eBusiness Weekly
Tsitsi Mutendi
Small businesses are the future of Africa. This sounds like a bold statement because when we think of small businesses or our family businesses, we think of “tuck shops” and “misika” and the “bottle stores” that we find across the sparse savannah. And the concept itself sounds like a laughable one built on dreams.
However, closer inspection of this fact proves that it is these small and humble beginnings that have made the huge corporations that we know today.
It is family businesses, that have their foundations built on value systems, and the financial dreams of families (to be independent and build wealth for future generations) that have built nations.
In Africa, the dream of enterprise and entrepreneurship has been dashed, by what has been dubbed by many as “generational curses”, where family businesses seem to run to ground as soon as the founder passes on and the financial freedom of the family gets buried with the founder of the business.
A staggering statistic shows that the majority of the world’s wealth is created by family-owned businesses. At least 85 percent of start-ups worldwide are established with family money (FFI Global Data Points). Estimates suggest that businesses that are majority-owned by a single family’s members contribute to 70-90 percent of the world’s GDP (Tharawat Magazine, Volume 22, p. 36).
New business is fuelled by family involvement. And family business is within the category of micro, small and medium enterprises (MSMEs) globally, whether in Africa, South America, Europe, Asia, and the US.
However, some family businesses are large multinational corporations that operate in many countries such as Ford Motors and McDonald’s, which originates from the US.
The survival rate of most African family businesses beyond the first generation is extremely low. It has been found that globally 33 percent of family businesses have survived past the first generation (the founder) onto subsequent generations. However, in Africa, only 2 percent of family businesses last past the first generation.
You may be wondering how this applies to you and your business. If you are a business owner, then you should be very concerned when you hear of such statistics. It means you may fall under the 98 percent of failed family businesses that are currently on the continent. Your company may be making money at this moment, but if you have not started planning for a succession plan, then it is 98 percent guaranteed that your business will no longer exist once you exit that business, either by incapacitation, illness, retirement or death.
How so? Simply put; as a business owner, your responsibility is to start planning for the life of your business after your departure from that business.
This, further simplified, means that you must see a future in your business where you are not managing it or involved in the day-to-day running of the business.
At some point in the life cycle of your business, you have to be outside the everyday running of the business, allowing it to grow independently.
You have to make yourself useful as either a chairperson who oversees the vision or completely walk away and allow others to take the lead.
To most SME founders, this seems like an impossibility, and indeed, it is if you do not plan this properly and use the right tools to get to this momentous event that will happen.
A business is not its owner, and the two must be separated. The owner is similar to a doting parent who is nurturing their child to become independent. However, we have found that in the African business space, SME business owners have made their business extensions of themselves and their egos. Which, in turn, leaves the business unable to grow.
Some red flags that you should know about that are crippling your business may include:
1. Lack of official operations manual for any of your business functions.
2. No set formula or method to your activities.
3. Your business values, vision, mission are just words on your brochures but do not form part of the culture of your organisation.
4. You have no values, vision, mission.
5. You are the sole signatory to all accounts.
6. Only you know your major suppliers.
7. Only you know and handle your major customers.
8. If you are ill or traveling your business is closed, or certain functions cannot be done.
9. You don’t trust any of your staff.
10. Your staff do not trust you.
11. Your family members who are part of your business are not qualified or trained (You are just helping them out).
12. Your children or spouse are not involved in your business, and you are the only person who is interested in the business.
13. Your company directors are just family members who you put on the paperwork, but they know nothing about your business.
14. You are not quite sure what your company structure means, and the various registration documents came standard with registration.
15. You have a will, and you believe this will protect your family and your business.
16. You do not have any written plans for your business.
17. Your business and personal finances are the same.
18. Your business has no governance structure.
At first glance, you may feel that you have already failed and that your business may never reach the heights reached by the huge corporates that you now see across the world. However, Africa has significant success stories similar to Econet, TM and Pick and Pay, and Dangote. These businesses were started by families, and that started as small operations providing goods and services to their communities.
But as they started envisioning the future of businesses, they also secured the futures of generations in their families.
And with the right planning and direction, your family business could be the next corporate giant. You are the person who will make this happen.
Over the next few weeks, we will unpack the succession of small businesses and the steps that must be taken to secure this future. The first most crucial step you have made is to be in business.
Tsitsi Mutendi is a succession and estate planning expert specialising in SME, MME and Family Business Services. She writes in her personal and professional capacity. Comments and views: [email protected] or [email protected]
