Out of the 77 percent of Nigerian family businesses who plan to pass on management to the next generation, only 10 percent have a robust, documented succession plan, Detail Commercial Solicitors reveals.
To enable Nigerian family businesses to become multigenerational enterprises, industry stakeholders at the ninth Detail Business Series, weekend, recommended: Corporate governance, collaboration between founders and new generation, clarity of framework, diversification, policies, among other factors.
According to Audrey Joe-Ezigbo, co-founder/executive director, Falcon Corporation Limited, institutionalism, the right policies are also the disciplines required to have a successful family business.
“It is important for next-generation to understudy the growth, tenacity, and plans of the founders,” Ezigbo said.
Experts believe that the successful transition of family businesses requires wealth management consulting and the right strategies.
According to a survey by Africa Wealth Partners, family businesses outperform non-family businesses by a factor of more than four, but family businesses, typically, very rarely, make it to the second generation.
“To build resilience in our family businesses, we must diversify by building up a performing investment portfolio that has a low correlation with the existing family business, in terms of asset type, geography, industry and currency,” Nike Anani, a Nextgen coach, assisting NextGens (second-generation family members in family businesses) says.
According to industry sources, family businesses are the bedrock of the economy, and statistics have also proven that they outperform non-family owned businesses.
From generation one to generation two, only 30 percent of the companies make it, while about 10 percent and less than three percent make it from the second to third, and third to fourth respectively.
On why Nigeria is not seeing much multigenerational success Anani said it was a result low level of professionalising the business, lack of integrating and preparing the next generation and the fact that the family human capital is not being developed.
“Effective collaboration between founders, the next generation and non-family staff by utilising an effective corporate governance structure is essential for fool-proofing the future of a family enterprise,” Chukwudi Ofili, Associate Partner, Detail Commercial Solicitors, remarked.
In her comment during the panel discussion at the 6th Detail Business Series, Ezigbo said that respect was important to enable a successful family business.
“Founders should respect the next generation that is coming into the business. Likewise, the next generation should ensure they are respectful when they bring their ideas to the table and should create a budget to deliver end to end.” The cofounder also explained that both generations are bringing value and we must find a midpoint.
The importance of corporate governance structures was also a key outcome of the Business Series. Temidayo Ajaji, senior associate, Detail, stated, “There is no one-size-fits-all approach for family governance as it is dependent on the family dynamics and it varies as newer generations come into the business.”
Speaking to one of the ways enterprises can ensure they are ready to compete, Anani stated that “Diversification is like a weapon you are preparing in anticipation of war. The more diversified you are as a family, the more potent your weapon is. We need to be proactive, diversifying constantly, during the good times and the bad times. To stop diversifying at any time, leaves us vulnerable to attacks.”
According to the maiden edition of the Family Business Survey report by PWC, family businesses in the country are optimistic about future growth.
