Succes­si­on planning in a family business - Fielmann as a role model?

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.
  • 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

  1. 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.
  2. 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.
  3. 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:

KERN study on business succes­si­on in Germa­ny 2020: Acute lack of succes­sors threa­tens family businesses

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

What belongs in the entre­pre­neu­ri­al emergen­cy kit as part of succes­si­on planning in the family business?

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.

Why is Fielmann’s succes­si­on plan not suita­ble as a model for other family businesses?

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.