicit agreement between the sponsor and the owner will need to be framed to prevent subsequent clashes. Typically local supporters bill separately for the programs they provide. Business owners, however, should be aware of the requirements which they would include in the agreement. Also, an acceptable written agreement should be enforced.

Businesses Reflexes

A Business never runs contrary to the system you were initially planning. The strategy must be changed according to the changing scenarios. And if you have a 20/20 vision with proper implementation and the best tools for your company, there will be a situation when things will not go as initially planned. A solution to this dilemma can be the development of "What if" scenarios and the organization's reaction and the response as well as the employees. Even, you can do the same for the loan modification. That can also be the best way to test the cash flow activities and revenues of your company.

Starting a business in the UAE would be a challenging job. The business owners must manage all aspects properly and as defined by the UAE regulatory authority. If you plan to start a UAE company, you should also be careful about the legal issues. Therefore it would be easier to select an expert for this mission.

So, you've got a good idea about the significant gaps. When you have any of them, it is best to resolve them immediately. We at Commitbiz provide end-to-end alternatives to all of their business issues for our clients. If you have any questions about the establishment of business in UAE and related services, you can contact us. We 'd be glad to help.


How does the lack of working capital leads to the failure of a startup 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 startup?

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 startup 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 any government intervention.

Why the awareness of bank account charges is required to avoid UAE startup 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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