Family businesses’ failure to scale holds back SME growth

Nigeria’s small businesses risk missing opportunities for growth if larger family-owned enterprises fail to expand, professionalise their operations and build stronger supply chains that support jobs and entrepreneurship.

This was a key message at the Family Business Summit 2026 hosted by BusinessDay, themed “Beyond the Founder: Scaling Family Businesses Across Generations”, where business leaders and advisers called for stronger governance, succession planning and access to long-term capital to help family businesses survive beyond their founders.

Bolaji Balogun, chief executive officer of Chapel Hill Denham, in his keynote address said family businesses had a responsibility to build institutions that create opportunities beyond their immediate families, given their influence on Nigeria’s wider business ecosystem.

“You hold the key to Nigeria’s collective success,” Balogun said, pointing to an ecosystem of more than 40 million SMEs and MSMEs whose growth depends partly on larger businesses expanding their value chains.

He said scaling businesses could generate jobs and opportunities for distributors, transporters and other smaller enterprises, but warned that entrepreneurs who focus only on personal wealth risk limiting their economic contribution.

Balogun said his firm had fewer than 200 employees at its head office but supported 1,932 people directly and another 5,000 indirectly, illustrating how the impact of a growing business can extend beyond its immediate workforce.

He urged family businesses to tap capital markets for long-term funding, arguing that banks alone cannot provide all the financing required for substantial business expansion. Issuing bonds or selling minority stakes, he said, could help businesses raise capital while retaining control, provided they were prepared to meet investors’ expectations for disclosure and accountability.

“The cash flow of the business belongs to strengthening the business,” he said, warning founders against treating company resources as personal wealth. He said separating family finances from corporate funds would allow businesses to reinvest earnings, strengthen operations and preserve value for future generations.

Balogun also stressed that succession planning must involve preparing the next generation to run the business rather than automatically placing family members in senior positions. He said successors should gain practical experience within the business and develop competence and character before assuming leadership responsibilities.

The financing and succession challenges facing family businesses were further explored during a panel session titled “Family Office Playbook”.

Zipo Lai, head of family office at Invest Hong Kong, said family offices could serve as strategic financial partners to operating businesses, providing funding, investing alongside external investors and helping attract additional capital.

She cited more than 3,000 single-family offices in Hong Kong as of June 2026, illustrating the role such structures can play in organising family wealth and supporting investment. She said family offices could also act as anchor investors, lending credibility to businesses seeking external funding.

However, establishing a family office requires more than creating a structure to manage financial assets. Families must determine whether their priority is preserving wealth across generations, supporting existing businesses or diversifying into new investments.

Jeremy Cheng, principal at Lansberg Gersick Advisors (LGA), said family businesses needed clear decision-making structures as they moved from founder-led management to collective ownership and professional leadership.

He explained that the transition from a founder making decisions independently to siblings or other family members sharing authority could create tensions if responsibilities were not clearly defined.

Cheng said governance arrangements should distinguish between decisions for family councils, company boards and shareholders. Without that separation, meetings could become overwhelmed by unrelated issues, from investment decisions and tax obligations to personal disputes.

He added that formal documents alone would not guarantee effective governance. Families also needed to establish processes that helped members understand their responsibilities and resolve disagreements before these affected business operations.

Other panellists emphasised the importance of understanding family relationships, asset ownership, tax exposure and legal arrangements before establishing governance structures, particularly where businesses and investments span multiple countries. They also stressed the need to involve younger family members early in succession planning so they could understand the business and their future responsibilities.

For Balogun, the stakes extend beyond individual families. Large businesses support networks of smaller enterprises, making their ability to expand important to employment and wider economic activity.

He urged Nigerian business owners to recognise their wider economic responsibilities by creating jobs, expanding opportunities for young people and women, and building businesses capable of supporting growth across their value chains.

He said the challenge was to build businesses that could preserve and compound wealth across generations while contributing to Nigeria’s economic future.