European Journal of Business and Management www.iiste.org ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online) Vol.5, No.6, 2013 52 Developing Entrepreneurial Ventures In Ghana Through Succession Planning Josephine Ganu, PhD 1* Peter Agyekum Boateng 2 1. School of Postgraduate Studies, Adventist University of Africa, Private Bag Mbagatti 00503 Nairobi, Kenya 2. School of Business, Valley View University, P.O. Box AF 595 Adentan, Ghana *E-mail of the corresponding author: ganuj@aua.ac.ke Abstract This paper reports the results from a survey of 147 small business owners in the Adentan Municipality in Accra, Ghana. Descriptive statistics were used to analyze the respondents’ general characteristics as well as their attitude toward business succession planning. Consistent with extant literature, the study revealed that though small business owners would want their businesses to outlive them and possibly transfer the business to the next generation; majority of these enterprises have not deliberately planned for their succession. It was also revealed that these small business owners do not have a clear understanding of the concept of succession planning and its benefits. This outcome has serious implications for entrepreneurship development in Ghana in relation to small businesses’ economic and job creation potential. Keywords: entrepreneurship, succession planning, small business, Ghana 1. Introduction Small enterprises are often the backbone of the private sector in the developing world, creating jobs and providing a tax base for local government. The promotion of the private sector has become an integral part of Ghana's economic development strategy since its Structural Adjustment Program (SAP) in 1983(Barwa, 1995). Thus, the private sector is considered one of the necessary factors for sustaining and expanding businesses, stimulating economic growth, and reducing poverty. In addition, family and privately owned businesses represent an important section of the Ghanaian economy. Statistics show that Small and Medium Enterprises (SMEs) represent over 90% of private business and contribute to more than 50% of employment and of GDP in most African countries (UNIDO, 1999). Small enterprises in Ghana are said to be a characteristic feature of the production landscape and have been noted to provide about 85% of manufacturing employment of Ghana (Steel and Webster, 1991; Aryeetey, 2001). SMEs are also believed to contribute about 70% to Ghana’s GDP and account for about 92% of businesses in Ghana (Abor & Quartey, 2010). Despite the proven economic and social benefits of the private sector in the developing world, the problem of succession, replacing exiting owner-entrepreneurs, ultimately confronts many small businesses in Ghana. Succession presents a serious and unique problem for small businesses for a number of reasons. Unlike large formal organizations in which ownership and control are separate and ownership is either dispersed or institutionalized, small businesses are characterized by the fusion of these attributes in one individual, the owner-entrepreneur, who embodies the organizational structure of the enterprise. Many Small and Medium-Sized Enterprise (SME) owners have founded and built their businesses without giving much thought to what will happen when it is time to retire or when they are incapacitated. Contrary to popular opinions, indigenous businesses in Ghana are not being destroyed by high operational costs, competition, unproductive labor or insidious regulation. Rather they fail in the long run because they allow themselves to be destroyed slower by the inaction of their owner/managers. Research shows that many small firms go out of existence after ten years and only three out of ten into a second generation (Zimmerer, Scarborough and Wilson, 2007). More significant, only 12 - 16% of all family enterprises make it to a third generation and just 3% make it to the fourth generation and beyond (Kuratko and Hodgetts, 1998; Zimmerer, Scarborough and Wilson, 2007). A study demonstrated these facts by examining the life expectancy of 200 successful manufacturing firms, which revealed that the average life expectancy for a family business is 24 years, which is also the average tenure for the founders of a business (Kets de Vries, 1993; Beckkhard & Dyer, 1983). One of the major causes of SMEs’ lack of continuity includes failure to prepare for the next generation through succession planning. The implication is that such businesses and future employment are at risk because they have not adequately prepared for the day when they will no longer be there. Thus, though entrepreneurs inevitably want their businesses to survive them, many seldom support their intentions by a plan to accomplish that goal. More so, the neglect of succession in small business analysis can be attributed to an implicit colossal assumption about the