Unresolved business successions endanger prosperity

Comment: Unresolved company successions endanger our prosperity

Two topics have been on my mind these days. These were a family-internal company succession in Espelkamp and a study by the Regensburg Chamber of Industry and Commerce on unresolved generational changes in family businesses. Unresolved company successions in particular could endanger our prosperity in the future.

But let's start with the company succession in Espelkamp. Paul Gauselmann, owner of the public limited company of the same name and Germany's slot machine king, spoke to the Neue Osnabrücker Zeitung (NOZ) about the generation change in the company he founded in 1964, among other things.

The 82-year-old Gauselmann revealed to the NOZ that he is not yet thinking of quitting. Although: In the meantime, he would like to pass the baton to his 62-year-old son. But that topic has been settled. 20 years ago he would have wanted to," Gauselmann told the NOZ, "but I wasn't ready then. The prominent company succession in Espelkamp has nevertheless been solved: with the transfer of Gauselmann AG to a family foundation, the company will be kept in the family for the long term.

Foundations to solve family-internal company successions

A Foundation solution can be a very good instrument for succession, but is only likely to be used in a minority of German family businesses. One reason for this is 'the average size of German family businesses and the associated limited possibility of appointing outside management.

At the same time, the results of a current study by the Regensburg Chamber of Industry and Commerce are causing a stir: At 52%, more than half of the 600 entrepreneurs surveyed are planning to hand over their business in the course of the next 5 years. This is around 300 companies. However, 69% of all respondents have not yet made any provisions. Ergo, only 31% of all entrepreneurs in the Regensburg region are concerned with their succession. And this third seems to be in a good position: 24% of all entrepreneurs have found a solution, two-thirds of them within the family. However, these two thirds correspond to only 16% of all entrepreneurs surveyed!

Only 16% of all entrepreneurs have made provisions for the future

In summary, three things can be said:

  1. Only a fraction of all family businesses are continued within the family after a generational change. studies, the proportion of businesses passed on within the family fell by more than 30% to around 34%. The results of the Regensburg study may be a statistical outlier, but they indicate the general trend.
  2. Many entrepreneurs deal with the issue of their own succession too late or not at all. One of the most important strategic decisions for the preservation of one's own entrepreneurial heritage is put on the back burner by the majority of entrepreneurs.
    And the situation is likely to get worse: Most entrepreneurs run their businesses well into retirement age. In just ten years, the proportion of entrepreneurs over 60 in Germany has doubled. And the demographic development suggests that this trend will continue.
    In the case of a company sale, waiting too long is likely to lead to less investment. This has a direct impact on the earning power and thus the value of a company.
  3. The generational change in small and medium-sized businesses is one of the greatest future challenges for the economic development of many regions. Business promoters, chambers and banks are alarmed and forced to deal intensively with the topic. This is because late company successions reduce innovative strength and delay urgently needed investments. The resulting lower competitiveness of companies ultimately endangers jobs and our prosperity.

What can entrepreneurs do?

It is as simple as it is complex: the key to a successful company succession lies in good and early preparation of the generation change. Because planning a company succession and the structured search for a successor as well as an orderly handover process is not a question of weeks or months but of years.

But in the end, economic politicians, bankers and advisors can only draw attention to this issue. The first step must be taken by an affected entrepreneur himself. To ensure an orderly transition, it is advisable to first address the issue from the age of 55. This would be a good time strategically. And not too late.

Tips for further reading:

Free guide to the sale of a company and company succession

Free webinars on business succession

Practical example of a successful company succession in the skilled crafts sector

Clarify important questions about business succession in advance

Family foundation as an instrument for resolving succession within the family

Enterprise value-oriented company valuation pays off when selling a company

Company succession also a topic in the Osnabrück region

The choice of the optimal successor model

The costs of a business succession or an M&A project

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