‘How family enterprises can create multigenerational growth’
Experts in the country’s business sector have tipped family enterprises as a tool that can create multigenerational growth, saying Nigerians can emancipate more citizens from the scourge of abject poverty by setting up family businesses.
According to them, a recent survey conducted by PwC on family businesses showed that 53 per cent of family businesses in Nigeria witnessed growth in 2018, and 20 per cent experienced double-digit growth.
They said about 87 per cent of the existing family businesses in the country are expected to grow over the next two years, as 33 per cent of them have a formal mid-term strategic plan in place, while 67 per cent have a clear sense of agreed value and purpose as a company.
Speaking at the 9th Detail Business Series, tagged: “The Future of Family Business – Building Resilient Multi-Generational Enterprises,” organised by Detail Commercial Solicitors (DCS), in collaboration with Nike Anani Practice Limited (NAPL), inL agos, Senior Associate, DCS, Temidayo Ajayi, however, noted that only 43 per cent of family businesses have a written company mission.
He said despite the significant growth rates, Nigerian family businesses must build appropriate structures to guarantee multigenerational growth, noting that good corporate governance structure influence the effectiveness of the governance process and boost the enterprises’ performance.
He maintained that most family businesses are faced with the absence of succession plans, use of informal governance strategies, abuse of shareholders’ rights, lack of ownership and management structures, internal controls, transparency, and accountability.
His words: “Family businesses, however, face peculiar sets of challenges, which are not always considered where ownership is dispersed, and management is mainly composed of external and hired specialists. This is because family relationships introduce a peculiar dynamic.
“From an investor perspective, the key is to establish the right corporate governance conditions so that the positive aspects of family ownership are coupled with assurances that the investor interests will be recognised and addressed.”
In her remarks, Chief Executive Officer, NAPL, Nike Anani, said one of the challenges faced by the next generation who join family businesses is building new social circles, and finding their identity in the business.
“A challenge we often face as the next generation in family businesses is feeling like we can’t compare with our parents knowing that they have done so well in building the businesses, but having clarity of purpose is key.
“Children must not take over the family business from their parents though they have a role to play in the wider structure. Their going into the business should be about them being interested in it and then being competent in it,” she said.
Also speaking, Founder and Executive Director, Falcon Corporation limited, Audrey Joe-Ezigbo, said a big part of the nation’s economy is actually hinged on a lot of family-tied businesses, and therefore creates the urgent need to make sure that those businesses scale up, transcend generations, and help in wealth creation.
She said this would help take Nigeria out of the current economic doldrums, noting that the only way to achieve this is to ensure transfer from the founder to a next generation by being able to build an enterprise wealth framework for the family as distinct from that of the business.
Similarly, Interface Manager, DCS, Stella Oladapo, argued that family businesses are actually the engines of economies, noting that 90 per cent of businesses in Nigeria are family-owned.
She maintained that although these businesses generate a large percentage of the gross national product, less than one-third of them survive the transition from first to second generation ownership, while another 50 per cent do not survive the transition from second to the third generation.
“We have examined the landscape and identified that enterprises, especially those seeking outside investments, should ensure that aspects from both the operational and governance perspectives are considered,” she said.
She said the event was aimed at sharing strategies to equip family-owned enterprises with tools to design roadmaps for resilience in Nigeria’s competitive business climate.
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