Article image 5 steps to business succession

Regula­te the compa­ny succes­si­on in 5 steps

The topic of succes­si­on planning is an important step in ensuring the conti­nui­ty and future success of any business. In this artic­le we give you a compre­hen­si­ve overview of all important infor­ma­ti­on to secure a successful succes­si­on soluti­on for your company.

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  • Entre­pre­neurs should take into account the Plan succes­si­on for their life’s work at an early stage
  • The business succes­sor can come from within the family, from within the business or be an exter­nal buyer
  • For successful imple­men­ta­ti­on, the follo­wing are requi­red Thorough prepa­ra­ti­on and prepa­ra­ti­on of the documents for the trans­fer of the compa­ny crucial
  • Find people interes­ted in buying a compa­ny on our compa­ny exchange

Defini­ti­on of business succession

Business succes­si­on is the process of trans­fer­ring owner­ship of a business from one person or group of people to another. Succes­si­on planning is an important part of business succes­si­on as it ensures that a business remains successful and profi­ta­ble when the current owner(s) retire or leave the business.

Forms of business succession

Chart on the forms of business succession

Farms can be trans­fer­red in many forms, including:

  1. Passing on the business to family members ? this is often refer­red to as ?family-inter­nal succession?
  2. Sale of the compa­ny to an exter­nal party ? this can be a priva­te person or a company
  3. Merger with another compa­ny or entering into a joint venture
  4. A Manage­ment Buy Out (MBO) ? here the current managers take over owner­ship and control of the company
  5. Sale of parts of the compa­ny ? this could include the sale of business units, product lines or other assets

In the family or rather externally?

It depends on the indivi­du­al family and its indivi­du­al goals whether the business succes­si­on should be regula­ted within the family or extern­al­ly. Since every case is diffe­rent, it is important to Careful­ly weigh up the advan­ta­ges and disad­van­ta­ges of both optionsbefore you make a decision.

For examp­le, if the family business is complex and several family members are invol­ved, a exter­nal expert or a strate­gic inves­tor can provi­de new impetus and thereby lead the compa­ny to a new stage of development.

On the other hand, if a family member knows the business and its opera­ti­ons very well, is passio­na­te about the business and is well trained, he or she may be better suited to take over.

Ultim­ate­ly, there are various options that need to be conside­red and evalua­ted in detail in order to find the right soluti­on for the business in the end.

Exter­nal compa­ny succes­si­on in 5 steps

Graphic representation of the external company succession in 5 steps

Planning for the future of your business is criti­cal. With the right strate­gies, you can ensure a smooth transi­ti­on and set your business up for contin­ued success.

Step 1: Succes­si­on planning

Succes­si­on planning is about the prepa­ra­ti­on of a order­ly transi­ti­on of leader­ship positi­ons, respon­si­bi­li­ties and owner­ship in a compa­ny. Planning also includes making the entire organi­sa­ti­on of a compa­ny fit for hando­ver. This process neces­s­a­ri­ly includes a timeta­ble in the first step, which serves as orien­ta­ti­on for all those involved.

Step 2: Business valuation

An important step in the prepa­ra­ti­on of the sale is the deter­mi­na­ti­on of the enter­pri­se value in order to have an orien­ta­ti­on as to what sales price the seller can expect. Common methods for this are an assess­ment using the multi­ple method or an objec­ti­ve calcu­la­ti­on using the Income approach accor­ding to IDW S1.

Step 3: Struc­tu­ring the handover

The struc­tu­ring of the hando­ver includes the Prepa­ra­ti­on and drafting of neces­sa­ry documents and reports, such as the compa­ny exposé or finan­cial reports. Ambigui­ties and possi­ble stumb­ling blocks should be known. You do not want to present incom­ple­te documents to a poten­ti­al buyer or have to create documents only after a request.

The more thorough the prepa­ra­ti­ons are comple­ted in this phase, the smoot­her the sales process can go.

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KERN location map for business succession

Step 4: Compa­ny succes­si­on exchange

A succes­si­on exchan­ge is a platform that brings together people who want to buy or sell a business with poten­ti­al buyers and sellers. It enables interes­ted parties to Access to infor­ma­ti­on on poten­ti­al succes­sors and enables sellers to put their businesses up for sale.

Anony­mi­ty can be ensured via M&A advisors or direct listings should be so neutral that identi­fi­ca­ti­on is not possi­ble in the first exchange.

The exchan­ge offers an online market­place on which Buyer and seller learn important details of a possi­ble transac­tion can. In additi­on, some provi­ders offer support­ing services such as due diligence and finan­cial analy­sis to ensure that the transac­tion is conduc­ted in a fair and trans­pa­rent manner.

Step 5: Comple­ting the transi­ti­on process

The fourth phase of business succes­si­on is the comple­ti­on of the transi­ti­on process. In this phase it must be ensured that Successful­ly fulfil­led all legal, finan­cial and opera­tio­nal requi­re­ments were made to ensure a smooth transi­ti­on from the current leader­ship to the new leadership.

At this stage, all documents for the trans­fer to a new owner must be proper­ly updated and submit­ted to the relevant autho­ri­ties, such as the tax autho­ri­ties or regula­tors. Further­mo­re, all other neces­sa­ry steps should be taken to ensure a successful transi­ti­on. One option here is the creati­on of a compa­ny manual describ­ing the old and, if appli­ca­ble, new polici­es, compe­ten­ces, respon­si­bi­li­ties and procedures.

Business Succes­si­on Checklist

Graphic of the checklist for business succession
  • Place a Timeta­ble for the trans­fer of assets, manage­ment positi­ons and respon­si­bi­li­ties firm.
  • Make an inven­to­ry of the assets and liabi­li­ties of the business to be transferred.
  • Check the existing legal documents, inclu­ding business contracts and insurance policies.
  • Deter­mi­ne the finan­cial needs related to succes­si­on planning.
  • Update the business records to reflect the Changes in owner­ship and manage­ment respon­si­bi­li­ties to be taken into account.
  • Develop control strate­gies to reduce the Tax burden to be reduced to a minimum through skilful action.
  • Use Profes­sio­nal advice during the search for suita­ble succes­sors. Besides an excel­lent network, the greatest advan­ta­ge of a quali­fied advisor is his emotio­nal neutra­li­ty. Only a profes­sio­nal can weigh up and bring together the concerns of all parties involved.
  • Identi­fy poten­ti­al succes­sors and assess their qualifications.
  • Develop a commu­ni­ca­ti­on strategy to inform employees, custo­mers, suppli­ers and other stake­hol­ders after the sale.
  • Check the business opera­ti­ons regular­ly and make adjus­t­ments as neces­sa­ry to ensure a smooth succes­si­on process.

3 tips for successful business succession

Since 2004, we have been support­ing our clients with the genera­ti­on change or the sale of their life’s work. From our wealth of experi­ence, we would like to share three tips with you at this point.

Compa­ny succes­si­on tax-free

A Compa­ny succes­si­on tax-free is possi­ble if a business is inheri­ted by one genera­ti­on within the family, but the succes­sor also actively conti­nues the business. By means of a so-called 5-year or 7-year model, the Tax burden reduced by 85 % or even 100 % become.

Since there are certain pitfalls that should be conside­red and it also makes sense to plan the succes­si­on very early, we will be happy to advise you. Basical­ly, the indivi­du­al case must always be considered.

There are also exten­ded tax optimi­sa­ti­ons if trans­fer construc­tions are prepared at an early stage before a sale.

The optimal time for business succession

The optimal timing for business succes­si­ons depends on the speci­fic needs of the business and its owners. In general, it is recom­men­ded that succes­si­on planning should be begins a few years before the owner or key employees retire.

This leaves enough time to develop a succes­si­on plan, find and hire poten­ti­al succes­sors and ensure a smooth transi­ti­on. Alter­na­tively, to sell the compa­ny direct­ly to a third party.

Finan­cing business succession

Funding for this process can come from a varie­ty of sources, inclu­ding Banks, savings banks, venture capita­lists, finan­cial inves­tors and govern­ment grants or guaran­tees. Entre­pre­neurs can not only turn to exter­nal inves­tors, but also ask family members for help in raising the neces­sa­ry capital.

To ensure a successful transi­ti­on, it is important to plan ahead and know all the options available.

Common succes­si­on mista­kes for businesses

Graphical representations of the most common mistakes in business succession

To ensure that the transi­ti­on goes smooth­ly, it is important to avoid mista­kes. Here are some common mista­kes entre­pre­neurs should avoid when planning for business succession:

  • Planning in advan­ce
    Far too often, business owners wait until they are close to their desired retire­ment or are forced to do so by illness before thinking about succes­si­on planning. This can lead to problems as there may not be enough time to trans­fer owner­ship proper­ly and ensure a smooth transi­ti­on. Successful succes­si­on planning requi­res careful conside­ra­ti­on of all aspects of the transi­ti­on, inclu­ding legal requi­re­ments, taxati­on and pensi­ons. Planning ahead can help ensure that these issues are addres­sed in a timely manner. A sale under time pressu­re also depres­ses the price.
  • No invol­vement of family members
    Family members should be infor­med about all aspects and reasons for succes­si­on planning and invol­ved in the process if possi­ble. Not invol­ving family members can lead to disagree­ments and confu­si­on about who will take over the business when the current owner retires or dies. Invol­ving family members early on can help avoid misun­derstan­dings later on about the future manage­ment and owner­ship structure.
  • Do not seek profes­sio­nal advice
    Business owners should consult an experi­en­ced advisor before making important decis­i­ons related to their business succes­si­on. These profes­sio­nals can provi­de valuable advice on asset protec­tion, tax manage­ment, trans­fer of owner­ship and other important issues related to succes­si­on planning.
  • Do not formu­la­te clear expec­ta­ti­ons
    When a business is trans­fer­red from one person to another, it is crucial that all parties invol­ved have clear­ly defined expec­ta­ti­ons regar­ding roles and respon­si­bi­li­ties in the new organi­sa­tio­nal struc­tu­re after the transi­ti­on. Without clear­ly defined expec­ta­ti­ons, conflicts can arise that can disrupt or delay the entire transi­ti­on process.
  • Ignoring poten­ti­al risks
    Entre­pre­neurs should also consider the poten­ti­al risks associa­ted with trans­fer­ring owner­ship of their business ? risks such as loss of control over decis­i­on-making proces­ses or poten­ti­al dispu­tes between family members over who will own what part of the business assets after the trans­fer is comple­te. By identi­fy­ing poten­ti­al risks related to their speci­fic situa­ti­on at an early stage, entre­pre­neurs can better prepa­re for and protect themsel­ves against poten­ti­al problems that may arise after the trans­fer. Similar concerns also need to be conside­red in relati­on to third parties.


In summa­ry, it is important to ensure a successful and smooth transi­ti­on from one manage­ment genera­ti­on to the next in a compa­ny. careful­ly plan and implement.

By follo­wing our recom­men­ded five steps, you can ensure a successful business succes­si­on. With thoughtful planning, businesses can ensure that the compa­ny remains healt­hy for genera­ti­ons to come.