Who will take over my succession?

The Chambers of Industry and Commerce advise about 30,000 entrepreneurs on the topic of succession every year. You are observing a shift in the direction that more people who want to hand over their business are getting advice than people who are interested in succession, right?

Exactly: The number of senior entrepreneurs who want to hand over a business and have sought advice from us on this was 79 per cent higher in 2019 than in 2010. In the same period, the number of people interested in succession has halved in our advisory service. So we are experiencing a strongly opposing development. At the same time, the topic of business succession is becoming more explosive: we are experiencing in Germany that the numerical ratio of seniors to juniors is shifting more and more in favour of the older age cohort.

Your last survey is from 2020 – what can you say about the time of the pandemic, how has the issue evolved since then?

The pandemic has led to a sharp drop in our consultations, which certainly also has to do with the fact that securing one’s livelihood was at the top of most companies’ agendas. We have recorded, for example, that since March 2020, 71 percent fewer senior entrepreneurs have contacted us about succession than in the same period of the previous year. But many CCIs also fear that the values of companies ready to hand over their business will fall, especially in those sectors that have been hit very hard by the pandemic. And then these companies will also find it harder to find a successor. If the time of a business handover is postponed, this often has financial disadvantages as well: The business is then already one or two years older, and if there has been less investment in market-oriented innovations, the value of the business also suffers.

How do you proceed if you cannot hand over a company within the family but want to find an internal solution?

First of all, you should be clear about the direction in which the company should develop. In industry, technical know-how is often particularly important. If you get an idea of which people who are already working in the company could be particularly good at driving these topics forward, you have initial approaches. Then it also has to be the right personality: Can he or she manage to lead a seasoned staff of experts in the workforce and steer them on the desired course? When you take over an established company, you are by no means sitting in a well-made nest; you have to bring a lot of entrepreneurial potential with you. The world is turning fast, many things are changing in a very short time. In terms of sustainability and digitalisation alone, we are experiencing a strong dynamic, and the international supply chains are reshaping themselves – you have to be able to manage all of this wisely and take the team along with you on the appropriate path.

When should the topic of business succession be addressed?

We recommend starting about ten years before you plan to retire. So if you want to retire at 65, you should ask yourself in your mid-50s where your own business stands, where investments might be needed or new customers should be acquired. About five years later, when the owner is about 60 years old, there comes a time when one can consider who might be a candidate for a takeover and, if necessary, draft a profile. Two to three years before the planned handover, at the latest, you should start looking for suitable people – there can also be several who take over the management responsibility as a team. In any case, it is important to develop the candidates’ professional skills in good time and to involve them in decision-making processes at the management level. And when the succession is initiated, this should also be communicated to the staff. A concrete roadmap of when which responsibilities will be transferred to the new management ensures clarity and smooth processes, prevents competence disputes and corresponding negative effects on the company.

In your experience, can entrepreneurs let go well in this process or are they strongly attached to their businesses?

The fact that letting go is difficult is something we experience very often. And even though this is all too understandable, it can have a negative impact on the company. Those who do not look for a successor in time may, as already mentioned, reduce the value of the company. Many owners also demand too high a purchase price because they factor in the effort and expense they have put into the company over the decades – a return on heart and soul, so to speak. Individually, this is very understandable. However, on the other side of the negotiating table sit interested parties for whom a company succession is also a life project. They naturally take a close look at what a company is earning on the market and what potential it has for the future. If the value of a business is to be determined, one can get support from tax or management consultancies or also from us, the Chambers of Industry and Commerce. I can always recommend such external advice because business succession is a very complex and unique situation, both in terms of business management and taxation – and it is also characterised by many emotions.

“When it comes to digitalisation, you shouldn’t just put people with the colour of my hair behind the wheel, but young minds,” said Roland Rüdinger, owner of Rüdinger Spedition from Krautheim in Baden-Württemberg, on the podium at the Wiehl Forum 2021. “If they already know a bit about how logistics works, then they just need some space and time, and then things start rolling, they have a lot of good ideas.” Rüdinger himself was born in 1962, and his company already celebrated its 90th anniversary in 2020. “The younger generation often also deals with digital topics in their private lives – that can be very valuable for the company.” Involving the next generation in decisions at an early stage, supporting them in the long term and giving them responsibility: in his eyes, this is what keeps a company fit for the future.