Why most SME's don't outlive their owners

A conversation turned out to be the basis for this article. The conversation led to a thought as to why some times entrepreneurs fail, struggle or find it difficult to expand their businesses. I decided to pick it from the end point of many businesses this time in respect to SME’s and their owners (Entrepreneurs). After the conversation I tried to have the same conversation with another young entrepreneur and funny, but my judgment was somehow buttressed by his response.

Many entrepreneurs in this part of the globe seem not to awaken their inner passion to that level or maybe it is because our environment missed the whole concept of entrepreneurship somewhere, that entrepreneurs never see it as an ingredient for the growth of business. Before I delve into the article proper, I’d like to share the conversation and hope entrepreneurs begin to put that into consideration while building their businesses.

The conversation;

My Friend: do you have any idea of the procedure or requirements for a company to get enlisted on the stock market?

Me: Hmmm! I've really never thought about it.

Now, because the business acumen of my friend and I are somewhat similar, instantly I knew where he was heading with the question. Which was that Nigerian entrepreneurs many times get to start up SME’s with little or no dream of one day growing their business to a level of getting listed on the stock market.

When I asked my second entrepreneur friend who’s been in business for about years and doing well a similar question, his body language told me he never thought towards that angle either. The assumption that SMEs owing to their size, do not significantly contribute to the economy is shortsightedness. In reality, many SMEs while small in size in terms of current operations have enormous growth potential.

According to the 2012 Enterprise Baseline Survey, SMEs contribute nearly half of Nigeria’s GDP and account for over 25 percent of employment in the country.

However, many Owner Managers are not receptive to embracing new processes, policies and structures which impose perceived restrictions on the way they do business. Thus, many SMEs do not outlive the first generation of owners.

Here are a few reasons why;

The word “SME”; many SME owners in Nigeria have unconsciously restricted their minds towards significant business growth. It seems the word SME has so much played on their perception of business growth such that they are comfortable operating at the small scale level as long as money keeps rolling into their account and they live the fat illusion lifestyle (posh cars, house and travel around the globe with family), thus limiting their business capacity and potential growth.

Absence of Corporate Governance policies: The inability to put in place and ensure proper practice of Corporate Governance policies opens many SME’s to a short life span. These policies ensure corporate success and economic growth, make the SMEs attractive to investors, develop formal structures and processes, plan for succession, assure competitive advantage and increase brand equity.

Money driven rather than service driven: A business is established for one main reason “service”, Robert Kiyosaki’s quote “Change your focus, from money to serving more people. Serving more people makes the money come in”. Unfortunately, the reverse is the case in Nigeria, many times SME's in Nigeria are unable to define and implement clear strategies.

Lack of Succession Planning: company founders do not want to take others along; in other words, they don't want to groom successors. Grooming successors is not about anointing someone to take over from you...it involves teaching and mentoring that person to be able to manage that company like you did, working the person through every unit from the smallest unit to the largest unit in the company.

Mismanagement: this is often caused by lack of accountability and transparency, once a business starts making money, the owners start buying exotic cars and properties instead of investing back into the business.

Entrepreneurship is the back bone of many developed countries, the ability of these businesses to continue to transform and transcend time, policies and politics has been what has set them apart and in return, grown to outlive their founders.

It is important to note that establishing a business or becoming successful in a business isn’t enough to weigh the capacity of the business's future. Many businesses have the potential to outlive first and second generation owners only if business owners begin to see farther and plan better.

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