Five Reasons Why Most Nigerian Businesses do Not Survive Beyond a Generation
Companies started by Nigerians in Nigeria have tendency not to survive a generation, especially not outliving their founder(s). One glaring example that springs to mind is the Concord conglomerate founded by Moshood Kashimawo Olawale Abiola in the 80s and 90s.
On one side of the coin, Abiola’s Concord comprised Concord Press, Concord Airlines, Abiola Farms and Wonder Loaf Bakery, among others. Today, nothing but faded memories of the once-internationally acclaimed entrepreneur and philanthropist has survived. This might not be particularly Nigerian problem though.
On the other side of the coin, names such as the International Business Machine (IBM), Coca-Cola, Ford Motors, Nestlé, Pepsi, General Electric, Procter & Gamble and Bacardi ring a bell. Apart from being large, highly successful global businesses, they also have something very interesting in common.
Smallstarter.com contends that all of them have been in existence for more than a century. Yes, started over 100 years ago, the entrepreneurs who started them are long dead, but these businesses have continued to exist, thrive and expand even after the minds that conceived them left this earth.
Some of these businesses, like Ford and Bacardi, have remained within family circles, and passed through successive generations. Other businesses — like Coca-Cola, IBM, and General Electric — have changed hands several times but continue to exist and expand as very successful companies.
Do family-controlled businesses have a better chance of ‘multi-generational survival’ than non-family-controlled businesses? Interestingly, there is some evidence in favour of family-controlled businesses. However, both types of businesses have a good chance of survival if some things are done right.
Across Africa, the situation is quite different. Apart from a handful of small family businesses, and a few others with colonial ties, it is often not the norm to find African businesses or brands that have survived beyond their founders.
For some strange reason, after the founder retires or dies, the business starts on a path of slow or accelerated death. At least five reasons or a combination these reasons could explain this phenomenon.
Poor Succession Planning
Africans in general and Nigerians in particular typically do not like to think or talk about death, grave misfortune or permanent disability. Nobody would wish for any of any of these, but they are some of life’s risks and realities. And we must always consider, and plan for them.
However, while human life is finite and vulnerable to death and misfortune, a business can ‘theoretically’ live forever.
The best time to find a successor with the right level of commitment, vision and zeal to lead a business beyond the lifetime of the founder is not when the founder retires or is on his/her deathbed.
Finding the right successor to take the reins of a business is a conscious, deliberate and calculated process (or decision) that should not be left to chance, or emergency situations. Actually, the earlier the process of succession planning is started in the life of a business, the better.
Death, misfortune, and accidents never give advance warnings. There is an intrinsic risk in every young business that it could cease to exist if the brain behind it suddenly disappears (probably due to death or illness) or is no longer available for some reason to nurture, drive and grow the business.
Actually, planning for succession does not have to be tough and complicated, like most entrepreneurs think. The secret is to make the conscious decision, and start the process early.
Successors could come from anywhere. They could come from within the family (children, siblings etcetera), or they could be business partners who share the risk and ownership of the business with you. Successors could also be your most promising employee(s).
Once you have identified the likely candidate(s), it is important to get them more involved in the business and groom them for leadership. They need to understand the nuts and bolts of the business and share a strong interest and passion in growing it into a bigger and better organisation.
If you identify any skills or knowledge they may be missing, invest in their learning and training. Formal education, short courses, mentorship, coaching and exposure are critical to the nurture and grooming of successors.
Some Nigerian entrepreneurs constantly kickback with the question: “what if these potential successors know too much and become dangerous to the business?”
That is a valid concern, but the risk of the business going extinct due to poor succession planning is far more dangerous than this concern.
There is no crime in starting small. Most businesses start small. Often, the mistake is staying small and ignoring possibilities for growth.
Many African businesses remain small all through the lifetime of the founder. And I think one key reason for this is most founders think small. What stops that small corner shop from becoming a national or international franchise? Why can’t that popular neighborhood product or service that you provide become a global brand?
Did you know that Coca-Cola was initially developed as a patent medicine; an elixir that claimed to cure morphine addiction and headaches? This dark-coloured drink, developed by a local drugstore owner in 1885, has now become a hugely successful international brand – a casual drink that exemplifies fun, friendship and refreshment!
To my mind, small thinking undermines the possibilities and potential of many businesses in Africa. If only we knew how truly big some of our local products and services could truly become, most African founders would test the limits of their vision and challenge themselves more.
By thinking big, the possible lifespan of your business automatically increases. Growth and expansion is an objective that could take several generations to accomplish, and embracing this fact can eliminate shortsightedness and increase your horizon of possibilities.
Lack of structure and business systems
One key trait of successful businesses, especially those that have existed through several generations, is the existence of a clear structure and business systems that help the business to operate effectively.
Structure is essential to every well-run business because it provides order, assigns responsibilities for key activities and improves accountability. Many African businesses cannot function independently of the founder.
For example, when they are out of town for any reason, or unavailable to sign cheques, suppliers and employees may not get paid on time. If he/she does not OK a deal, it is likely to fall through. His/her involvement in the business is often so central and too personal that it gets in the way of everything.
Business systems are also very important. How many medium-sized businesses on the continent actually have policies and procedures that govern everything from recruitment, employee conduct, finance and accounting, among others?
How many businesses actually keep accurate and up-to-date records of their activities, including complete information about operations, finances, transactions, customers, suppliers, employees and everything else?
It is not surprising then that the most critical information and records concerning most businesses are housed in the heads of their founders. They seem to be the only ones who know where everything should be and how the business should run.
With this kind of ‘chaos’, it is almost impossible to carry on a business when the almighty founder is unavailable.
Blind to business trends and changes
Another strong feature of businesses that last beyond a generation is their ability to adapt. In a world of constantly changing markets, consumer trends, socio-political influences and outright disruption, adaptation is a key strength of businesses that will survive today and in the future.
Adapt or die!
Many businesses seem to think that they have found a formula for success that will remain effective for a thousand years. A tale order.
Entrepreneurs are often too focused on running their businesses that they do not take the time to look into the distance to think, strategise or identify current and future threats or risks that could significantly affect their business, or worse still, kick them out of business.
In today’s globalised and interconnected world, one disruptive idea or business in a faraway country can totally change the landscape of your industry or market so fast you may never find the time to think or plan.
Looking into the future, changes and trends in both the local and international market place will be one of the biggest risks that African entrepreneurs and businesses are likely to face. With a growing number of foreign businesses and brands increasing their footprint in Africa, even small family-owned corner shops and neighborhood businesses may not be spared.
To survive in these times of rapid change, entrepreneurs need to be open-minded and must not take everything for granted. Unlike a few decades ago, no business is too big to fail these days. One little unknown startup could have your business for lunch if you’re not prepared to adapt.
Among several others, Über is one example of a foreign disruptive idea/business that is changing the landscape of business across Africa – urban transport, in this case.
My advice: stay in the know about developments in your market and industry, both locally and globally. Seek out innovative ways and technologies to make your business run more efficiently; make your products and services more valuable; keep your employees committed and effective; and improve the satisfaction of your customers.