Günther Fielmann, the king of glasses, is preparing the succession plan in the family business. Just over a year ago, his 26-year-old son Marc joined the Management Board of the company of the same name. Despite several announcements to the contrary, the senior is not yet giving up the reins: the 77-year-old would like to run his listed company with more than 17,000 employees for another three years. Is this type of company succession in a family business a variant for German SMEs? A brief analysis of the Fielmann model and recommendations for action for medium-sized family entrepreneurs.
According to the Federal Statistical Office, men born in 1960 live to be 76 and women to be 83. Statistically, today’s 57-year-old company owners still have between 19 and 26 years to organise their succession in the family business in an orderly manner. This period shortens significantly, taking into account a retirement period.
Risk of emergency succession increases
Now it is no secret that the risk of an unexpected succession situation due to death or serious illness increases with age. An accident or serious illness can literally throw a company owner off the entrepreneurial track even well before he or she reaches retirement age.
For this reason, the entrepreneurial Emergency case among the most important precautionary instruments for company owners. However, it is also one of the most neglected precautions. This is because around 70% of all entrepreneurs have no or only inadequate emergency provisions. Yet a carefully maintained entrepreneurial emergency file regulates the essential business and personal succession issues. In this way, it facilitates business succession in the family business. This includes, among other things:
- A representative who has been consulted and agreed with a Substitute regulation and a written Emergency plan. Incidentally, it does not help to appoint one’s spouse as a proxy. Such a proxy arrangement would be obsolete, for example, if something happened to a married couple on a joint holiday trip.
- A Advisory board regulation for companies with about 15 employees or more. A Advisory Board is a cost-effective instrument. In doing so, he can support the company owner in strategic issues and, in an emergency, take over the operational management of the company at short notice.
- Clear Powers of attorneyThese include private powers of attorney and account authority for the company and private accounts as well as a power of attorney or procuration for the deputy.
- The company contracts synchronised with the Entrepreneur’s will.
- Other documents such as a Overview of key business partners, customers or suppliers. And quite banal: A Key and password list.
Fixing timetables for business succession in the family business
The drafting of the will usually also answers the 3 Ws of generational change: Whe will Wan Wen handed over?
If a suitable and willing successor is available in the entrepreneurial family, he or she should join the company in good time. It is advisable to work out a timetable for the transfer of operational management in the company and the transfer of assets. In practice, the transfer of assets often takes place after the transfer of management due to a gradual transfer of shares. In this context, it is advisable to draw up a Business valuation to quantify the value of the company in the inheritance estate.
Demographics and the well-functioning labour market are currently ensuring that children are deciding against a generation change within the family. As a result, many family-run companies are already affected by a Lack of entrepreneurs threatened.
Examine the use of third-party management
If the company is to remain in family hands, an external manager is a possible alternative. This is particularly true if the successors within the family are still young, as in the case of Fielmann. An experienced external manager could support the junior with his know-how and give the company additional valuable impetus from outside. The search for and induction of such a non-family manager requires careful planning and usually takes several months.
When is a company sale advisable?
However, often neither a generation change within the family nor the use of an external manager is an option. Then a sale of the company is another alternative. Senior entrepreneurs should prepare for this eventuality at an early stage. After all, an external company succession takes an average of two to five years.
It is therefore helpful for entrepreneurs to start thinking about the generation change at an early stage. For the first time, entrepreneurs should start thinking about succession in the family business from the age of 55. This is because a business succession, unlike other projects, is a life decision that takes time to prepare.
Our daily consulting practice and various studies show: A late sale of a company makes a successful change of leadership more difficult. Two possible causes are a decreasing innovative strength combined with an increasing investment backlog.
For this reason, early and thorough preparation of the company sale pays off in economically good times. The accompaniment of the change of baton by specialists with transaction experience is an investment with a high return. Thanks to their experience, they steer straight Emotional business successions goal-oriented and identify potential conflicts at an early stage. In this way, they reduce the time and financial expenditure of the process and spare the parties involved emotional stress.
In short: three reasons against the Fielmann model as a role model for family businesses
- Increasing risk of unregulated succession: A 77-year-old entrepreneur cannot free himself from age-related risks. In the absence of a second level of management, the Fielmann model is likely to threaten the existence of the majority of German family businesses.
- Family succession becomes less likely with increasing age: A generation gap of 50 years is rare in most entrepreneurial families. Many of the children of entrepreneurs are now pursuing careers outside the family business. With increasing age, many juniors often decide against taking over the family business.
- Third-party management not always an alternative: The vast majority of all companies in Germany employ between 5 and 19 people. For these companies in particular, the use of external managers is risky, expensive or impractical.
Tips for further reading:
Free webinars on business succession
Interview: Preparing the succession within the family well
Practical example of a successful company succession in the skilled crafts sector
Successfully selling IT companies
Rising number of company sales forecast in Osnabrück
Company succession in East Westphalia and Bielefeld on the rise
One third of all craft enterprises face business succession in Grafschaft Bentheim
The costs of a business succession or an M&A project
FAQ
The entrepreneurial emergency case is one of the most important instruments in business succession planning. After all, it regulates the essential business and personal succession issues and facilitates business succession in the family business. Nevertheless, it is often unfortunately neglected. The business emergency kit includes, among other things:
- A representative agreed with the Substitute regulation and a written Emergency plan.
- One Advisory board regulation for businesses with approx. 15 employees or more. An advisory board is cost-effective and can support the entrepreneur in strategic issues. Moreover, in an emergency it can take over the management of the company at short notice.
- Clear Powers of attorney. On the one hand, this includes private and account powers of attorney for the private and company accounts. In addition, there is a power of attorney or procuration for the deputy.
- The Entrepreneur’s will, synchronised with the articles of association.
- Other documents, including a Overview of key business partners, customers or suppliers and a Bowl and password list.
1. increasing risk of unregulated succession: At 77, an entrepreneur has certain risks due to his age. However, most family businesses do not have a second level of management. This means that a late succession threatens the existence of many family businesses.
2 Family-internal succession becomes less likely with increasing age: Many children of entrepreneurs decide against family-internal succession. Especially with increasing age, many juniors decide against taking over the family business.
3. external management is not always an alternative: the majority of all German companies have between 5 and 19 employees. For these companies in particular, external management is risky, expensive or impractical.