Small businesses are important for many reasons, whether they are nano, micro, small or medium enterprises. On the one hand, as an important contributor to any economy and as the engine of many developing and underdeveloped economies. Small businesses can also provide many critical opportunities that cannot be overlooked because, as they scale, they have an impact on innovation, job creation, economic diversification, poverty reduction, wealth creation and income redistribution in the country. Therefore, the primary attribute that enables small businesses to achieve all of this and more is the agility provided by founders/owner-managers. This makes this form of business almost inseparable from the founders.
This inseparability makes the decision-making process and flexibility within companies much faster than those of large companies. Additionally, coupled with the agile management that exists in small businesses, adapting to current realities and changing economic circumstances is much easier in small businesses. Research has also shown that the agility that exists in small businesses is the direct involvement of founders and business owners. They can provide quick decisions and easily react to changes in the environment. There is no doubt that the COVID-19 pandemic has added to the challenges for small businesses around the world. A lot has happened with the novel coronavirus (COVID-19) pandemic, it has fueled many economic, livelihood and business disruptions with more severe consequences on developing countries like Nigeria.
Undoubtedly, the pandemic has resulted in the untimely loss of loved ones, colleagues, associates, neighbors, friends and prominent Nigerians. While many have died from complications related to COVID-19, some have died from accidents, age-old illnesses, and others have died from economic pressures. The painful truth is that most of them held key positions in the entertainment industry, sports, politics, and especially many held key corporate positions before they died, relying on observing the context.
As it stands and based on worldometer and World Health Organization (WHO) figures, as of January 2022, coronavirus deaths since the start of the pandemic stand at 5,575,367 and 3,116 in Nigeria. The figure seems under-reported for Nigeria as it is common knowledge that most deaths go unreported and mostly uncaptured and not registered with the necessary authorities. Families see no reason to formalize the closures by going to the hospital for proper certification, obtaining death certificates and registering deaths.
As a reminder, since small businesses and founders/owner-managers are inseparable, then it is easy to conclude that we might just lose businesses under the huge consequences of COVID-19 related situations. Pleasingly, the rate at which obituaries are appearing in the newspapers these days is so alarming and disturbing that many are unaware that most of these deceased people are business owners and key decision makers in those companies. So what happens to the company when a founder dies or becomes incapacitated? This generally creates a leadership vacuum in companies, the survival and continuity of which are highly threatened, which can lead to the liquidation of the company.
In fact, research confirms that many businesses could suffer lasting and significant negative impacts if founders/owner-managers die prematurely. Although there is no reliable data to back up this claim. In Nigeria, it is evident that a large portion of the population lives off the income of small businesses which account for 96% of businesses and 84% of jobs in the country. Coupled with Nigeria’s current demographics, the prevalence of deaths of founding entrepreneurs or owner-managers can negatively impact many businesses and worsen the unemployment situation in the country. Although small businesses have different forms of incorporation, from partnership to sole proprietorship, limited liability company (Ltd) and private unlimited company, the reality is that founders/owner-managers rarely set up such business structures.
Thus, upon the death of the owner who has a clear vision and goals for the business, a leadership and decision-making vacuum is created almost immediately. A clear recent reference was the collapse in November 2021 of a high-rise building of luxury apartments under construction in Ikoyi Lagos State. At least 42 people have died, including the property developer, who is also the general manager and owner-manager of the building. Since the unfortunate incident and the disappearance of the founder/MD/CEO of the company, no detailed statement or press release has been issued regarding the collapse of the building by the company – a limited liability company. What we have in the public space are the investigations and assessment of the state of affairs by the Lagos State Government. On the contrary, the project’s website was shut down by the company, so it’s easy to say that, given the capital-intensive nature of the project, the company supporting it lacks a proper business structure.
Most of the time, this is usually the trend for small businesses in the country, businesses either disappear or experience significant operational decline after the death of the founder or key owner-manager, regardless of the form of incorporation of the business. The stories of Chief Moshood Abiola and Chief Henry Fajemirokun and many others are well known. They had investments in critical sectors of the economy with business interests in aviation, agriculture, sports, baking, real estate, publishing and communications, but after their deaths the companies are gradually extinguished. It starts with business difficulties, the overall performance of workers and staff declines, and the family of the founder who most of the time has no knowledge of the business steps, which further aggravates the unhappiness of the businesses. Contrary to what most believe to be fair, a business owner’s spouse is never a co-owner of the business by mere fact of marriage, unless expressly stated in the incorporating documents.
As business economics change, a non-economic factor such as the death of founders, decision makers, and key entrepreneurs can have an additional negative impact on small businesses that are already burdened with challenges. The growing concerns of many of these companies may simply be in jeopardy due to the negative impact of the pandemic and any loss of owner-managers. Therefore, with the pandemic quietly ravaging and untimely deaths, family businesses and small businesses may simply need to adopt strategies to stem the tides.
On the part of companies, special attention should be paid to the effective implementation of the corporate structure, good governance, business risk analysis, succession planning, mentoring and transitions, as these are the most prevalent factors leading to leadership voids. Stakeholder management is equally important: contributions, feedback and initiatives from customers, employees, suppliers and investors should be honored and appreciated for different situations at all times.
To reduce the vulnerability of small businesses closing with the disappearance of the founders, the government, policymakers and SMEDAN should intensify their efforts to disseminate information on business continuity, capacity development, use of technology and other needs for SMEs to continue to make the desired choice. positive impact in the country. So, a lot of support and development of government interventions are needed for small businesses to go beyond mere survival.
Finally, government interventions can turn small businesses into vast, tax-generating employers of labour, which will contribute to government revenue and ultimately to the growth of the economy, but again, the right structures need to be in place. Good luck!
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Dr. Timi Olubiyi, expert in entrepreneurship and business management with a Ph.D. in Business Administration from Babcock University of Nigeria. A prolific investment coach, seasoned academic, Chartered Fellow of the Chartered Institute for Securities & Investment (CISI) and registered capital market operator with the Securities & Exchange Commission (SEC). He can be reached on the Twitter account @drtimiolubiyi and via email: [email protected]