The looming entrepreneurial bottleneck in the SME sector could jeopardise the future of German family businesses. More than 40 percent of senior entrepreneurs cannot find the right new boss. The situation is even more dramatic in family-run industrial companies. In this case, a successor can choose from five companies to be handed over.
These are the alarming findings of the current DIHK Report on Company Succession 2014. This assessment is regularly presented by the Association of German Chambers of Industry and Commerce on the succession situation in German SMEs.
DIHK warns of entrepreneurial bottleneck
The DIHK statements are based on field reports from the IHK advisors on business succession at the 80 chambers of industry and commerce (IHKs) and a statistical evaluation of the IHK service on business succession. Overall, the DIHK Report on Business Succession 2014 is based on 20,000 contacts of IHK experts with senior entrepreneurs and start-ups interested in taking over a business.
The main seven findings of the study at a glance:
1. company succession ? an ever-increasing problem in small and medium-sized businesses
More than ever before and less than ever before ? this is how the current situation regarding business succession can be described. While the number of start-ups seeking the advice of the Chambers of Industry and Commerce (IHKs) has fallen to a new low, a record number of former owners want to hand over their businesses. For the first time, the number of former owners exceeds the number of potential business takeovers.
2. medium-sized industry lacks successors
In this case, there are five former owners for every possible successor. High capital and modernisation requirements and the difficult search for qualified successors make the succession situation in the industry particularly tight.
3. demographics and a lack of skilled workers as the cause of the entrepreneurial bottleneck in SMEs
More and more entrepreneurs are reaching retirement age. On the other hand, many qualified people prefer a well-paid dependent job to self-employment, especially in times of a shortage of skilled workers. 41 percent of senior entrepreneurs and even 49 percent of potential takeovers do not find the right company or the right new boss.
4. more women are interested in business succession
Among potential takeovers, the share of women reaches a record level of around 25 percent. A progressive social change is also noticeable here.
5 Financing remains the biggest problem for business successors
One in two takeover candidates has difficulties financing the takeover and any necessary modernisation investments. However, in the current favourable interest rate and financing environment, acquirers find it somewhat easier to overcome financing problems than in previous years.
6. threatening Tightening of inheritance tax creates uncertainty
The ruling of the Federal Constitutional Court on inheritance tax, which is expected before the end of the year, is causing great uncertainty among entrepreneurs ? in both generations: 22 percent of senior entrepreneurs see a burden of inheritance tax as a threat to the handover of their business, and 21 percent of junior entrepreneurs.
7 Leichtsinning: The majority of entrepreneurs do not have an “emergency kit”.
Almost three quarters of senior entrepreneurs have not compiled the documents most important for a smooth continuation at hand. It is particularly worrying that this proportion has recently risen again and has not been below 70 percent for four years. Apparently, the psychological barrier to dealing with accident, death or illness is strongly entrenched.
In the increasingly tight succession situation, the DIHK sees politicians as having a special responsibility not to make the generational change in medium-sized businesses even more difficult. The DIHK therefore calls on the federal government to stick to its statement in the coalition agreement and to continue to maintain an inheritance tax that is friendly to medium-sized businesses. In future, too, companies must be able to be transferred from one generation to the next without any loss of substance. | Source: DIHK-Report on Business Succession 2014
Read also our Comment on the entrepreneurial bottleneck in the SME sector.
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