Top 10 Reasons Small Halal Businesses Fail

The global Halal industry is on the rise. It has been consistently growing for the powers. Now and then we hear success stories of newbie entrepreneurs in various sectors of the global Islamic economy.  However, many Halal businesses also fail. And, they fail miserably. For us to become successful entrepreneurs in the Halal industry and beyond we need to be aware of the reasons behind the reasons these failures occur.

One of the least understood aspects of entrepreneurship is why small businesses fail, and there’s a simple reason for the confusion: Most of the evidence comes from the entrepreneurs themselves.

I have had a close-up view of numerous business failures — including a few start-ups of my own. And from my observation, the reasons for failure cited by the owners are frequently off-point, which kind of makes sense when you think about it. If the owners knew what they were doing wrong, they might have been able to fix the problem. Often, it’s simply a matter of denial or of not knowing what you don’t know.

In many cases, the customers — or, I should say, ex-customers — have a better understanding than the owners of what wasn’t working. The usual suspects that the owners tend to blame are the bank, the government, or the idiot partner. Rarely does the owner’s finger point at the owner himself or herself. Of course, there are cases where something out of the owner’s control has gone wrong, but I have found those instances to be in the minority. What follows, based on my own experiences and observations, are the top 10 reasons small Halal businesses fail. The list is not pretty, it is not simple, and it does not contain any of those usual suspects (although they might come in at Nos. 11, 12, and 13).

Top 10 Reasons Small Halal Businesses Fail

1. Lack of Proper Business Planning

A common reason small halal businesses fail is the absence of a solid business plan. Without a roadmap, businesses struggle to set clear goals, understand market dynamics, or allocate resources effectively.

A halal bakery in the UK opened without researching local competitors or consumer preferences. Despite having high-quality products, it failed to attract customers because its pricing and product lineup didn’t align with market demand. A business plan could have highlighted these gaps early on.

Create a detailed business plan outlining your objectives, target audience, competition analysis, marketing strategy, and financial projections. Use tools like SWOT analysis to identify strengths, weaknesses, opportunities, and threats.

2. Insufficient Market Research

Many entrepreneurs underestimate the importance of understanding their market. This includes knowing the demand for halal products in the area, customer preferences, and competitor strategies.

A halal cosmetic brand launched in a region with a small Muslim population. The limited market demand led to poor sales, forcing the business to shut down within a year.

Conduct thorough market research using surveys, focus groups, and industry reports. Tools like Google Trends and Statista can provide insights into regional demands for halal products.

3. Poor Financial Management

Mismanagement of finances is a major reason for business failure. Many small businesses struggle with maintaining cash flow, budgeting, and managing debt.

A halal restaurant in New York City took a large loan to renovate its space but failed to generate enough revenue to cover operational costs and loan repayments. Within two years, the restaurant had to close.

• Track expenses and income meticulously using tools like QuickBooks or Wave.
• Keep a reserve for emergencies.
• Seek advice from financial advisors who understand halal business dynamics.

4. Inadequate Marketing Efforts

Halal businesses often fail because they don’t market their products effectively. Traditional word-of-mouth marketing is not enough in today’s digital age.

A halal clothing store in Malaysia relied solely on in-store sales and did not invest in online marketing. Competitors with strong social media strategies captured a significant market share.

• Develop a digital marketing strategy, including social media, email campaigns, and search engine optimization (SEO).
• Partner with influencers in the halal niche to reach a broader audience.
• Leverage platforms like Instagram and TikTok for visually appealing content.

5. Overlooking Certification and Compliance

Halal certification is essential for credibility. Many businesses fail to obtain proper certification, leading to customer mistrust.

A halal snack company in Indonesia faced backlash after a rumor spread that its products were not certified. Sales dropped drastically, and the business struggled to recover.

• Obtain halal certification from a recognized authority in your region.
• Display certification prominently on products and marketing materials to build trust.

6. Limited Understanding of Halal Standards

Halal businesses must adhere to specific guidelines, but some fail to fully understand these requirements, leading to operational challenges.

A halal meat supplier in Canada lost customers after it was revealed that its sourcing process did not fully comply with halal standards.

Stay informed about halal standards and ensure every aspect of your supply chain adheres to them. Engage with scholars or halal certification bodies to ensure compliance.

7. Poor Customer Service

In the competitive halal market, poor customer service can make or break a business. Customers expect high-quality products and excellent service.

A halal travel agency received multiple complaints about unresponsive customer service, leading to negative online reviews and a decline in bookings.

• Train your staff to provide exceptional service.
• Use tools like live chat or chatbots for faster customer support.
• Actively engage with customers on social media to address their concerns.

8. Ignoring Digital Transformation

With the rise of e-commerce, many halal businesses fail because they don’t embrace digital transformation.

A halal grocery store in Dubai resisted creating an online store. During the COVID-19 pandemic, it lost customers to competitors offering home delivery services.

• Set up an e-commerce platform to sell products online.
• Offer digital payment options and delivery services.
• Use online advertising to reach tech-savvy consumers.

9. Underestimating Competition

Many small halal businesses assume they’ll succeed simply by offering halal products, but competition within the halal sector is growing rapidly.

A halal catering service in London underestimated the presence of established competitors. Without a unique selling proposition, it failed to differentiate itself.

• Identify your unique value proposition (UVP).
• Analyze competitors to find gaps in the market you can fill.
• Regularly innovate your product offerings to stay ahead.

10. Lack of Community Engagement

Halal businesses thrive on community trust and support. Businesses that fail to engage with their local or online communities often struggle to build loyalty.

A halal fashion brand in South Africa rarely participated in community events or collaborated with local influencers. As a result, it failed to build a loyal customer base.

• Participate in community events like halal expos or charity drives.
• Collaborate with local mosques or organizations to promote your brand.
• Use social media to foster meaningful connections with your audience.

The halal market is growing, but success requires more than offering halal-certified products. By addressing these common pitfalls and learning from real-world examples, small halal businesses can build a strong foundation for growth. Focus on strategic planning, robust financial management, and community engagement to turn your halal business into a success story.

Remember, the key to thriving in the halal industry is staying adaptable, understanding your market, and consistently delivering value to your customers.

Let us know which challenges resonate with you and how your halal business plans to overcome them!