ENT312 - Venture Creation and Growth

Module 5: Small Business Management / Family Business

Module Description

Module 5 addresses the distinct realities of managing small businesses and family-owned
enterprises, which constitute the overwhelming majority of Nigerian businesses. Students
learn the core leadership and management principles essential for small venture success,
including practical bookkeeping for financial control. The module then focuses specifically
on family businesses – their unique nature, growth models, succession planning, and the
typical challenges they face (e.g., nepotism, conflict, unclear boundaries between family
and business). Finally, practical remedies are discussed to professionalize family firms
without losing their strengths. By the end, students can distinguish between professional
management and family management, design basic record-keeping systems, and plan for
orderly succession in a family business context.

Module Objectives

Upon completion of this module, students will be able to:

 Explain the key leadership and management functions in a small business,

distinguishing them from large corporate management.
 Maintain basic bookkeeping records (cash book, ledger, simple financial
statements) for a micro or small enterprise.
 Describe the nature of family businesses and analyse the stages of the Family
Business Growth Model.
 Outline the stages of succession planning for a small or family business,
identifying critical transition points.

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  Identify common issues and challenges facing Nigerian family businesses and
propose practical remedies.

Learning Outcomes

By the end of Module 5, students will be able to:

 LO1: Differentiate between leadership and management in a small business

context, providing examples of each function.
 LO2: Prepare a simple cash book and calculate profit/loss for a given one-month
transaction record.
 LO3: Draw and explain the Family Business Growth Model (e.g., from
founder-dominated to professionally managed), identifying key transitions.
 LO4: Develop a basic succession plan template covering key stages (identification,
development, transition, post-transition).
 LO5: Analyse a short case scenario of a Nigerian family business, identifying three
core challenges and recommending corresponding remedies.

Topic 2: Leadership & Management

For a small business or family business, the roles of leadership and management are
often performed by the same person (the founder or owner-manager). However, they are
conceptually distinct and both essential.

Leadership is about setting direction, inspiring people, and creating a vision. Key
leadership activities in a small business:

 Articulating a clear mission and values (e.g., “We will provide the freshest
produce to our community at fair prices”).
 Motivating employees and family members to commit to the business’s
success.
 Making strategic decisions about which opportunities to pursue and which to
decline.

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  Building a culture of trust, accountability, and customer focus.
 Adapting to change and leading through crises (e.g., economic downturns,
supply chain disruptions).

Management is about planning, organising, coordinating, and controlling resources to

achieve the vision efficiently. Key management activities:

 Planning: Setting daily, weekly, and monthly goals; budgeting; scheduling.

 Organizing: Designing roles, delegating tasks, establishing reporting lines.
 Staffing: Recruiting, training, and evaluating employees (including family
members).
 Controlling: Monitoring performance, comparing to plans, taking corrective
action.
 Problem-solving: Resolving operational issues (e.g., a supplier failed to
deliver).

Differences in a small business context:

Aspect Leadership Management

Focus Vision, direction, “why” Execution, efficiency, “how”
Time horizon Long-term Short-term to medium-term
Key question “Where are we going?” “How do we get there?”
Source of Personal influence, charisma, Position, rules, processes
authority ownership
Risk orientation Takes calculated risks Minimises risks, ensures
stability

In small businesses, the founder often must lead the business through growth phases
and manage daily operations simultaneously. Failure to balance both leads to common
problems: too much leadership without management leads to chaos (great ideas but no
follow-through); too much management without leadership leads to stagnation
(efficiently doing the wrong things).

Practical leadership and management principles for Nigerian small businesses:

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  Lead by example: The owner’s work ethic, honesty, and customer service set
the standard.
 Communicate clearly: Regular briefings (even informal) keep everyone
aligned, especially when family and non-family staff work together.
 Delegate effectively: Many owner-managers struggle to let go. Delegation
frees time for strategic leadership.
 Use simple management tools: Checklists, daily sales logs, task boards (even
physical whiteboards) improve control.
 Invest in self-development: Attend workshops (e.g., SMEDAN, LSETF, Bank
of Industry training) to improve both leadership and management skills.

Topic 2: Basic Bookkeeping

Bookkeeping is the systematic recording of financial transactions. For a small business,

basic bookkeeping is not optional – it is essential for tax compliance, loan applications,
tracking profitability, and making informed decisions. Many small businesses fail
because owners do not know whether they are making or losing money.

Core concepts in basic bookkeeping:

 Single-entry system: Simplest method. Each transaction is recorded once

(either as income or expense). Suitable for very small businesses with few
transactions.
 Double-entry system: Each transaction affects at least two accounts (e.g., cash
decreases, inventory increases). More accurate but more complex.
Recommended for growing businesses.

Essential records for a small business:

Record Description Example (Nigerian small

business)
Cash book Daily record of all cash coming in (receipts) A provisions store records daily
and going out (payments). Shows cash sales (cash and transfers) and
balance at the end of each day/week. payments to suppliers.

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 Sales Records amounts owed by customers who A wholesale distributor tracking
ledger buy on credit (debtors). which retailers have not paid
for goods collected.
Purchases Records amounts owed to suppliers A bakery tracking flour supplier
ledger (creditors). invoices not yet paid.
Inventory Quantity and value of stock on hand. A phone accessory shop listing
record each item type and count.
Petty cash Small, incidental expenses (e.g., transport, Office runner given ₦5,000 for
book recharge cards, snacks). errands; each expense
recorded.

Simple financial statements from bookkeeping:

 Income statement (Profit & Loss): Revenue – Expenses = Net Profit (or Loss).
Calculated over a period (month, quarter, year).
 Example: Monthly sales = ₦500,000; cost of goods = ₦200,000; rent, salaries,
utilities = ₦150,000; net profit = ₦150,000.
 Balance sheet: Assets (what the business owns) minus Liabilities (what it owes) =
Owner’s Equity. A snapshot at a point in time.
 Example: Cash ₦100,000 + inventory ₦300,000 + equipment ₦200,000 = total
assets ₦600,000. Loan payable ₦150,000 + unpaid supplier ₦50,000 = liabilities
₦200,000. Equity = ₦400,000.

Practical bookkeeping for Nigerian small businesses (low-tech options):

 Paper-based: Notebooks or columnar pads. Simple but prone to errors and loss.
 Spreadsheets: Microsoft Excel or Google Sheets. Free templates available; allows
basic formulas and summaries.
 Mobile apps: Many affordable or free accounting apps work offline (e.g.,
QuickBooks Simple Start, Wave, or local solutions like Moni or Kippa – designed
for Nigerian small businesses).
 Outsourced bookkeeper: For a small fee, a part-time bookkeeper can visit weekly
or monthly. Common in Nigerian markets.

Key bookkeeping habits to instil:

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  Record every transaction daily – never rely on memory.
 Keep receipts and payment proofs (even for small amounts).
 Reconcile cash and bank balance at least monthly.
 Separate business money from personal money (a separate bank account is
essential).
 Know your tax obligations (e.g., withholding tax, VAT, income tax) and keep
records accordingly.

For family businesses, bookkeeping can be emotionally sensitive because family

members may treat business funds as personal. Enforcing discipline – even a simple cash
book – is the first step toward professionalization.

Topic 3: Nature of Family Business and Family Business

Growth Model

A family business is a venture where two or more family members are involved in
ownership and/or management, and the family has significant influence over strategic
decisions. Most Nigerian businesses – from corner shops to large conglomerates (e.g.,
Dangote Group, BUA, Honeywell) – are family-owned and often family-managed.

Nature of family businesses (distinctive characteristics):

Characteristic Explanation
Overlap of systems Family, ownership, and management systems overlap. A family dinner
may involve business discussions; a board meeting may involve
family feuds.
Emotional ties Decisions are influenced by love, loyalty, rivalry, and obligation – not
just economic logic.
Long-term Family owners often think in generations, not quarters. They may
orientation sacrifice short-term profit for legacy.
Informal culture Rules are often unwritten, roles are fluid, and communication may be
indirect (“please your uncle”).
Preference for Hiring family members is common, even if not the most qualified.
family labour

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 Wealth Most of the family’s wealth is tied up in the business, making failure
concentration catastrophic.

The Family Business Growth Model (also known as the Three-Circle Model or
generational stages):

A widely used framework describes how family businesses evolve through three
overlapping circles: Family, Ownership, and Business. Growth problems arise when
these circles are not managed. The stages of growth are often described as:

Stage Description Key Challenges

Stage 1: The founder owns and manages Founder burnout; business is the
Founder-dominated everything. Family members may help founder’s identity; no separation of
but have no formal roles. personal and business funds.
Stage 2: Sibling Next generation (children) join. Sibling rivalry; unclear roles; each
partnership Ownership and management shared sibling may have different vision;
among siblings. non-working siblings demand
dividends.
Stage 3: Cousin Third generation expands ownership Fragmented ownership; free-rider
consortium to many cousins. Some manage, some problems; difficulty making
are passive owners. decisions; need for professional
management.
Stage 4: Family retains control but hires Letting go of control; balancing
Professionalised non-family executives. Formal family values with professional
family business governance (board, family council, standards.
shareholder agreements).

Alternative model – The Family Business Lifecycle (adapted from Gersick et al.,
1997):

 Controlling owner stage – one dominant leader.

 Sibling partnership stage – co-leaders, usually brothers/sisters.
 Cousin collaboration stage – larger family group, often requires formal structures.
 Family investment group – business sold or publicly listed; family remains as
shareholders.

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Understanding these stages helps family business owners anticipate problems before
they occur and plan appropriate governance changes.

Topic 4: Succession Planning in Family Business and Small Business –

Stages

Succession planning is the process of identifying and developing new leaders who can
replace old leaders when they retire, die, or otherwise leave the business. In family
businesses, succession is often the most difficult and emotionally charged issue. Failure
to plan is a leading cause of business failure across generations.

Why succession planning is critical:

 Ensures business continuity.

 Preserves family wealth and employment.
 Avoids leadership vacuum and destructive infighting.
 Allows smooth transfer of customer and supplier relationships.

Stages of succession planning (generic model):

Stage Description Key Actions

1. Identification of Determine who is capable and Assess competencies, interest,
potential successors willing to take over. May be family and commitment. Avoid
(children, nieces, nephews) or assuming the eldest child
non-family (key employee, external automatically succeeds.
buyer).
2. Development and Prepare the successor through Assign projects, rotate
grooming education, mentorship, and through departments,
progressive responsibility. Often encourage external experience
takes years. (e.g., working elsewhere).
3. Formal succession Written plan covering timeline, Draft a succession policy;
planning document roles, ownership transfer (gift, sale, consult lawyers and
inheritance), and contingency.

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 accountants; update wills and
shareholder agreements.

4. Transition (active Current leader gradually steps Define clear dates;

handover) back; successor takes on more communicate to employees,
authority. May involve a period of customers, suppliers; manage
co-leadership. family expectations.
5. Post-transition Retired leader may stay as advisor Establish feedback
monitoring or board member. Successor is mechanisms; celebrate the
evaluated; adjustments made if transition; avoid interference
needed. from predecessor.

Succession stages specific to family businesses (adapted from several models):

 Stage A – Pre-succession planning: Founder acknowledges mortality and

need for a plan. Often the hardest stage due to denial.
 Stage B – Selecting the successor: Criteria should include competence, not
just birth order. Transparent process reduces conflict.
 Stage C – Developing the successor: Includes formal education,
apprenticeship under founder, and external work experience.
 Stage D – Communication of plan: Family members and key non-family
managers are told the plan; concerns addressed.
 Stage E – Legal and financial restructuring: Transfer of shares, updating
company registration, tax planning, estate planning.
 Stage F – Implementation of handover: Actual change in leadership roles.
May be phased (e.g., first as COO, then CEO).
 Stage G – Evaluation and correction: After 12–24 months, assess if
succession is working; make adjustments.

Common succession mistakes:

 Starting too late (e.g., after founder’s sudden death or illness).

 Choosing a successor based on loyalty or family pressure rather than ability.

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  Failing to prepare non-succeeding children (who may feel rejected and cause
conflict).
 No written plan – leaving everything to verbal promises.
 No contingency for an unexpected exit (e.g., successor dies or leaves).

For a small non-family business, succession may mean selling the business, transferring
to a loyal employee, or closing. The same stages apply, but without the emotional family
overlay.

Topic 5: Issues and Challenges of Family Business, and

Remedies

Family businesses face unique problems that can threaten survival. Understanding these
issues is the first step to designing remedies. Below are the most common issues,
followed by practical remedies.

Common Issues and Challenges

Issue Description Nigerian Example

Nepotism Hiring or promoting family A restaurant owner puts a lazy son
members regardless of as manager; skilled cook leaves to
competence. Non-family start a competing business.
employees become demotivated.
Lack of professional Decisions made by emotion or The founder refuses to delegate,
management tradition, not data. No formal keeps all financial records in head,
budgets, performance reviews, or and makes impulsive purchases.
strategic plans.
Succession conflict Multiple children or relatives fight After father’s death, three children
over who will lead. Founder does each claim they were promised the
not make a clear choice. business; court cases drag on for
years.

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Boundary blurring Business funds used for personal Owner withdraws company cash
expenses (school fees, weddings). to build a house; business cannot
Personal liabilities mixed with pay suppliers.
business debts.
Resistance to Founder or older generation Elderly founder refuses to use
change clings to outdated methods. digital record-keeping or
Younger generation’s new ideas e-commerce, while competitors
are rejected. move online.
Free-rider problem Some family shareholders work A cousin who never comes to the
hard; others do nothing but office expects same annual payout
demand equal dividends. as the managing sibling.
Emotional Fear, guilt, or loyalty drives Owner continues paying a brother
decision-making choices (e.g., keeping a failing who no longer works because “he
business open, giving discounts is family.”
to relatives).
No exit plan for Talented non-family employees A brilliant sales manager leaves
non-family see no path to leadership and because the CEO’s underqualified
managers leave. son is made director of sales.

Remedies and Professionalization Strategies

Remedy Explanation Application in Nigeria

Family Employment Written rules for hiring, evaluating, Example: “Any family member
Policy and firing family members. must have a relevant degree
Minimum qualifications, job and work outside the business
descriptions, performance reviews. for 2 years before joining.”
Separation of business Maintain separate bank accounts, Open a dedicated business
and personal finances pay salaries (including family account; director’s salary is
members) via formal payroll, no fixed monthly; all family loans
arbitrary withdrawals. to business are documented.
Family Council / Family Regular structured meetings to Monthly family breakfast
Meeting discuss business issues, resolve meeting to share updates;
conflicts, and align on values – quarterly family retreat to
separate from board meetings. discuss long-term vision.

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 Board of Directors with Bring in non-family professionals Add a retired banker, a lawyer,
independent members to provide objective advice, and a respected business
challenge decisions, and mentor leader as independent
successors. directors.
Succession plan Documented plan agreed by all Consult a family business
(written) key family members, updated advisor to draft a succession
regularly, communicated charter signed by all adult
transparently. family members.
Shareholder Legal document governing Specifies that shares cannot be
agreement ownership transfer, dividend sold to outsiders without
policy, dispute resolution, and sale family approval; sets valuation
of shares. method.
Performance Family and non-family employees Annual appraisals using
management for all evaluated by same criteria. scorecards; bonuses tied to
Merit-based promotions and business performance, not
compensation. family status.
Professionalization of Hire non-family executives for key Appoint a professional general
management roles (CFO, COO). Create clear manager who reports to the
reporting lines and decision family board, not to the
authority. founder’s whims.
Mediation and family A family constitution (olive Engage a business coach or
constitution document) stating values, conflict lawyer to mediate when
resolution mechanisms, and roles. conflicts arise; include a
Use external mediators for “cooling-off” clause.
disputes.
Exit strategy for Provide alternative assets, Create a family trust that owns
non-succeeding education funds, or separate the business; non-active
children business opportunities to family members receive dividends or
members not joining the business. separate investments.

Critical success factor: Professionalizing a family business does not mean removing
family influence. It means adding structures (policies, boards, agreements) that preserve
family unity while enabling business growth. Many successful Nigerian family businesses
(e.g., Dangote Group) have transformed from founder-dominated to professionally

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managed while retaining family control through a holding company structure and family
council.

Assessment for Module 5 (Indicative)

Assessment Task Weight Ties to
LO
Short essay: Leadership vs Management in a small business 15% LO1
(individual)
Basic bookkeeping exercise – prepare cash book and profit 20% LO2
calculation from given transactions (individual)
Diagram and explanation of Family Business Growth Model 15% LO3
(individual)
Succession plan template for a hypothetical Nigerian family 20% LO4
business (team)
Case study analysis: Identify challenges and propose remedies 20% LO5
(individual)
Module examination (short answer on all topics) 10% LO1–
LO5

Suggested Readings for Module 5

 Gersick, K. E., Davis, J. A., McCollom Hampton, M., & Lansberg, I. (1997). Generation to
Generation: Life Cycles of the Family Business. Harvard Business School Press.
 Ward, J. L. (2016). Perpetuating the Family Business: 50 Lessons Learned from
Long-Lasting, Successful Families in Business. Palgrave Macmillan.
 Tagiuri, R., & Davis, J. (1996). “Bivalent Attributes of the Family Firm.” Family Business
Review, 9(2), 199–208.
 SMEDAN (various years). Small and Medium Enterprises Development Agency of Nigeria
– Training Manuals on Bookkeeping and Management.
 Nigerian case studies: “The Story of Dangote Group” (various business publications);
“Succession Challenges in Nigerian Family Businesses” – PwC Nigeria Family Business
Survey reports.

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 Practical bookkeeping resources: Kippa app user guide, QuickBooks for Small Business
tutorials.

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