ASSESSING THE START-UP MANAGEMENT IN FAMILY BUSINESSES: THE CASE OF BUEA LOCALITY

ABSTRACT

The purpose of this study was to assess the start-up, management in family business in Cameroon. The objective of the study is to examine start-up, management in family businesses in Cameroon. To achieve this main objective, which was explaining start-up, management in family businesses in Cameroon, the major source of data for this study was primary data obtained from field study. This study employs both qualitative and quantitative research designs, where interviews and questionnaires were used. Data was collected from primary source. Data was process and analysed using formal tables and charts. A total of 30 respondents were considered out of the entire population in the Buea Municipality with all 30 returned. The findings revealed the problems faced by family businesses as a regard on how to raise start-up capital, which retard economic activities in this sector. Give the findings of each research question e.g. research question one was sources of capital. What did you find as sources of capital for start up. Recommendation on “start-up, management in family businesses” includes; improve on personal savings, employ manager who will be responsible for day to day running of actives as such he or she is held responsible without any family affection in respective to the business as it is a separate entity on its own, improve on regular family meetings were communication will be enhanced, as such this will go a long way to identify family business problems and immediate solutions will be provided.

KEY WORDS; start up, family businesses

CHAPTER ONE

GENERAL INTRODUCTION

1.1     Background of Study

The starting point of any economy is the enterprise which arises from an idea to organization of factors of product to realize an output that is commercialised. One type of enterprise dominating the world today is the family enterprise. Family enterprises are all round us and present a significant part of the economy in the world today. It is a form of productive organization whose origin is impossible to locate precisely in place or time. Family businesses were the majority during the first industrial revolution, as well in the pre-industrial period  (periti, 2002). Family business had been  the backbone of a significant number of industrialized countries in Europe and Africa and still a lively presence in the old industrialized economies, as well as in a large number of sectors, from labour intensive and craft based to specialized supplies (Fruin, 1998).

The presence of the family business inside a certain economic system is largely if not completely due to asymmetric information, a turbulent environment and legal system unable to secure and enforce property rights (Colli, 2003). The family businesses in western economies operate in a much less hostile environment today  than in the past because of the increasing competitive nature of the market environment. However, family members are involved in both strategic and day-to-day decision-making and the business is shaped by dynastic motive, is still a reality in almost all the advance economies even those in USA, that have been called the “seedbed of managerial capitalist”

There has been a growing tendency to analyze the role of family businesses at different stages of growth of a defined national economic system. For example, Johnson (2015) argue that Significant case study evidence in western economies now show that family businesses may have a positive influence in some sectors, especially in services as compared with publicly owned and managerial companies in other sectors. Family businesses are entrepreneurs in nature, which enhances commitment to business performance, long-term strategic plans, and corporate independence (Neshamba, 2017). In addition, Family businesses is the most frequently encountered ownership business model in the world and their impact on the global economy is considered significant and it is estimated that the total economic impact of the family business to global G D P is over 70% (Osunde, 2017).

Like any other business endeavour, family businesses also need finances to support their start-up activity. Family businesses usually raise their start-up capital from a number of sources, Such as external financing, such borrowings from friends, bank loan etc mean by this in (Petty, 2002) advantage remains by far the most preferred funding option for family businesses (Burgstaller, 2015). Because this could help speed up growth and because it raises then of payback and creates awareness that the money has to be manage efficiently.

Research funding gives evidence of a pecking order in financing family businesses. Blanco, (2007) says that where debt instead of new equity is preferred when additional external financing is sought. However, Gallo, (1996) says that the is a negative effect when using debt financing in a family business as it brings about the fear of bankruptcy cost, and the bank credit underwriting policy. To Chrisman; (2007), family businesses involvement appears to result in lower use of external equity, when further analysing the external equity in family businesses, meaning that family businesses do not depends on external equity as a means to finance their business. Petty, (2000) says because of the non-financing benefits that such investors can bring to family such as managerial support and expertise, meaning that investors do not only provide financial benefits buts also do bring in good managerial support to the business as they become part of the business and other strategies that help with-stand the business competitive environment. 

After raising capital for start- up or expansion, another area of concern to family enterprise is the organizational structure. Craig, (2000) says that organizational structure of family businesses is being influence by that of their families. The head of the family automatically becomes chief executive officer of the family business, and the chain of command span from the C.E.O (family head) to the floor staffs (children and grandchildren), in most instances, non-family employees are not included in the organizational chart of the family business. Organizations exist to achieve goals; these goals are broken down into tasks as the basis for jobs. Jobs grouped into departments in organizations maybe characterized by marketing, sales, adverting, finance, and manufacturing and so on.  Villaloga; (2006), has argued that performance of family businesses using agency theory, beside owner and manager conflicts as shown in the organizational chart, the argue the influence of principal conflict and agent (agency problem). That is the shareholders and the manager’s relationship to rewards shareholder’s maximization)

The number of employees a manager can effectively lead and supervised determines the organizational decision. Hamilton, (2007) says that the total number of employees or span of control should not be more than five to six people, however a larger span of control is possible depending on the complexity, variety of jobs. The ability, experience and style of the manager also have a lot of influence on the span of control so as well as an educated, well trained, motivated, satisfied worker has an influence on the span of control

Barbara, (1976) says that the end of a financial year is upon us making it a great opportunity to discuss sensitive issues like compensation and profit sharing policies. If a family business those not have formal policies for profit sharing it can lead to family conflicts, family businesses turn to pay lower dividend and reinvest back their profits to the business to fuel future growth.

Culture is the driving engine behind many family businesses (Loxton, 2008). Successful family businesses are one in which the new generation of leaders adopt the established values of the previous one, a change in leadership can be disturbing for employees, leadership in a family business is different from leadership from any kind of business as leaders in family business is always appointed by the family members whose decision is mostly influence by other amily members because of the close relationship the both share together Westhead, (2002).

1.2 Problem Statement

Family business is a distinctive form of entrepreneurship in the world today. Its uniqueness arises different facets of their operation such as raising start-up capital, management and their survival after the death of the founder.

Obtaining external financing is one of the key factors if not the most in preventing start-ups from growth and development. The economics of information suggest that asymmetric information plays an important role when an entrepreneur seeks external financing for their new ventures. In theory, when conditions of uncertainty combine with asymmetric information (where investors and borrowers have different set of information’s), for the funder there are problems of selection (choosing profitable ventures) and moral dilemma (what will the entrepreneur do with this invested capital)

The management of family businesses is a point of focus because of the crucial nature of family businesses, management style is a complex one because of the different family members with different interest in the because with may bring about conflict among members, to management these businesses the is a need to control and coordinate the various daily activities of the family businesses and also ensure that mismanagement of resources is not allowed, with may course the business to collapse. From the aforesaid, it is clear that understanding how family business raise their start-up.    

1.3 Research Question

The main research question for this study is “how do family businesses raise their start-up capital. Specific research question include,

• What are the different option opened to family businesses to raise start-up capital in Cameroon?
• What management style is adopted by family businesses in Cameroon?