February 06, (THEWILL) – Small businesses, whether nano, micro, small or medium-sized enterprises, are important for many reasons. They are an important part of any economy and the lifeblood in many developing and underdeveloped countries. Small businesses also have many opportunities that must be embraced. As they grow, they can impact innovation, job growth, economic diversification and poverty alleviation. Hence, the core attribute that makes small businesses achieve all these and more is the agility which the founders/owner-managers provide. This makes the founders almost inseparable.
This inseparability allows for faster decision-making and flexibility within businesses than large corporations. Small businesses are more able to adapt to changing economic conditions and current realities because of their agile management.
Research has also shown that small businesses are more agile when the founders and business owners are involved. They are able to make quick decisions and react quickly to changes in the business environment. The COVID-19 epidemic has caused small business problems around the world, there is no doubt about that. There has been a lot that has happened to the novel coronavirus, COVID-19 pandemic. It has caused many economic, livelihood and business disruptions with worse consequences for developing countries like Nigeria.
The pandemic has caused the tragic deaths of many loved ones, colleagues and associates. Many died from COVID-19-related complications. Others died from accidents, long-term illnesses, and others were victims of economic pressures. They were all key figures in the entertainment and sports industries, politics and, in particular, many were key business leaders before they died.
Based on Worldometer data and World Health Organisation figures, the number of coronavirus cases in Nigeria, since the outbreak, is now 5,575,367. The Nigerian figure seems to be underreported because most deaths go unreported, are not captured and are not recorded with the authorities. Families don’t see any reason to formalize closures by visiting a hospital for proper attestation, obtaining death certificates, or having the deaths captured.
As a reminder, since small businesses and the founders/owner-managers are inseparable, it is easy then to conclude that we may just be losing businesses as part of the huge consequences of the COVID-19 situations. It is clear that the number of obituaries appearing in the newspapers these day has been alarming and disturbing. Many are unaware that many of these late people are business owners and key decision makers in these businesses. What happens to the business if a founder passes away or becomes incapacitated. This can lead to a leadership vacuum, which can result in the businesses being unable to survive and may threaten the continuity of the business.
Research shows that many businesses can suffer significant and long-lasting negative effects if their founders/owner-managers pass away too soon. Although there isn’t any reliable data to support this claim in Nigeria, it is clear that a large proportion of Nigerians rely on income from small businesses. These businesses account for 96% of businesses and 84% of jobs.
The current demography in Nigeria may make it more difficult for many entrepreneurs to succeed and lead to a worsening unemployment situation. Small businesses can be incorporated in many ways. There are a variety of forms, such as a partnership, sole proprietorship, Private Limited Company (Ltd), or Private Unlimited Company. However, founders and owner-managers seldom put such structures in place.
The owners’ death leaves a gap in leadership and decision-making power. Recent examples include the November 2021 explosion at a block of high-rise luxury flats in Ikoyi (Nigeria State), which resulted in the death of 42 people. 42 people were killed, including the property developer who was also the MD/CEO of the building and the owner-manager.
No press release or detailed communiqu has been issued by the company, an incorporated limited company, since the unfortunate incident and the death of the founder/MD/CEO. The Lagos State Government’s investigations and evaluation of the current state of affairs are what we have. Contrariwise, the company has taken down project website. It is clear that, as capital-intensive the project is, the company behind is lacking a proper business structure.
This is usually the case for small businesses in the nation. The founders or key owners-managers die, and the businesses either disappear or experience significant operational decline. It doesn’t matter what form of incorporation. Many stories are familiar about Chief Moshood and Chief Henry Fajemirokuns. They had investments in crucial sectors of the economy, including business interests in aviation, sports, bakery and real estate. But after their death, the businesses dissolved slowly.
It all starts with business problems, the performance of workers and employees dwindles, and then the family of the founder, who most often has no knowledge of the business, steps in to help. This further exacerbates the misfortunes of the businesses. Contrary to popular belief, a spouse of a business owner is not a co-owner of a business by virtue of marriage, unless it is explicitly stated in the incorporation documents.
A non-economic factor, such as the deaths or resignations of key decision-makers and founders, may have a further negative impact on small businesses already facing challenges. Many of these businesses’ futures may be at risk due to the negative effects of the pandemic, as well as any loss of their owner-managers. With the silently ravaging pandemic, untimely deaths, and the resulting chaos, small businesses and family businesses may need to devise strategies to stem the tides.
Businesses should pay attention to the effective implementation and management of business structure, governance, business risk analysis. Succession planning, mentorship, transitions, and succession planning are all important factors that can lead to leadership gaps. Stakeholder management is equally important. Customers, employees, vendors, investors, and their feedback, as well as initiatives, should all be honored and appreciated for their contributions in every situation.
Government, policymakers, SMEDAN, and SMEDAN must intensify their efforts in disseminating information on business continuity and technology usage to SMEs in order to reduce the risk of them closing down due to the death of their founders. Small businesses must be able to thrive beyond survival. This is why the government needs to provide a lot of support.
Last but not least, government intervention can transform small businesses into large employers of labour and tax generators. But again, the right structures need to be in place.
Dr Olubiyi has extensive experience in business management and entrepreneurship.