Family-owned businesses are an integral part of the global economy, contributing to 70% of the global GDP. They have been instrumental in facilitating global economic recovery, constituting more than 30% of companies with sales over $1 billion. These businesses, passed down from one generation to another, have created jobs, contributed to local communities, and stimulated economic growth.
However, despite the significant contribution of family businesses to the global economy, the future of family-owned businesses is still uncertain due to various factors such as succession planning, globalisation, and technological advancements.
According to a 2021 global family business survey by PwC, 41% of family businesses in Nigeria expect a decline in sales growth. In fact, the survey shows that 60% of family-owned businesses do not have strong digital capabilities, while more than half reported that they have no governance structures and policies.
Succession planning, one of the main challenges facing family-owned businesses, involves preparing for the transfer of ownership and management of a business from one generation to the next. In Nigeria, only one out of every four family businesses has a robust, documented, and communicated succession plan in place. This deficiency in planning can lead to disputes, family conflicts, and ultimately the failure of the business.
To ensure the longevity of a family-owned business, it is crucial to have a well-defined succession plan. This plan will help identify potential successors, outline their roles and responsibilities, and establish a clear timeline for the transition of ownership and management. A successful succession plan also involves developing the necessary skills, knowledge, and competency of the successor and providing them with the necessary resources to manage the business effectively.
The rise of globalisation has also impacted family-owned businesses. Globalisation has led to increased competition, changing consumer behaviour, and the need to adapt to different cultures and regulations. To stay competitive, it is critical for family-owned businesses to embrace globalisation and expand their operations beyond local markets. Although expanding into new markets can be challenging, family-owned businesses can form strategic partnerships, hire local talent, and invest in research and development to create products and services that meet the needs of the local market. Family businesses in Nigeria are now placing high priority on expanding their businesses to diversify their revenue sources and mitigate risks, and the African Continental Free Trade Area (AfCFTA) presents opportunities for businesses to capitalise on. It is imperative for Nigerian family businesses to revamp their business processes by exploring innovative ways to leverage their domestic human capital and offer global services.
The rapid pace of technological advancements is another challenge facing family-owned businesses. The adoption of new technologies can help family-owned businesses increase efficiency, reduce costs, and improve their products and services. Many family-owned businesses are slow to adopt new technologies due to the lack of resources or the fear of disrupting traditional business practices. To remain competitive in the market, family-owned businesses should embrace technological advancements and invest in digital transformation. This includes adopting new technologies such as artificial intelligence, machine learning, and the Internet of Things (IoT), among others.
In family-owned businesses, just like in any business, trustworthiness is often gauged by factors such as environmental, social, and governance (ESG) practices, as well as diversity, equity, and inclusion (DEI) efforts, which are important not just to internal stakeholders but also to potential investors and partners. An example of a family-owned enterprise that has shown great commitment towards building a robust governance framework and promoting diversity, equity, and inclusion is Honeywell Group. This is evident in their executive leadership team, which comprises 60% women and 40% men. Through their unwavering dedication to social responsibility, sustainability, and investments in local communities, the Group has made a significant impact over the past 50 years.
In conclusion, despite the challenges that lie ahead, Nigerian family-owned businesses have the potential to adapt and thrive in the future. By leveraging new technologies, exploring new markets, and staying true to their values, these businesses can maintain their competitive edge and make significant contributions to the local and global economies.