10 Worst Businesses to Start in Kenya [2024]

Starting a business can be an exciting experience. The problem is, not all business ideas guarantee success. Each business idea comes with its own set of hurdles, influenced by market dynamics, cultural preferences, regulatory landscapes, and technological advancements.

To help you pick the right venture, we are going to look at the worst businesses you can start in Kenya. This will help you in your research to understand which ideas to avoid or be careful with when starting.

That said, I should clarify that the worst businesses to start are not necessarily unprofitable. The problem can be anything from shifts in consumer behavior to regulatory hurdles and changing market preferences. Understanding these challenges will help you make informed decisions when starting a business in Kenya.

Worst Businesses to Start in Kenya

• Movie Shop
• Cyber Cafe
• Liquor Store
• Clothing Boutique
• Matatu Business
• M-Pesa Agent
• Money Lending
• Charcoal Selling
• Retail Shop
• Pet Shop

1. Movie Shop

Movie shops used to be profitable just a few years ago. However, this is now one of the worst businesses to start in Kenya. You see, most people these days prefer to stream their favorite movies on platforms like Netflix or download them from places like Telegram and other pirate sites. This means not many Kenyans are heading out to buy movies from movie shops anymore.

And even if you manage to get some customers through your door, selling movies for just Ksh 20 to 50 a piece doesn’t leave much room for profit. It is even worse if you intend to sell CDs which have been phased out by streaming services and the ease of downloading movies for free.

Mitigation Strategies for Movie Shop

• Add Some Spice: Make your movie shop more than just a place to buy movies. How about adding a gaming corner or organizing movie nights so people can come and enjoy movies together?
• Go Digital: Instead of only selling physical copies, why not explore selling movies online? Think about streaming services or offering exclusive content that customers can access through your shop.
• Stand Out: Try offering rare or special edition movies. Focus on catering to movie enthusiasts looking for something different.

2. Cyber Cafe

Starting a cyber cafe in Kenya, once a thriving business, now faces significant challenges due to changes in technology and user behavior. With the availability of cheaper internet plans and widespread access to the internet via personal devices like smartphones, people can now easily connect from the comfort of their homes and don’t need to go to a cyber cafe.

Additionally, the proliferation of Wi-Fi, Mi-Fi devices, and free public Wi-Fi further diminishes the demand for cyber cafes.

People have also become more internet savvy. This means that they can now do things they would usually do in a cyber on their own. For instance, most people used to go to the cyber to file tax returns, apply for jobs, and access various government services.

While some still do, more people now do these things on their own. As a result, the demand for cyber cafe services has reduced significantly, making this one one of the worst businesses to start in Kenya.

Mitigation Strategies for Cyber Cafe:

• Diversification of Services: Offer specialized services that people still require, like assisting with tax filing, applying for business permits, or providing technical support for specific software.
• Adapt to New Trends: Consider transitioning into a different tech-related business, such as becoming a Wi-Fi hotspot provider or offering computer repair services.
• Focus on Niche Services: Concentrate on services that are not easily accessible or understood by everyone, thereby offering unique value to a particular customer base.

3. Liquor Store

It is the dream of most Kenyans who have a few thousand shillings to start a wines and spirits business. Understandably, this can be a profitable business considering that many Kenyans consume alcohol.

However, a liquor store comes with its fair share of challenges. Firstly, getting all the necessary permits and licenses can be a real hassle.¹ In fact, most people will get frustrated by the tedious process and stop here.

Permits for liquor stores are also very expensive. Plus, the taxes on alcoholic drinks are pretty high, which eats into your profits. You will also notice that the operation hours for a liquor store are very limited and you might only be able to operate for about 5 hours daily.

Another tricky part is finding reliable employees who won’t mess things up or sell alcohol to their buddies on the sly. When you start operation, you will also likely be frustrated by police officers who might ask for bribes especially if you violate some of the liquor store regulations.

Mitigation Strategies for Liquor Store:

• Play by the Rules: Make sure you’ve got all the right licenses before you start your store to avoid frustration from police and county officials
• Location Matters: Choose a spot where lots of people pass by so you can get more customers coming in.
• Smart Hiring: Be careful when hiring staff. Consider offering incentives to encourage honesty and loyalty.

4. Clothing Boutique

If you are lucky, a clothing boutique can be a very profitable business. However, for most people, it can also be very frustrating. While it can be profitable if located in the right spot with a good customer base, there are a few hurdles you will likely face.

For once, the preference for cheaper mitumba means you will have limited demand. Many Kenyans prefer these affordable second-hand clothes over boutique purchases. On top of that, there is a lot of competition, making it tough for new boutiques to stand out.

Mitigation Strategies for Clothing Boutique:

• Be Unique: Differentiate your boutique by offering unique or specialized clothing that customers can’t find in Mitumba markets.
• Location Matters: Choose a strategic location with high foot traffic or where your target customers frequently visit.
• Targeted Customer Base: Focus on a specific customer segment or fashion style to carve out your niche in the market.
• Emphasize Quality: Concentrate on providing high-quality clothing items and customer service to distinguish your boutique.

5. Matatu Business

Although the matatu culture is thriving in Kenya and even gaining international recognition,² starting a matatu business can be mighty frustrating.

One of the major hurdles is the lack of a standardized code of conduct among matatu operators. This makes managing the business tough, especially if you’re aiming for professionalism and quality service.

Additionally, if you don’t have prior experience in the matatu industry, you might face issues with your employees. There’s a risk they might not be honest about maintenance costs or could even siphon off some of your profits.

On top of that, dealing with harassment from traffic police officers, who often demand bribes, can add to the difficulties. But that’s not all. The high fuel costs in Kenya and the need for costly and sometimes fraudulent insurance covers further add to the operational expenses and frustration.

Mitigation Strategies for Matatu Business:

• Knowledge is Key: Learn as much as you can about the matatu industry before jumping in.
• Partner Up: Consider teaming up with someone who understands the ins and outs of the matatu business.
• Reliable Hiring: Hire people you trust and don’t need constant supervision to ensure they manage the business honestly.
• Explore Alternatives: If the challenges seem too much, consider starting a car hire business or a ride-sharing service instead.

6. M-Pesa Agent

Operating as an M-Pesa agent in Kenya, while once lucrative, now faces challenges due to various factors impacting profitability. One of the primary issues is the high level of competition in the market. There are numerous M-Pesa agents, leading to a reduced profit margin for individual agents, especially those operating as sub-agents.

Moreover, as more businesses adopt M-Pesa as a payment method, fewer people withdraw cash, resulting in decreased commissions for agents.

Additionally, the risk of scams, fraud, and sometimes black magic ³ can lead to significant financial losses. There’s also a security concern as robbery incidents targeting M-Pesa agents are on the rise.⁴

Mitigation Strategies for M-Pesa Agent:

• Diversification of Business: Run the M-Pesa agency alongside other complementary businesses to supplement income.
• Strategic Location: Set up shop in areas with good security to minimize the risk of robbery incidents.
• Independent Operation: Instead of being a sub-agent, consider becoming an independent agent to improve profit margins.

7. Money Lending

It’s pretty obvious why money lending is one of the worst businesses to start in Kenya. Whether you are doing it informally or as a registered business, you will likely suffer losses due to the high rate of defaulting among borrowers.

Although there is an increasing demand for short-term loans in Kenya, ⁵ the industry is still largely unregulated. The absence of robust regulations makes it difficult to recover losses from defaulters, thereby posing a significant risk to the lender’s capital.

Furthermore, the presence of stiff competition from mobile loan apps, coupled with high taxes imposed by the government, affects the profitability of independent money lending businesses. Additionally, the process of obtaining licensing from the government can be time-consuming, delaying the establishment of the lending business.

Mitigation Strategies for Money Lending:

• Diversify Income Streams: Explore offering additional financial services beyond just lending money to mitigate risks associated with defaults.
• Compliance with Regulations: Despite the challenges, ensure strict adherence to whatever regulations are in place to protect your business and customers.
• Consider Alternative Ventures: If the regulations and competition are too overwhelming, consider other financial service sectors that might be more feasible or less regulated.

8. Charcoal Selling

Selling charcoal in Kenya comes with plenty of frustrations primarily due to stringent government regulations.⁶ The government is actively discouraging the cutting of trees for charcoal production and encouraging the adoption of cleaner, greener energy alternatives. This makes the charcoal business more challenging as it faces legal restrictions and diminishing demand.

Moreover, consumer preferences are shifting towards alternative cooking solutions such as cooking gas and clean energy options like KOKO, which uses ethanol for cooking. This further reduces the demand for charcoal, impacting the profitability of charcoal-selling businesses.

Overall, the profit margins in this industry tend to be quite low.

Mitigation Strategies for Charcoal Selling:

• Diversify Product Line: Consider diversifying the business by incorporating or focusing on alternative energy products or eco-friendly solutions.
• Compliance with Regulations: Ensure strict compliance with environmental regulations to avoid legal complications and penalties.
• Exploring New Markets: Consider exploring niche markets or regions where there might still be demand for charcoal or related products.

9. Retail Shop

While a retail shop may seem like a straightforward business idea, it is among the worst you can start. One of the significant challenges is the narrow profit margins that is very common with this business. Small retail shops often struggle to generate profits due to competition and overhead costs.

Moreover, operating a retail shop usually demands long working hours, and finding reliable employees can be challenging. Often, small business owners may find themselves managing the shop alone, leading to increased workload and potential burnout.

Additionally, the reliance on credit sales, especially with familiar customers, can affect cash flow and profitability.

Mitigation Strategies for Retail Shop:

• Strategic Product Selection: Focus on high-demand or niche products that offer better profit margins to enhance revenue.
• Efficient Inventory Management: Implement efficient inventory management systems to reduce wastage and improve overall profitability.
• Customer Relationships: Build strong relationships with customers to encourage timely payments and minimize credit-related issues.
• Consider Online Presence: Explore establishing an online platform to reach a wider customer base and supplement in-store sales.

10. Pet Shop

I have interacted with a few people who were pondering over the idea of opening a shop. However, I think this is one of the worst businesses to start in Kenya for obvious reasons.

For one, attitude towards pet care in Kenya is not as positive as in developed countries like the US, where the pet market is very lucrative.⁷ While pets like dogs and cats are common in Kenyan households, the culture around pet care and spending on pet products and services differs significantly from Western countries.

One of the primary challenges is that a large portion of pet owners in Kenya might not prioritize purchasing pet products like food and leashes or investing in pet care services. For instance, many pet owners tend to feed their pets leftovers and may not seek veterinary care regularly, affecting the demand for pet-related products.

Mitigation Strategies for Pet Shop:

• Education and Awareness: Educate pet owners about the benefits of proper pet care and the importance of specific pet products.
• Target Affluent Segments: Focus on marketing to wealthier demographics who are more likely to invest in pet products and services.
• Diversify Product Range: Offer a range of products that cater to different budgets and emphasize affordability without compromising quality.
• Expand Services: Consider offering grooming services or veterinary consultations to add value beyond just selling products.

The Bottom Line

Before you can start a business in Kenya, you’ll need to ensure that it has enough demand and is profitable. While some of the businesses in our list can be profitable, they can also be frustrating to start and run, making them equally worse.

Therefore, before you put your money into any business, be clear on the challenges you are likely to encounter. You can then either find solutions for these challenges or consider alternative businesses.

The business landscape is constantly evolving, shaped by technological advancements, regulatory changes, and shifting consumer behaviors. So, it is important to stay updated and do thorough research before investing in any business.

1. The Standard, Bar owners cry foul as counties deny them liquor licenses
2. CNN, Matatus – Nairobi’s loud, vibrant minibuses – face an uncertain road
3. The Standard, Thugs using black magic to rob mobile money agents in Nairobi
4. The Standard, Police reveal face of thug targeting M-Pesa shops
5. The East African, Demand for loans grows in Kenya despite rate hike
6. The Conversation, Kenya has been trying to regulate the charcoal sector: why it’s not working
7. Yahoo! Finance, USA and Canada Pet Care Products Market is Projected to hit US$ 21,762.7 Million at a CAGR of 5.1% during 2023 to 2033 | Analysis by Future Market Insights, Inc.