KERN founder Nils Koerber and your specialist for business succession family businesses

Business succes­si­on family business

6 pitfalls and soluti­ons: Our guide for family-owned companies

When it comes to the Compa­ny succes­si­on in family businesses, the process can be complex and full of poten­ti­al pitfalls. As the saying goes: Those who fail to plan, plan to fail’.

It is there­fo­re important that families Consider all aspects of business succes­si­onto ensure a successful transi­ti­on. In this artic­le, we look at some of the most common problems that arise when trans­fer­ring family businesses. And we provi­de you with possi­ble soluti­ons in our complex guide.

How is the market for business succes­si­ons developing?

We at KERN have develo­ped its own nation­wi­de follow-up study. We took a closer look at the age groups of the owners and the number of businesses in the German chamber districts.

The situa­ti­on is more serious than we percei­ve in every­day life.  From our point of view, those politi­cal­ly respon­si­ble have still not recog­nis­ed the problems arising from the wave of business succes­si­on in family businesses and the resul­ting econo­mic problems.

Due to the enorm­ously high degree of small­ness of the compa­nies and struc­tures, this creeping process is not parti­cu­lar­ly noticeable. More than 90 % of German compa­nies have fewer than 25 employees. And if they disap­pear tomor­row, it will only be noticed years and years later. higher pace of corpo­ra­te destruc­tion really in the conse­quence. If the genera­tio­nal change in our family businesses does not succeed, our prospe­ri­ty is threatened.

Graphic on succession planning in family businesses

A soluti­on approach

There is no such thing as the only soluti­on that makes you happy. At KERN, we think a lot of the Princi­ple of perso­nal respon­si­bi­li­ty. If entre­pre­neurs really take the succes­si­on issue serious­ly and see it as the greatest entre­pre­neu­ri­al chall­enge par excel­lence, a large propor­ti­on of all succes­si­on issues in family businesses should be solvable.

But I have to want it and get invol­ved. With time, too, becau­se business succes­si­ons rarely succeed under pressure.

Strate­gic succes­si­on consul­ting: the key to success in family businesses

The importance of a strate­gic Succes­si­on advice cannot be overe­sti­ma­ted, especi­al­ly in the comple­xi­ty of family businesses. This advice goes far beyond mere figures and contracts and deals inten­si­ve­ly with the dynamics within the business family, the impen­ding changes and the associa­ted concerns in the family business.

Key points of succes­si­on counselling

  • Under­stan­ding family and compa­ny dynamics: Consul­tants need to recog­ni­se and under­stand the unique situa­ti­on of each family business. It’s about recog­nis­ing the family relati­onships, the business challenges and the emotio­nal aspects of succession.
  • Develo­p­ment of a custo­mi­sed succes­si­on plan: A perso­na­li­sed plan tailo­red to the speci­fic needs and goals of the business family is crucial. This includes clear succes­si­on regula­ti­ons, respon­si­bi­li­ties and a roadmap for the handover.

Conflict manage­ment and finding soluti­ons: Conflicts often arise within the family that can compli­ca­te the hando­ver process. Counsel­ling should help to identi­fy these conflicts and develop solutions.

Support from experts

Compa­ny succes­si­on is extre­me­ly complex. Here Legal, econo­mic, tax and emotio­nal issues be focus­sed. And every aspect is finely interwoven.

As a compa­ny owner, I can’t and don’t have to know every­thing myself, and I should Experts for this special field. Compa­n­ions who have exact­ly this experi­ence and, like on a deman­ding tour in the mounta­ins, bring me safely to the desti­na­ti­on as a mountain guide. Without crashing and ideal­ly also without detours.

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6 Common pitfalls in family business succession

From how the retiring manage­ment plans for retire­ment to how to deal with emotio­nal issues, there are some common issues when it comes to succes­si­on in family businesses. Pitfalls that should be avoidedso that the transi­ti­on goes smoothly.

Chart of the 6 hurdles to business succession in family businesses

1 Unclear succes­si­on plan

One of the most common pitfalls in family business succes­si­on is unclear succes­si­on planning. Without a Defined strategy for the hando­ver of the compa­ny to new leader­ship, it can be diffi­cult for families to ensure a smooth transi­ti­on of owner­ship and management.

Unclear succes­si­on plans can lead to misun­derstan­dings between family members, Poor decis­i­on-making and hosti­li­ty among family members lead. It is important that family businesses create a clear plan that sets out who will take over the business, how they will perform their role and what respon­si­bi­li­ties are invol­ved. This requi­res open conver­sa­ti­ons and clari­ty about the needs of everyo­ne invol­ved in the process.

2 Lack of family involvement

Lack of family invol­vement is also a common problem scena­rio. Without the full commit­ment of all the family members invol­ved, it can be diffi­cult to Smooth succes­si­on planning and a successful transi­ti­on from one genera­ti­on to the next.

It is important that owners of family businesses ensure that key family members are invol­ved as early as possi­ble in decis­i­on-making and the Commu­ni­ca­ti­on about succes­si­on planning be invol­ved. This will help create an environ­ment where everyo­ne under­stands their role and respon­si­bi­li­ty in the process and can work together towards a successful outcome.

Or it becomes clear early on that a succes­si­on within the family will not be possi­ble and the search for an exter­nal soluti­on comes to the fore.

Nils Koerber on commu­ni­ca­ti­on during genera­tio­nal change within the family and to the outside world

3 Lack of profes­sio­nal advice and expertise

One of the most common pitfalls in family business succes­si­on is the Lack of profes­sio­nal and objec­ti­ve advice and exper­ti­se. Succes­si­on planning requi­res an under­stan­ding of legal, finan­cial, econo­mic and tax issues as well as a clear plan for the future of the business.

In additi­on, due to inexpe­ri­ence and lack of under­stan­ding, families may not have the neces­sa­ry resour­ces to facili­ta­te a successful transi­ti­on. Profes­sio­nal counsell­ors who are not emotio­nal­ly invol­ved can help at this criti­cal time. Provi­de invaluable assis­tance and provi­de valuable support to achie­ve the goals.

Just the ‘trans­la­ti­on’ and ‘inter­pre­ting’ in a family in this process is of utmost importance.

4 Do not define clear areas of responsibility

One of the most common pitfalls in business succes­si­on is omissi­on, Define clear areas of respon­si­bi­li­ty. Without clear­ly defined respon­si­bi­li­ties and expec­ta­ti­ons, it can be diffi­cult for family members to know exact­ly what each person needs to do to ensure the success of the business.

And if the family doesn’t under­stand it, how will the employees be able to under­stand it?

This lack of clari­ty can lead to confu­si­on and ultim­ate­ly to a Break­down of commu­ni­ca­ti­on between family members which in turn can lead to deepe­ning dispu­tes over roles and respon­si­bi­li­ties. It also increa­ses the risk of important tasks not being done or being done incorrectly.

And when employees leave the compa­ny in frustra­ti­on becau­se of so much ambigui­ty, the damage is alrea­dy greater in advance.

5 Unrea­li­stic expectations

Not infre­quent­ly, unrea­li­stic expec­ta­ti­ons regar­ding the transi­ti­on from one genera­ti­on to the next are also a conten­tious issue. For examp­le, they expect A smooth and timely transi­ti­on, while in reali­ty it can take several years to imple­ment a successful succes­si­on plan.

In additi­on, the family members may have diffe­rent ideas about how the business should be managed and what role each indivi­du­al should play in the new struc­tu­rewhich can lead to diffe­ren­ces of opini­on and disagreements.

Final­ly, family members may not under­stand their own roles and respon­si­bi­li­ties within the business or do not have enough experi­enceto run it effec­tively, which can be diffi­cult for owners and managers.

If you take the time to set reali­stic expec­ta­ti­ons about the roles of managers and owners, and develop a compre­hen­si­ve succes­si­on plan, you can make the Successful­ly managing the transi­ti­on of a family business.

6 No prepa­ra­ti­on for retirement

Without a suita­ble plan, even the senior boss may face problems after the genera­ti­on change. The Retire­ment plans must be careful­ly preparedto ensure that, for examp­le, adequa­te finan­cial securi­ty is guaran­teed for Senior and the family in the years to come. At the same time, this securi­ty must not overbur­den the finan­cial perfor­mance of the enterprise.

Further­mo­re, it is important to poten­ti­al tax effects must be taken into account, associa­ted with retire­ment and estate planning, as well as other factors such as liqui­di­ty manage­ment and asset distri­bu­ti­on. Negle­c­ting even one of these aspects can lead to a failure of the business succes­si­on and leave behind costly mista­kes that could have been avoided with proper planning.

Organi­s­ing the succes­si­on process: 5 steps and decis­i­ons in the transi­ti­on phase

Now that the challenges and pitfalls of succes­si­on in family businesses have been highligh­ted, it is essen­ti­al to take a detail­ed look at the organi­sa­ti­on of the succes­si­on process itself. This process is more than just a formal hando­ver; it requi­res careful planning, clear commu­ni­ca­ti­on and strate­gic decisions.

Important steps in the succes­si­on process

  1. Inven­to­ry and objec­ti­ves: First­ly, the current state of the compa­ny and its positi­on in the market should be analy­sed in detail. At the same time, the objec­ti­ves for the succes­si­on must be clear­ly defined. What should be achie­ved with the succes­si­on? Is it about maintai­ning the family business, expan­si­on or strate­gic reorientation?
  2. Selec­tion of succes­sors: A criti­cal step is the selec­tion of a suita­ble succes­sor. This can include members of the business family or exter­nal candi­da­tes for a Manage­ment buy-in. The decis­i­on should be based on skills, vision for the compa­ny and willing­ness to take over.
  3. Develo­p­ment of a transi­ti­on plan: A detail­ed plan for the transi­ti­on must be develo­ped. This includes timelines, the hando­ver of respon­si­bi­li­ties and how the transi­ti­on phase will be organis­ed. A gradu­al transi­ti­on can help to ensure the stabi­li­ty of the company.
  4. Legal and finan­cial aspects: All legal and finan­cial aspects of the succes­si­on must be careful­ly planned. This includes Compa­ny valua­tionstax issues and the drafting of purcha­se or trans­fer agreements.
  5. Guidance and support during the transi­ti­on: Throug­hout the transi­ti­on, it is important that both the trans­fer­or and the trans­fe­ree recei­ve support. This can be provi­ded by inter­nal consul­tants or exter­nal experts.

Ficti­tious example

Let’s imagi­ne that a family business in the manufac­tu­ring sector is planning to hand over to the second genera­ti­on. The current CEO, a founding member, wants to retire and his daugh­ter is to take over the compa­ny. She has fresh ideas but needs support in taking over the manage­ment respon­si­bi­li­ties. A struc­tu­red transi­ti­on plan that includes coaching for the daugh­ter as well as a gradu­al reduc­tion of the current CEO’s respon­si­bi­li­ties could be ideal.

Why do family entre­pre­neurs find it so diffi­cult to change generations?

Challenges for senior entrepreneurs in business succession

Basical­ly, there are three reasons why trans­fer­ors find it so diffi­cult to let go:

  1. The entre­pre­neur lacks a vision or a goal for the time after. This would be the decisi­ve motiva­ti­on for this important step. What should I look forward to and why should I let go if nothing is ‘waiting’ for me?
  2. Many compa­ny leaders also feel that they themsel­ves are being called into questi­on with the hando­ver. And it doesn’t matter whether you sell the compa­ny or hand it over to the next generation.
  3. Lack of or incom­ple­te precau­tio­na­ry measu­res. Owners of smaller businesses in parti­cu­lar have diffi­cul­ties in making a living as a result.

The princi­ple of perso­nal responsibility

Anyone who has worked respon­si­bly in their ’system’ day in and day out for many years, even decades. compa­ny rarely takes the time early on to Time for these weigh­ty questions.

From our point of view, however, it is precis­e­ly Princi­ple of perso­nal respon­si­bi­li­ty, which is lived out entre­pre­neu­ri­al­ly in every­day life. However, it is often forgot­ten for the very priva­te planning of life. Sounds a bit unusu­al, but it is really hard for senior entre­pre­neurs. It’s like learning something new. To look at something unknown. Even if it is myself.

We recom­mend that every donor take a break from every­day life for 1-2 days and ask themsel­ves questi­ons in their own silence.

  1. What gives me lasting pleasu­re today and in the future?
  2. What could be the meaning of my succes­si­on solution?
  3. Who am I when I am no longer an entre­pre­neur and what am I looking forward to?
  4. And what do I have to do to achie­ve these goals?

Compa­ny succes­si­on through one’s own children

Ideal­ly, child­ren should know and also be able to feel that a Taking over the paren­tal farm can really be volun­t­a­ry. I can, but I don’t have to. And there is no relati­onship drama between parents and child­ren or even withdra­wal of love. As a child, I am really free to decide whether I feel called to do so.

And the same is true for the parents, the people who hand over a compa­ny. Child­ren must also make their contri­bu­ti­on in their educa­ti­on and quali­fi­ca­ti­on so that the compa­ny recei­ves the leader­ship perso­na­li­ty it needs for the new future.

The enter­pri­se that feeds everyo­ne has requi­re­ments for future leader­ship. What quali­ties are needed in leader­ship? And is it then really the new genera­ti­on that will successful­ly solve this task in the future?

Are the child­ren prepared to align their educa­ti­on and quali­fi­ca­ti­ons with this?

And depen­ding on their develo­p­ment, parents should then also have the freedom to decide differ­ent­ly if neces­sa­ry and sell their business.

This is something that both sides have to accept.

When child­ren do not want to, cannot or are not allowed to

A trend that, accor­ding to our estima­tes, is now Every­day life for a good 60 % of German family businesses is.

If it is certain that no soluti­on is to be expec­ted within a family in the genera­tio­nal transi­ti­on, the Sale of the compa­ny is defini­te­ly a good alternative.

It doesn’t mean that something doesn’t work, but that the story can’t conti­nue to be written in the respec­ti­ve family. However, there are many other indivi­du­als or compa­nies who are certain­ly interes­ted in an exter­nal succes­si­on soluti­on. And behind them are usual­ly other families, the majori­ty of them.The middle class thus remains in family hands and the special cultu­re of family businesses is trans­fer­red to a new family.

What are the alter­na­ti­ves to a genera­ti­on change within the family?

In the compa­ny succes­si­on phase, family businesses face complex challenges that affect both business and perso­nal aspects. Parti­cu­lar­ly when child­ren do not have the oppor­tu­ni­ty or desire to take over the family business, speci­fic diffi­cul­ties arise that need to be addressed.

Emotio­nal challenges and how to overco­me them

  • Letting go of life’s work: For many founders, the compa­ny is part of their identi­ty. The emotio­nal attach­ment can make it diffi­cult to let go. This is where it can be helpful to seek exter­nal advice to ensure an objec­ti­ve view and make the transi­ti­on process easier.
  • Conflicts within the family: Tensi­ons often arise when it comes to succes­si­on. Open commu­ni­ca­ti­on and the invol­vement of all family members in the process are essen­ti­al. Media­ti­on by exter­nal advisors can provi­de support here.

Strate­gic soluti­ons for succes­si­on planning

  • Estab­lish­ment of a transi­ti­on team: An inter­di­sci­pli­na­ry team made up of inter­nal and exter­nal experts can help to make the transi­ti­on process effici­ent and smooth.
  • Flexi­bi­li­ty in succes­si­on planning: Not every business succes­si­on has to take place within the family. Options such as Manage­ment buy-outs or the sale of the compa­ny can be viable alternatives.

Prepa­ring for the future

  • Adapt­a­ti­on to change: Compa­nies must constant­ly evolve in order to remain compe­ti­ti­ve. The new genera­ti­on or exter­nal managers can bring a breath of fresh air and new perspectives.
  • Planning finan­cial securi­ty: Parti­cu­lar­ly when the senior manager retires, sound finan­cial planning is important to ensure the finan­cial securi­ty of both the senior manager and the company.

What are the alter­na­ti­ves to a genera­ti­on change within the family?

There are basical­ly two possi­bi­li­ties here:

  • On the one hand, there is the Compa­ny sale to an exter­nal buyer to menti­on. These are often also family entre­pre­neurs. This preser­ves the family corpo­ra­te culture.
  • On the other hand, there is the chance of Sale to an employee, MBO (Manage­ment Buy Out) called.

Nils Koerber on the book on compa­ny succession

Succes­si­on soluti­ons with the employees of a company

A so-called Manage­ment Buy Out MBO often even makes succes­si­on easier. The execu­ti­ve knows the compa­ny and thus hardly needs any training. After all, the senior employees of the compa­ny in questi­on know the entity from the FF and usual­ly enjoy the trust of employees, custo­mers and suppliers.…

Both sides, the trans­fer­or and the trans­fe­ree, know what to expect and what is important.

At the same time the finan­cing of a transac­tion also make such a soluti­on parti­cu­lar­ly difficult.

Not every employee of a family business has the priva­te means and can set up his or her own finan­cing. If the trans­fer­or is not prepared to help, the inter­nal succes­si­on in the business will not work.

Finan­cing options

There are many diffe­rent possi­bi­li­ties. We menti­on two models as very frequent­ly chosen approaches:

  1. Part of the Purcha­se price is designa­ted as a vendor loan and thus the trans­fer­or becomes a further finan­cing partner of the trans­fe­ree in additi­on to a bank.
  2. The shares are trans­fer­red step by step over the years. The succes­sor can thus try to earn part of the finan­cing himself. Of course, these models also have their risks. These must be weighed up against an exter­nal succes­si­on by outside buyers.


Succes­si­on in a family business is an important process that, due to the Comple­xi­ty of the family dynamic can be a challenge.

Pitfalls include misali­gned goals between genera­ti­ons, unclear roles and respon­si­bi­li­ties, diffi­cul­ties in trans­fer­ring owner­ship and control, lack of commu­ni­ca­ti­on and trust between family members, inade­qua­te finan­cial planning and a lack of legal structure.

With careful conside­ra­ti­on and planning these pitfalls can be avoided and the transi­ti­on to the next genera­ti­on of leader­ship can be successful.

FAQ - Brief answers to important questi­ons on the topic

What needs to be taken into account in business succes­si­on?

Early planning, clari­fi­ca­ti­on of legal and finan­cial aspects, the invol­vement of all relevant family members and employees and the defini­ti­on of a clear hando­ver plan are important. Conside­ra­ti­on should also be given to whether and how the corpo­ra­te cultu­re and values should be preserved.

How do I hand over a compa­ny?

The hando­ver includes valuing the compa­ny, develo­ping a succes­si­on plan, selec­ting a succes­sor, clari­fy­ing tax and legal issues and gradu­al­ly handing over respon­si­bi­li­ties. It is also important to consider the emotio­nal compo­nent of the handover.

When do we speak of a family business?

A family business is a compa­ny in which the majori­ty of decis­i­on-making power lies in the hands of one family. Several family members are often active in the manage­ment of the compa­ny and there is a desire to pass the compa­ny on to the next generation.

Why is succes­si­on planning important?

Careful succes­si­on planning ensures the long-term viabi­li­ty and success of the compa­ny. It helps to minimi­se poten­ti­al conflicts, avoid legal and finan­cial problems and ensures a smooth transition.

What makes family businesses successful?

Successful family businesses are often charac­te­ri­sed by strong values, long-term orien­ta­ti­on, close relati­onships with custo­mers and employees and a high degree of adapta­bi­li­ty. They combi­ne profes­sio­nal manage­ment practi­ces with the strengths of family cohesion.

What is an owner-managed family business?

An owner-managed family business is managed direct­ly by one or more members of the family who also own the compa­ny. These compa­nies are charac­te­ri­sed by a close connec­tion between compa­ny manage­ment and ownership.