An important goal in the succession of medium-sized family businesses is the optimal preservation of assets. Ingo Claus, partner at K.E.R.N - Die Nachfolgespezialisten Osnabrück - answered four important questions about preparing for the process in an article for the German Unternehmerbörse.
1. the 3Ws: what should be handed over to whom and when?
There is no perfect age to think about business succession. However, the older the senior entrepreneur, the higher the probability of a disorganised emergency succession due to illness or death.
A timetable of which assets are to be transferred to whom and when has proved very helpful in practice.
The best way for the transferor to plan backwards is to answer the question of how many years he wants to enjoy the retirement he has earned, based on an average life expectancy of 78 or 83 years (men / women).
2. family-internal business succession: is there a junior in the family?
If a suitable and willing successor is available in the entrepreneurial family, he or she should be introduced to the business in good time. Any eligible siblings should be compensated accordingly by transferring assets. As a general rule, the person who shoulders a higher risk should receive a higher share of the estate. A company valuation helps to realistically justify the value of the company and to determine its share in the assets to be transferred.
If parts of the company of equal size are transferred to all children within the framework of a family-internal company succession, this can endanger the existence of the company. The fanned-out ownership structure can significantly restrict a (family) manager’s freedom of decision. With such a - supposedly fair - construction, relinquishing entrepreneurs risk not only disputes among the successors but also considerable financial damage for themselves and future generations.
3. should an outside director run the family business?
It happens more and more often that no suitable successor can be found within the family. If the business is to remain in family ownership, a suitable outside manager must be found in good time and trained in the business. This requires careful planning and usually takes several months.
A job description or a profile of requirements for an external managing director is part of every business plan. Emergency case.
4. when is a company sale advisable?
Selling the company is always the alternative when a succession within the family or the continuation of the business via an external manager is out of the question. Senior entrepreneurs should also prepare for this case at an early stage, as an external company succession takes an average of two to five years.
Thorough preparation of the sale of a company often pays off in the amount of the price to be realised. In addition to a company valuation, a detailed exposé answers many questions that a potential external successor may have about the company and its market position as well as the figures.
An orderly business succession takes time and expert knowledge
In parallel, the tax and legal issues are examined. Any changes to be made in the company law and tax construction require time before they become effective. This applies in particular if certain assets (e.g. real estate) are to be separated from the business in a tax-optimised manner before the planned generation change.
It is therefore advisable for entrepreneurs to deal with the regulation of their generation change at an early stage. This is because a company succession, unlike other projects, is a special project that, in case of doubt, can take several years.
Generally speaking, only a few family-internal business successions succeed at the first attempt. This may be due to objectively understandable reasons, e.g. if financing fails, or to communication problems within the family.
Specialised advisors can help with all of these questions and can thus reduce the time and financial expenditure and save the parties involved emotional stress.
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