Lack of entre­pre­neurs: juniors shy away from family-inter­nal business successions

Intra-family business succes­si­ons are becoming incre­asing­ly rare in the so-called DACH region. This is becau­se most of their entre­pre­neurs’ child­ren in Germa­ny, Austria and Switz­er­land have no interest in conti­nuing their parents’ business. Instead, the child­ren are drawn to salaried employ­ment. Accor­ding to a study by the Univer­si­ty of St. Gallen and the consul­ting firm EY, this trend is even more prono­un­ced in Germa­ny than elsewhe­re and has inten­si­fied in recent years.

Threa­tening entre­pre­neu­ri­al shorta­ge ahead

Alrea­dy last year, the Associa­ti­on of German Chambers of Indus­try and Commer­ce (DIHK) warned in a study of the impen­ding Lack of entre­pre­neurs. Months ago, the Kredit­an­stalt für Wieder­auf­bau (KfW) also pointed out that the demogra­phic develo­p­ment of the popula­ti­on is much faster than that of the popula­ti­on. Ageing of the entre­pre­neu­ri­al popula­ti­on in Germa­ny. These results are further under­li­ned by the current study. For examp­le, only about four percent of German students whose parents own a family business want to become their parents’ succes­sor within five years. In princi­ple, only about nine percent of all entre­pre­neu­ri­al child­ren can imagi­ne succes­si­on within the family.

Austria and Switz­er­land face similar situation

The figures for Austria and Switz­er­land are very similar. In Austria, 3.4 percent of the child­ren want to follow in their parents’ entre­pre­neu­ri­al foots­teps within the next five years and 12.6% are basical­ly aiming for family-inter­nal business succes­si­on. In Switz­er­land, only 3.9 percent want to take over the paren­tal business in the next five years and 10.4 percent in principle.

This puts the readi­ness of juniors for family-inter­nal compa­ny succes­si­on at the lower end of the inter­na­tio­nal compa­ri­son. World­wi­de, 19.8 percent of all entre­pre­neurs’ child­ren can imagi­ne succee­ding their parents. In terms of early commit­ment to succes­si­on, German-speaking entre­pre­neurs’ child­ren are only slight­ly below the global avera­ge of around 5%. The study is based on a survey of 34,000 entre­pre­neu­ri­al child­ren from 34 count­ries and was published for the second time.

Attrac­ti­ve alter­na­ti­ves to a genera­ti­on change within the family

The big diffe­rence between the results of the DACH region and the rest of the world is likely to lie in the attrac­ti­ve­ness of the labour markets, becau­se where the econo­my is strugg­ling to get off the ground, many entre­pre­neu­ri­al child­ren are depen­dent on a job in their parents’ compa­ny. Thanks to the well-develo­ping econo­mic environ­ment in Central Europe and the resul­ting shorta­ge of skilled workers, a large propor­ti­on of juniors (around 60%) are initi­al­ly focusing on a career in employ­ment outside their parents’ compa­ny. However, many also want to try their hand at entre­pre­neur­ship and are working on founding their own compa­ny. For these juniors, the paren­tal business is appar­ent­ly not attrac­ti­ve enough to take over as part of a family-inter­nal succes­si­on. This is becau­se, funda­men­tal­ly, the succes­si­on inten­ti­ons of the younger genera­ti­on have decli­ned by around 30% world­wi­de in recent years.

Daugh­ters assess family-inter­nal compa­ny succes­si­ons as more risky

Accor­ding to the study, there are also diffe­ren­ces between the two sexes. Regard­less of the field of study, the cultu­re and the birth order, daugh­ters world­wi­de would have less desire to take on family-inter­nal business succes­si­ons. “It turns out that daugh­ters consider an entre­pre­neu­ri­al career to be riskier than sons,” said Profes­sor Thomas Zellwe­ger of the Univer­si­ty of St. Gallen of the Swiss Handels­zei­tung. “Moreo­ver, sons are more convin­ced of their own entre­pre­neu­ri­al abili­ties than daughters.”

Good prepa­ra­ti­on is becoming incre­asing­ly important

Becau­se the results of this study make it clear that it is of high importance for family businesses to prepa­re the genera­tio­nal change well. “From our experi­ence, entre­pre­neurs should start dealing with their own business legacy for the first time from the age of 55”, recom­mends Ingo Clausa consul­tant at K.E.R.N - Die Nachfolge­spezialisten who specia­li­ses in business succes­si­on. This is becau­se only about one third of all family businesses succeed with succes­si­on within the family. Claus adds: “In a first step, the entre­pre­neur should there­fo­re consider what he wants to hand over to whom and when. Then the entre­pre­neu­ri­al family faces the chall­enge of convin­cing the next genera­ti­on of the oppor­tu­ni­ties and attrac­ti­ve­ness of a family-inter­nal succession.”

Please also read our Comment.

You might also be interes­ted in this:

Free webinars on business succession

How do you find reputa­ble business sale advisors?

10,000 compa­ny succes­si­ons in Osnabrück

DIHK warns of entre­pre­neu­ri­al bottlen­eck in SMEs

Compa­ny succes­si­ons in Switz­er­land: Every eighth SME is looking for a successor

Family-inter­nal business succes­si­on: The four most important questions

Clari­fy important questi­ons about business succes­si­on in advance