Starting a business in Kenya can be a lucrative venture if done right. However, not all businesses are created equal.
Some are fraught with high risks, low returns, or simply outdated models that no longer make sense in the current economic landscape.
This article explores the worst businesses to start in Kenya and the #1 reason why they are likely to fail.
Explore the most profitable businesses to start with 100K
Worst Businesses to Start in Kenya
1. Movie Shop
A movie shop may have been a thriving business in Kenya a decade ago, but the landscape has drastically changed.
With the advent of streaming services like Netflix, Showmax, and YouTube, the demand for physical DVDs has plummeted. Consumers now prefer the convenience of on-demand streaming over the hassle of buying or renting movies from a shop.
Moreover, piracy has further eaten into the profitability of movie shops. Many people opt for pirated copies of movies, which are easily accessible online, making it difficult for legitimate movie shop owners to compete.
The high cost of licensing and the ever-decreasing customer base make running a movie shop a risky and often unprofitable venture.
2. Liquor Store
Starting a liquor store in Kenya may seem like a profitable idea due to the high demand for alcohol. However, this business comes with significant risks that make it one of the worst to start.
The first major challenge is the strict regulation and licensing requirements imposed by the government. Obtaining and maintaining a liquor license is not only costly but also time-consuming, with regular inspections that can lead to heavy fines or even closure if regulations are not strictly followed.
Additionally, the alcohol market in Kenya is highly competitive, with well-established brands and chains dominating the space. Small independent liquor stores often struggle to compete on price and variety, leading to low profit margins.
Moreover, the increasing awareness of health risks associated with alcohol consumption and the push for more stringent laws on alcohol sales have led to declining sales in some areas, making the business even riskier.
Alternative: Businesses to start with Ksh.5,000
3. Tendering to the Government
Government tenders are often seen as a lucrative opportunity in Kenya, but the reality is far from rosy.
The tendering process is highly competitive and often marred by corruption, favoritism, and bureaucratic red tape. Securing a government contract requires not only a well-connected network but also the ability to navigate the complex and often opaque bidding process.
Moreover, even when a tender is successfully awarded, payment delays are common. Many businesses that rely on government contracts face cash flow problems due to late payments, sometimes waiting months or even years to be paid. This can lead to financial instability, making tendering to the government a risky and often frustrating business venture.
4. Matatu Business
The matatu business has long been a staple of Kenyan public transport, but it’s increasingly becoming a less attractive venture.
The industry is plagued with numerous challenges, including frequent police harassment, high fuel and maintenance costs, and stiff competition from other modes of transport like Boda Bodas and app-based taxi services.
Additionally, the government has been making efforts to regulate and streamline the public transport sector, which includes phasing out older vehicles and introducing new requirements for matatu operators. This has led to increased operational costs, making it difficult for new entrants to thrive.
The high risk of accidents and the constant threat of strikes and protests also make the matatu business a less appealing option for aspiring entrepreneurs.
5. Clothing Boutique
Starting a clothing boutique in Kenya might seem like a fashionable and profitable idea, but the reality can be quite different.
The market is saturated with numerous boutiques, second-hand clothing vendors (mitumba), and online stores, making it highly competitive. The high cost of importing trendy clothes, coupled with the fluctuating exchange rates, can significantly eat into profit margins.
Moreover, consumer preferences in Kenya are shifting towards cheaper, more accessible options like online shopping or buying from second-hand markets. This makes it difficult for boutique owners to attract and retain customers, especially when operating costs such as rent and utilities are high.
The frequent changes in fashion trends also mean that inventory can quickly become outdated, leading to losses.
6. Cyber Cafe
The demand for cyber cafes has drastically declined in Kenya due to the widespread availability of smartphones and affordable mobile data plans.
Most people now access the internet through their phones, eliminating the need to visit a cyber cafe. Additionally, the costs of setting up and maintaining a cyber cafe, including high rent, electricity, and equipment costs, can be prohibitive.
Cyber cafes also face stiff competition from businesses like restaurants and libraries that offer free Wi-Fi to attract customers. The low profit margins and the declining customer base make running a cyber cafe one of the least viable business options in Kenya today.
7. M-Pesa Agent
While M-Pesa has revolutionized financial transactions in Kenya, becoming an M-Pesa agent is not as lucrative as it once was.
The market is saturated, with agents found on almost every corner in major towns and rural areas. This saturation has led to fierce competition, driving down the commissions that agents can earn.
Additionally, the cost of setting up an M-Pesa shop, including the need for capital to handle daily transactions, can be quite high. There is also the risk of fraud and theft, which can result in significant financial losses.
As Safaricom continues to innovate and introduce new digital services, the need for physical M-Pesa agents may decline further, making this business a risky investment.
Find the most profitable businesses to start with 50K
8. Money Lending
Money lending might seem like an easy way to make money, but in Kenya, it’s fraught with risks. The high default rate among borrowers, coupled with the challenges of recovering debts, makes this business a potential financial nightmare.
Many lenders find themselves in a position where they cannot recover their money, leading to significant losses.
Moreover, the government has been cracking down on predatory lending practices, introducing strict regulations on interest rates and lending terms. This has reduced the profitability of the money lending business while increasing operational risks.
The negative perception of money lenders, often seen as exploitative, also makes it difficult to attract and retain customers.
9. Charcoal Selling
Charcoal selling is a traditional business that has been a source of livelihood for many Kenyans, especially in rural areas. However, it’s becoming increasingly unsustainable due to environmental concerns and government regulations.
The ban on logging and the push towards sustainable energy sources have made charcoal less accessible and more expensive to source.
Additionally, the charcoal business is associated with illegal activities, including deforestation, which has led to increased scrutiny and crackdowns by the government. The risks of fines, imprisonment, and the loss of business make charcoal selling a highly risky venture with diminishing returns.
10. Retail Shop
Opening a retail shop in Kenya might seem like a straightforward business, but it’s one of the most challenging ventures due to the high level of competition.
Supermarkets, online shopping platforms, and wholesale stores offer a wide range of products at competitive prices, making it difficult for small retail shops to attract customers.
The high operational costs, including rent, utilities, and stock management, further eat into profit margins. Additionally, the rise of e-commerce has made it easier for consumers to shop online, reducing foot traffic to physical stores. The low-profit margins and high competition make running a retail shop a risky business in today’s market.
Explore 100+ profitable products to sell online
11. Luxury Car Rental
The luxury car rental business may appear glamorous, but in Kenya, it’s a high-risk venture with limited profitability.
The target market for luxury car rentals is small, mainly consisting of high-net-worth individuals and corporate clients. This limited customer base means that the demand for luxury cars is low, leading to long periods where vehicles remain idle.
Moreover, the cost of purchasing and maintaining luxury cars is extremely high. Depreciation, insurance, and repair costs can quickly eat into profits, making it difficult to sustain the business. The risk of theft and damage to the vehicles further adds to the financial burden, making luxury car rental one of the worst businesses to start in Kenya.
12. Forex Trading
Forex trading is often marketed as a way to make quick money, but in reality, it’s one of the riskiest ventures you can undertake in Kenya.
The forex market is highly volatile, and even experienced traders can suffer significant losses. The high risk of losing your investment, coupled with the complex nature of forex trading, makes it unsuitable for most people.
Moreover, many forex trading platforms are unregulated, leading to cases of fraud and scams. The lack of proper regulation and the high potential for loss make forex trading a risky and often unprofitable business in Kenya.
Unless you have significant experience and capital to risk, it’s best to avoid this business altogether.
13. Betting Firm
Betting is a popular activity in Kenya, but starting a betting firm is not as lucrative as it may seem.
The industry is heavily regulated, with high taxes and strict licensing requirements. The government has been cracking down on betting firms, imposing heavy taxes and fines on operators, making it difficult to run a profitable business.
Additionally, the public perception of betting firms has shifted, with many people viewing them as exploitative. This has led to a decline in customer numbers and a decrease in revenue for betting firms. The high operational costs, coupled with the declining popularity of betting, make this business a risky and often unprofitable venture.
14. Traditional Taxi Business (Offline Taxi)
The traditional taxi business has been largely disrupted by the advent of ride-hailing apps like Uber, Little Cab, Wasili, Farasi, and Bolt.
These apps have made it easier for customers to find and book taxis, offering competitive prices and better service compared to traditional taxis. As a result, the demand for traditional taxi services has declined significantly.
Moreover, the cost of operating a traditional taxi, including fuel, maintenance, and insurance, can be quite high. The competition from ride-hailing apps has driven down prices, making it difficult for traditional taxi operators to compete.
Additionally, many customers prefer the convenience and safety features offered by ride-hailing platforms, such as cashless payments and real-time tracking. The declining demand and increased competition make the traditional taxi business one of the worst to start in Kenya today.
15. Traditional Photo Studio
In the age of smartphones and digital photography, the demand for traditional photo studios has significantly decreased.
Most people now have access to high-quality cameras on their phones, allowing them to take and print photos at their convenience. This has rendered traditional photo studios obsolete, with fewer customers needing their services.
Moreover, the cost of running a photo studio, including rent, equipment maintenance, and utilities, can be high. With declining customer numbers and low-profit margins, many traditional photo studios struggle to stay afloat. The rise of digital photography and the availability of affordable printing options make this business a risky and outdated venture.
Explore the most convenient businesses for campus students
16. Shylock Business
The shylock business, which involves lending money at high-interest rates, is fraught with legal and ethical risks.
In Kenya, shylocks are often seen as predatory lenders who exploit borrowers in desperate financial situations. This negative perception makes it difficult to attract and retain customers, as people are increasingly aware of the dangers associated with high-interest loans.
Moreover, the government has been cracking down on unregulated money lenders, introducing strict laws to protect consumers from exploitation. The high risk of defaults, coupled with the possibility of legal action, makes the shylock business one of the worst to start in Kenya.
The potential for financial loss and reputational damage far outweighs any profits that might be made.
17. Travel Agency
The travel agency business has been severely impacted by the rise of online booking platforms and the COVID-19 pandemic.
Many travelers now prefer to book their flights, hotels, and tours directly online, bypassing traditional travel agencies. This shift has led to a decline in demand for travel agency services, making it difficult for traditional agencies to stay competitive.
Additionally, the travel industry is highly sensitive to external factors such as political instability, economic downturns, and pandemics, which can lead to sudden drops in business.
The high operational costs, including rent, staff salaries, and marketing, further strain profitability. In a market where consumers increasingly favor digital solutions, starting a traditional travel agency is a risky and outdated venture.
Alternatives: Low-Risk Businesses to Start in Kenya
1. E-commerce
Starting an e-commerce business in Kenya is a low-risk and potentially profitable venture, given the growing trend of online shopping.
With a well-structured website, effective marketing strategies, and a reliable delivery system, you can sell a wide range of products online, from electronics to fashion. The initial capital required is relatively low, and you can start small, scaling up as your business grows.
2. Agribusiness
Agribusiness is a low-risk venture with high potential returns in Kenya, especially given the country’s reliance on agriculture.
You can start with a small farm, focusing on high-demand crops such as fruits, vegetables, or herbs, or venture into poultry farming or fish farming. With proper planning and market research, agribusiness can provide a steady income with lower risks compared to many other industries.
3. Mobile Car Wash
A mobile car wash business is a low-cost, flexible option that eliminates the need for expensive premises.
You can offer your services at clients’ homes or offices, reducing overhead costs and catering to the growing demand for convenience. The business requires minimal startup capital, mainly for equipment and detergents, making it a relatively low-risk venture.
4. Digital Marketing Agency
With businesses increasingly shifting to online platforms, there’s a growing demand for digital marketing services in Kenya.
Starting a digital marketing agency requires minimal investment, particularly if you already have skills in SEO, social media management, or content creation. The low operational costs and high demand make this a viable and low-risk business option.
5. Content Creation and Monetization
If you have a passion for writing, video production, or photography, content creation can be a low-risk and profitable business.
Platforms like YouTube, TikTok, and blogging offer opportunities to create and monetize content. With consistency, creativity, and an understanding of your target audience, you can build a loyal following and generate income through ad revenue, sponsorships, and affiliate marketing.
Conclusion
While some businesses may seem lucrative, they are faced with challenges that make them difficult to sustain.
The businesses highlighted in this article come with high risks, low profitability, or both, making them some of the worst to start in Kenya.
However, numerous low-risk alternatives offer better chances of success, provided you conduct thorough market research and stay adaptable in the ever-changing business landscape.