Basel II and III have once again brought the issue of succession to the forefront, yet intra-family business succession has lost a great deal of popularity in recent decades. Often, heirs lack the necessary skills to continue running the business, or simply have entirely different plans for the future. This presents an opportunity for external buyers to take over these companies and dive right in with motivation and innovative drive.
Taking over a stable company as a successor and strategically expanding it over the years seems like a logical and promising decision. Yet this opportunity is still far too rarely taken advantage of, even though, according to the KMU Next Foundation, it offers a success rate of about 95 percent. Instead, starting a business from scratch and building it up independently still ranks high on the wish list of entrepreneurs, especially young entrepreneurs—even though around 80 percent of newly founded companies fail.
Starting a New Business vs. Succession: Advantages of a New Startup
Starting from scratch—this prospect seems less daunting than one might initially assume. The consistently high number of new startups speaks for itself. But what advantages does this offer founders and young entrepreneurs?
• Putting their own visions into practice instead of conforming to existing structures and plans—for founders, this means maximum freedom and flexibility, rather than having to deal with legacy issues or historical obligations
• There are numerous funding programs, startup competitions, and more to help establish a solid financial foundation. Furthermore, there is a vast array of consulting services available, and new founders also benefit from tax advantages
• The leader can grow alongside the company—there is still plenty of time and room for development
Starting a Business vs. Succession: Disadvantages for Founders
While starting a business offers some advantages, it also comes with numerous risks that should not be overlooked. These include, among other things, the following factors:
• A customer base must first be identified and acquired, and ultimately retained through tailored products or services
• General market access is also a hurdle, as partners and suppliers must be found and networks established and expanded
• The succession problem, which persists due to a steady stream of new startups, could cause lasting damage to the economy or, at the very least, prevent Germany from strengthening its position as a business hub
• It takes capable employees and well-coordinated teams to lead a company to success—it can sometimes take a long time to build a satisfied, competent, and compatible workforce
• When starting a new business, cash flow is not guaranteed—financing, fundraising, and similar measures are often necessary to cover all initial and ongoing expenses over a certain period of time
• There are bureaucratic tasks involved in starting a business that cost time, money, and resources—these include permits, patents, and similar requirements
