The ageing business community and the increasingly topical issue of business succession in Rhineland-Palatinate are increasingly becoming the focus of regional discussion. Associations, business development agencies and chambers are devoting more and more space to this topic in their event calendars and advisory meetings. Is this turn to the topic scaremongering or reality?

The Institute for SME Research and the KfW established in independent studies some time ago that Germany is facing a wave of business succession. According to IFM, around 135,000 companies with around 2 million employees are facing a generational change by 2018. This is undoubtedly an impressively large number: a look at the individual federal states reveals major differences. In the economically strong state of North Rhine-Westphalia, for example, around 29,400 companies and in Bavaria 23,900 are facing the issue of succession.

34% of all firms seek business succession in Rhineland-Palatinate

Only 6,200 companies have to plan their business succession in Rhineland-Palatinate in the same period. This does not sound particularly high in comparison, but it corresponds to 34 percent of all active companies in the region. In plain language, this means that in more than a third of the SME-managed companies in Rhineland-Palatinate, the captain will disembark and retire in the next three years.

For many company owners, the continuation of their business is the greatest entrepreneurial challenge of the coming years. Rhineland-Palatinate cannot escape the nationwide trend either: Only about 40 percent of entrepreneurs find their successor within their own family. Nevertheless, in about 17 percent of all generational changes, a company successor can be found among the employees of one’s own company within the framework of a management buy-out. In about 35 percent of all cases, an external business succession must be organised in Rhineland-Palatinate.

As a result, 8-10 percent of all senior entrepreneurs already have to reckon with not finding a successor and closing the company. And the trend is rising. What are the reasons for this?

Lack of entrepreneurs: The willingness to become self-employed and take on entrepreneurial responsibility is decreasing among the younger generations. Reasons for this include personal life planning, an increased need for leisure time and financial reasons. Especially in the skilled crafts sector, the Lack of entrepreneurs abundantly clear. Despite the mostly positive future prospects, fewer and fewer entrepreneurs are finding master craftsmen or entrepreneurs willing to take over. Many young craftsmen in the master classes of the chambers are not ready to undertake entrepreneurial responsibility.

Farm sizes: Many of the companies to be transferred are affected by structural change in their respective sectors. For small businesses that are already barely earning a fair market wage due to their order and turnover situation and have no return on equity, continuation is at risk.

Purchase price expectations: Owners of small businesses in particular often have very high expectations of the price to be achieved in the event of a sale. Unrealistic purchase price expectations make it difficult to find a successor and to finance the purchase.

This makes it difficult for many of these small, regionally rooted companies to find a business successor in Rhineland-Palatinate.

So what can a business owner do when preparing for generational change?

A business succession in Rhineland-Palatinate is a complex project that needs to be managed professionally. For this reason, it is advisable to always seek competent advice when preparing a business succession. The consultations often offered free of charge by chambers and associations and the low-cost company exchanges provide an initial rough overview of the most important topics of the upcoming succession project. About these Checklist senior entrepreneurs also receive an initial overview of the status of their succession project.

Specialised consultancies then help with the concrete preparation and implementation. Owners of smaller companies often shy away from the costs involved in organising the generation change and try to manage this project alongside their day-to-day business. However, investing in the professional preparation and implementation of a company succession pays off: A structured process significantly increases the probability of success of the project. A reputable succession advisor also accompanies entrepreneurs of smaller companies cost-effectively in sub-areas, e.g. in the preparation of a Business valuationThe preparation of a company exposé and accompanies negotiations.

Systematic nationwide search increases chances of success

In the systematic search for a successor, the advisor’s network helps to identify potential buyers. With www.unternehmenskauf-24.de operate, for example, K.E.R.N - Die Nachfolgespezialisten ? a nationwide candidate exchange on which around 1,500 vetted company buyers are currently registered with their detailed search profiles.

Not only in the case of a family-internal business succession in Rhineland-Palatinate does an experienced moderator or mediator help to eliminate possible conflicts in the process of generational change and to find workable rules and agreements.

In summary, it can be said that business succession is a highly topical issue in Rhineland-Palatinate and throughout Germany. The probability of success of the project increases through professional preparation and implementation.