Feature/OPED
Founders Effect and Enterprise Failure: Anticipating and Avoiding the Pitfalls
By Timi Olubiyi, PhD
Small businesses are important for many reasons be it nano, micro, small, or medium-sized enterprises; on one hand, as an important contributor to any economy, and as the lifeblood of many developing and underdeveloped economies.
Small businesses can equally provide many essential opportunities that cannot be overlooked because as they scale, they impact innovation, job creation, economic diversification, poverty reduction, wealth creation, and income redistribution within the country.
Hence, the core attribute that makes small businesses achieve all these and more is the agility that the founders/owner-managers provide. This makes this form of business nearly inseparable from the founders.
This inseparability makes the decision-making process and flexibility within the businesses much faster than that of large corporations. More so, coupled with the agile management that exists in small businesses, adaptation to current realities and changing economic circumstances is much easier in small businesses.
Research finds have also shown that the agility that exists in small businesses is the direct involvement of the founders, and the business owners. They can provide quick decisions and also react to changes in the environment easily.
There is no doubt that the COVID-19 pandemic has added to small business challenges around the world. A lot has happened with the novel coronavirus (COVID-19) pandemic, it has fuelled a lot of economic, livelihood, and business disruptions with more grave consequences on developing countries like Nigeria.
Without a doubt, the pandemic has brought about the untimely loss of loved ones, colleagues, associates, neighbours, friends, and prominent Nigerians. While many died as a result of COVID-19 complications, some died due to accidents, age-long sicknesses and others died as a result of economic pressures.
The painful truth is that most of them held key roles in the entertainment industry, sports, politics, and in particular many held key roles in businesses around before they succumbed to death drawing from context observation.
As it stands and relying on worldometer and the World Health Organization (WHO) figures, as of January 2022, coronavirus deaths, since the pandemic began, stand at 5,575,367 and 3,116 in Nigeria.
The figure seems underreported for Nigeria because the common knowledge is that most deaths go underreported and most times not captured and unrecorded with the necessary authorities. Families do not see reasons to formalize closures by visiting the hospital for proper attestation, getting death certificates, and 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.
Agreeably, the rate at which obituaries come up in the newspapers these days has been very alarming and disturbing, many are unaware that most of these late individuals are business owners and key decision-makers in these businesses.
Therefore, what happens to the business when a founder dies or is incapacitated? This usually creates a leadership vacuum in the businesses, survival and continuity is highly threatened which may lead to liquidation of the business.
In fact, research finds corroborate that many businesses could suffer long-lasting and significant negative impacts if the founders/ owner-managers die untimely. Though no reliable data to substantiate this claim in Nigeria, it is evident that a large portion of the population lives on income from small businesses which account for 96 per cent of businesses and 84 per cent of jobs in the country.
Coupled with the current demography of Nigeria, the prevalence of deaths of founding entrepreneurs or owner-managers may negatively impact many of the businesses and worsen the unemployment situation in the country. Though small businesses have different forms of incorporation, from a partnership to sole proprietorship, or Private Limited Company (Ltd) and Private Unlimited Company, the reality is that founders /owner-managers rarely put such business structures in place.
So, upon the owner’s death, 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 November 2021 collapse of a high-rise block of luxury flats under construction in Ikoyi Lagos State. At least 42 people died including the property developer, who also is the MD/CEO and owner-manager of the building.
Since the unfortunate incident and the demise of the founder/MD/CEO of the company, no detailed communiqué or press release has been issued in respect of the building collapse by the company -an incorporated limited company.
What we have in the public space is the investigations and evaluation of the state of things by the Lagos State Government. Contrarywise, the project’s website has been shut down by the company, therefore, it is easy to tell that as capital intensive the project is, the company behind it lacks an adequate business structure.
Most times, this is usually the trend with small businesses in the country, the businesses disappear or experience significant operational decline following the death of the founder or key owner-manager, regardless of the form of business incorporation.
Chief Moshood Abiola and Chief Henry Fajemirokun’s stories and a host of others are well known. They had investments in critical sectors of the economy with business interests from aviation, agriculture, sports, bakery, real estate, publishing, and communications but after their death, the businesses fizzle out gradually.
It starts with business struggles, the overall performance of workers and staff dwindles and the family of the founder who most times have no knowledge of the business steps in, which further compounds the misfortune of the businesses. Contrary to what the majority thinks is right, a business owner’s spouse is never a co-owner of the business just by virtue of marriage unless it is expressly stated in the incorporation documents.
With the changing economic circumstances of businesses, a non-economic factor such as the deaths of founders, decision-makers, and key entrepreneurs may further impact negatively on the small businesses that are already burdened with challenges.
The going concerns of many of these businesses may just be threatened because of the negative impact of the pandemic and any loss of owner-managers. Consequently, with the silently ravaging pandemic and untimely deaths, family businesses and small businesses may just need to adopt strategies to stem the tides.
On the part of businesses, attention should be paid to the effective implementation of businesses structure, good governance, business risk analysis, succession planning, mentorship, and transitions because these are the most prevalent factors leading to leadership vacuums. Stakeholder management is equally important customers, employees, vendors, and investors contributions, feedback, and initiatives should be honoured and appreciated for different situations at all times.
To reduce the vulnerability of small business closure with the demise of the founders, government, policymakers, and SMEDAN need to intensify their efforts to disseminate information on business continuity, capacity development, technology usage, and other needs for SMEs to continue to make the desired positive impact in the country. So, a lot of support and development of interventions from the government is required for small businesses to go beyond mere survival.
On a final note, government interventions can transform small businesses, into vast employers of labour, tax generators, which will contribute to government revenue, and ultimately the growth of the economy, but again right structures have to be in place. Good luck!
How may you obtain advice or further information on the article?
Dr Timi Olubiyi, an Entrepreneurship & Business Management expert with a PhD in Business Administration from Babcock University Nigeria, is a prolific investment coach, seasoned scholar, Chartered Member of the Chartered Institute for Securities & Investment (CISI), and Securities & Exchange Commission (SEC) registered capital market operator. He can be reached on the Twitter handle @drtimiolubiyi and via email: [email protected], for any questions, reactions, and comments.
By Luke Kyohere
The global payments landscape is undergoing a rapid transformation. New technologies coupled with the rising demand for seamless, secure, and efficient transactions has spurred on an exciting new era of innovation and growth. With 2025 fast approaching, here are important trends that will shape the future of payments:
1. The rise of real-time payments
Until recently, real-time payments have been used in Africa for cross-border mobile money payments, but less so for traditional payments. We are seeing companies like Mastercard investing in this area, as well as central banks in Africa putting focus on this.
2. Cashless payments will increase
In 2025, we will see the continued acceleration of cashless payments across Africa. B2B payments in particular will also increase. Digital payments began between individuals but are now becoming commonplace for larger corporate transactions.
3. Digital currency will hit mainstream
In the cryptocurrency space, we will see an increase in the use of stablecoins like United States Digital Currency (USDC) and Tether (USDT) which are linked to US dollars. These will come to replace traditional cryptocurrencies as their price point is more stable. This year, many countries will begin preparing for Central Bank Digital Currencies (CBDCs), government-backed digital currencies which use blockchain.
The increased uptake of digital currencies reflects the maturity of distributed ledger technology and improved API availability.
4. Increased government oversight
As adoption of digital currencies will increase, governments will also put more focus into monitoring these flows. In particular, this will centre on companies and banks rather than individuals. The goal of this will be to control and occasionally curb runaway foreign exchange (FX) rates.
5. Business leaders buy into AI technology
In 2025, we will see many business leaders buying into AI through respected providers relying on well-researched platforms and huge data sets. Most companies don’t have the budget to invest in their own research and development in AI, so many are now opting to ‘buy’ into the technology rather than ‘build’ it themselves. Moreover, many businesses are concerned about the risks associated with data ownership and accuracy so buying software is another way to avoid this risk.
6. Continued AI Adoption in Payments
In payments, the proliferation of AI will continue to improve user experience and increase security. To detect fraud, AI is used to track patterns and payment flows in real-time. If unusual activity is detected, the technology can be used to flag or even block payments which may be fraudulent.
When it comes to user experience, we will also see AI being used to improve the interface design of payment platforms. The technology will also increasingly be used for translation for international payment platforms.
7. Rise of Super Apps
To get more from their platforms, mobile network operators are building comprehensive service platforms, integrating multiple payment experiences into a single app. This reflects the shift of many users moving from text-based services to mobile apps. Rather than offering a single service, super apps are packing many other services into a single app. For example, apps which may have previously been used primarily for lending, now have options for saving and paying bills.
8. Business strategy shift
Recent major technological changes will force business leaders to focus on much shorter prediction and reaction cycles. Because the rate of change has been unprecedented in the past year, this will force decision-makers to adapt quickly, be decisive and nimble.
As the payments space evolves, businesses, banks, and governments must continually embrace innovation, collaboration, and prioritise customer needs. These efforts build a more inclusive, secure, and efficient payment system that supports local to global economic growth – enabling true financial inclusion across borders.
Luke Kyohere is the Group Chief Product and Innovation Officer at Onafriq
In a heartfelt statement released today, the Conference of Nigeria Political Parties (CNPP) has extended its warmest congratulations to Ghana’s President-Elect, emphasizing the importance of learning from Ghana’s recent electoral success as Nigeria gears up for its 2027 general elections.
In a statement signed by its Deputy National Publicity Secretary, Comrade James Ezema, the CNPP highlighted the need for Nigeria to reclaim its status as a leader in democratic governance in Africa.
“The recent victory of Ghana’s President-Elect is a testament to the maturity and resilience of Ghana’s democracy,” the CNPP stated. “As we celebrate this achievement, we must reflect on the lessons that Nigeria can learn from our West African neighbour.”
The CNPP’s message underscored the significance of free, fair, and credible elections, a standard that Ghana has set and one that Nigeria has previously achieved under former President Goodluck Jonathan in 2015. “It is high time for Nigeria to reclaim its position as a beacon of democracy in Africa,” the CNPP asserted, calling for a renewed commitment to the electoral process.
Central to CNPP’s message is the insistence that “the will of the people must be supreme in Nigeria’s electoral processes.” The umbrella body of all registered political parties and political associations in Nigeria CNPP emphasized the necessity of an electoral system that genuinely reflects the wishes of the Nigerian populace. “We must strive to create an environment where elections are free from manipulation, violence, and intimidation,” the CNPP urged, calling on the Independent National Electoral Commission (INEC) to take decisive action to ensure the integrity of the electoral process.
The CNPP also expressed concern over premature declarations regarding the 2027 elections, stating, “It is disheartening to note that some individuals are already announcing that there is no vacancy in Aso Rock in 2027. This kind of statement not only undermines the democratic principles that our nation holds dear but also distracts from the pressing need for the current administration to earn the trust of the electorate.”
The CNPP viewed the upcoming elections as a pivotal moment for Nigeria. “The 2027 general elections present a unique opportunity for Nigeria to reclaim its position as a leader in democratic governance in Africa,” it remarked. The body called on all stakeholders — including the executive, legislature, judiciary, the Independent National Electoral Commission (INEC), and civil society organisations — to collaborate in ensuring that elections are transparent, credible, and reflective of the will of the Nigerian people.
As the most populous African country prepares for the 2027 elections, the CNPP urged all Nigerians to remain vigilant and committed to democratic principles. “We must work together to ensure that our elections are free from violence, intimidation, and manipulation,” the statement stated, reaffirming the CNPP’s commitment to promoting a peaceful and credible electoral process.
In conclusion, the CNPP congratulated the President-Elect of Ghana and the Ghanaian people on their remarkable achievements.
“We look forward to learning from their experience and working together to strengthen democracy in our region,” the CNPP concluded.
By Kenechukwu Aguolu
The proposed tax reform, involving four tax bills introduced by the Federal Government, has received significant criticism. Notably, it was rejected by the Governors’ Forum but was still forwarded to the National Assembly. Unlike the various bold economic decisions made by this government, concessions will likely need to be made on these tax reforms, which involve legislative amendments and therefore cannot be imposed by the executive. This article highlights the purposes of taxation, the qualities of a good tax system, and some of the implications of the proposed tax reforms.
One of the major purposes of taxation is to generate revenue for the government to finance its activities. A good tax system should raise sufficient revenue for the government to fund its operations, and support economic and infrastructural development. For any country to achieve meaningful progress, its tax-to-GDP ratio should be at least 15%. Currently, Nigeria’s tax-to-GDP ratio is less than 11%. The proposed tax reforms aim to increase this ratio to 18% within the next three years.
A good tax system should also promote income redistribution and equality by implementing progressive tax policies. In line with this, the proposed tax reforms favour low-income earners. For example, individuals earning less than one million naira annually are exempted from personal income tax. Additionally, essential goods and services such as food, accommodation, and transportation, which constitute a significant portion of household consumption for low- and middle-income groups, are to be exempted from VAT.
In addition to equality, a good tax system should ensure equity and fairness, a key area of contention surrounding the proposed reforms. If implemented, the amendments to the Value Added Tax could lead to a significant reduction in the federal allocation for some states; impairing their ability to finance government operations and development projects. The VAT amendments should be holistically revisited to promote fairness and national unity.
The establishment of a single agency to collect government taxes, the Nigeria Revenue Service, could reduce loopholes that have previously resulted in revenue losses, provided proper controls are put in place. It is logically easier to monitor revenue collection by one agency than by multiple agencies. However, this is not a magical solution. With automation, revenue collection can be seamless whether it is managed by one agency or several, as long as monitoring and accountability measures are implemented effectively.
The proposed tax reforms by the Federal Government are well-intentioned. However, all concerns raised by Nigerians should be looked into, and concessions should be made where necessary. Policies are more effective when they are adapted to suit the unique characteristics of a nation, rather than adopted wholesale. A good tax system should aim to raise sufficient revenue, ensure equitable income distribution, and promote equality, equity, and fairness.
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