Why family businesses face extinction – LBS

2026-03-23 - 15:53

By Cynthia Alo The Lagos Business School (LBS) has raised concerns over the high mortality rate of family-owned businesses in Nigeria, warning that weak governance structures and poor succession planning remain major threats to their long-term survival. The warning formed the crux of deliberations at a recent expert session hosted by LBS under its Family Business Initiative, where stakeholders examined how weak governance undermines continuity even in profitable family businesses. According to LBS, family businesses, which dominate Nigeria’s small and medium-scale enterprise landscape and provide employment across sectors, represent a major source of indigenous capital but the long term survival remains fragile and rarely outlive their founders. Experts at the session noted that while many founders focus on profitability and expansion, the real risk confronting family enterprises is leadership transition, not performance. They noted that most family owned Nigerian businesses often collapse not because the business is unviable but because governance systems were never designed to manage succession, accountability and role clarity. Speaking at the session, Director of the Family Business Initiative at LBS, Dr. Okey Nwuke, described governance as the “lifeline” for continuity, stressing that businesses without structured frameworks risk collapse regardless of their financial success. “A family business without a governance framework is a ticking time bomb,” he said, adding that sustainable enterprises are built on clearly defined roles, accountability systems, and structured succession planning. He noted that many Nigerian family businesses operate on informal arrangements driven by emotional ties, which often become liabilities as organisations grow in size and complexity. Also speaking, Chief Executive Officer of Construction Kaiser Limited, Igbuan Okaisabor, said governance should not be viewed as a luxury but a necessity, citing instances where poor structures led to the collapse of once-thriving indigenous companies. “I have seen grandchildren of billionaires become tenants. When the business disintegrates, the family often follows,” he said. Okaisabor said there is a need to separate family relationships from business operations, noting that competence, not kinship, should determine leadership roles within enterprises. The experts highlighted that governance in family businesses extends beyond formal boards to include basic structures such as documented roles, transparent financial systems, and clearly defined expectations for family members involved in the business. They noted that a major source of conflict in many family enterprises is limited financial transparency, particularly around profit distribution, reinvestment strategies, and long-term growth plans. According to the LBS initiative, independent directors and external advisers play a critical role in strengthening governance by introducing objectivity and aligning business strategies with growth ambitions. They maintained that early planning and governance frameworks are most effective when established proactively rather than during crises. “God forbid is not a strategy. Only deliberate governance and proactive succession planning guarantee sustainability,” Nwuke added. As part of efforts to deepen engagement, LBS announced plans to host the Third IFBC 2026 Conference scheduled for March 26, 2026, at the Ecobank Pan-African Centre, where family business owners, successors and advisers across Africa will converge to share strategies for building enduring enterprises. The conference, themed “Beyond Survival: Governance and Culture as the Foundation for Lasting Family Legacies,” is expected to further spotlight the role of structure, transparency and leadership development in sustaining family-owned businesses. Vanguard News