Is business succession really more challenging than starting a new business? What do they have in common?
First of all, both endeavors require three well-developed competencies from aspiring entrepreneurs: the technical knowledge appropriate for the company and the industry, a business and commercial understanding, and the often-underestimated entrepreneurial skills such as decisiveness and leadership. After all, in both cases, the focus is on the company’s development and long-term viability.
Why is succession more challenging and better?
Good reasons for business succession in small and medium-sized enterprises as a viable alternative to starting a new business
First things first.
The business—the foundation, and usually a secure one—already exists and “works.” It has a presence in the market, the products and services are in place, ideally a functioning network of suppliers and partners, and the customers are there. Furthermore—and this is central to future viability—there are employees with knowledge and skills. In a succession, entrepreneurs start by building on what’s already there rather than starting from scratch. That saves time, effort, and often a lot of money.
A solid foundation
This is essential for any development, for any change. The existing company provides a strong platform for the necessary changes. A major advantage is that successors can identify weaknesses with an unbiased perspective and transform them into added value for everyone. This is because all employees are then more likely to pitch in quickly. Furthermore, with their new ideas and skills, they can improve processes and the product portfolio and continue to ensure the company’s stability.
It Won’t Work Without a Team
If successors manage to integrate into the company in a respectful yet persuasive manner, building trust and fostering open internal communication, they will quickly allay employees’ fears of change. If they also succeed in demonstrating the benefits of this new style of leadership, they can count on a strong team well into the future.
Knowledge and Experience as Keys to Success
The risk of making poor decisions decreases significantly, as successors gain a solid understanding of day-to-day operations and external factors right from the start. This insight involves systematically drawing on both the in-depth knowledge and the experience of the handover leaders and key employees over an extended period of time. This further strengthens team cohesion—something that is typically not possible when starting a new business.
Digital Transformation Supports the Succession Process
Appropriate digital transformation is central to securing the future of any medium-sized company, because only those who can digitally map their business processes will remain competitive. In a business takeover, many existing processes do not need to be “reinvented,” though they certainly must be subjected to a thorough review. In this way, process analysis and documentation also serve as the foundation for a systematic digitization process. Furthermore, digitizing existing processes gives them new momentum. It’s a win-win-win!
Time is money—and it can be saved
Stepping in as a successor to an existing company offers the opportunity to immediately join the ongoing business and enter the profit zone. This is because, with few exceptions, starting a new business means overcoming a certain financial slump during the initial period until the business becomes profitable. Speaking of money: One factor that’s often overlooked is financing all aspects of the business, which is much easier because the company often has a long-standing relationship with its primary bank.
What’s more drastic and difficult?
Succession is not only a highly emotional matter but also one of the biggest changes in the lives of entrepreneurial families, employees, and the company itself.
And this is true regardless of whether the handover is within the family to the next generation, within the company to the workforce, or a sale to external third parties.
It’s always about values: assets, family values, social values, and a responsibility that extends far beyond one’s own existence.
People in the company have often been working there for many years, and the structures have often been in place just as long. What’s needed here, above all, is respect for what already exists and the courage to change things—with patience and the drive to make it happen.
This is “more daunting” than many of those involved initially imagine, and the major challenge—for both women and men—in succession planning lies in preserving what already exists while simultaneously guiding it into the future. For it is precisely here that the often underestimated interpersonal factors and unspoken emotions and sensitivities can—as if “out of nowhere”—stand in the way of both the person handing over the reins and the successor, and thus hinder a successful transition.
My conclusion: the advantages of a succession outweigh the disadvantages. Both successors and those handing over the business take on this responsibility, secure existing jobs, and strengthen Germany’s small and medium-sized enterprises.
