Environment and Context
Digitalization, artificial intelligence, globalization, and our VUCA world: upheaval, speed, uncertainty, and complexity are on the rise. This raises many questions for entrepreneurs stemming from external factors: Where might your company be vulnerable? Could new competitors emerge from entirely different industries? And, of course: Where do opportunities lie for your company? Which products, markets, and innovations can you develop to boost your competitiveness, economic strength, and future viability?
The Significance of Your Company
A family’s control over a company—that is my definition of a family business. In some cases, this may take the form of a minority stake, but sole ownership is the norm. And 88% of sole-owner-owned companies in Germany are owner-managed.
Family-owned businesses account for 90% of all companies in Germany, 58% of all jobs, and 48% of corporate taxes. Those are the facts. I consider even more significant the impact that every single company and every entrepreneur—male or female—has on the culture of our society, on our willingness to take risks, and on the economic foundation of our lives.
We have 3.3 million businesses in Germany—what a responsibility, what significance each and every entrepreneur holds. It pains me every time a business exits the market and ceases to compete—whether through liquidation, insolvency, or an unresolved succession.
What can you do to secure your company’s future?
Economic success is the foundation of every company’s future. And yet I do not define economic success as an end in itself, but rather as the result of thousands of decisions. So: What are you doing for your customers, for your employees, for our society? And from this comes your added value, your success, your return on investment.
These considerations point to the necessity—indeed, I would say the obligation—to continuously review your business strategy—and this directly raises questions for you as a family business owner.
Ownership Structure: Who Bears the Responsibility?
My most important question when working with entrepreneurs is: “What will happen to your company if you were to crash into a tree tomorrow and die?” People often put off considering such a scenario—it’s important, yes, but not urgent. And yet I know many entrepreneurs who, thanks to some external motivation, have clarified these issues for themselves—and in some cases for their families—namely the question of ownership and the question of corporate governance.
These decisions are emotionally difficult, have great significance for every single family member, and harbor considerable potential for conflict. But what’s the alternative? I’ve seen too many cases where, for example, the children have ended up at each other’s throats when these questions weren’t answered before the entrepreneur’s passing.
Yes, unfortunately, I know of several cases where family members no longer speak to one another and communicate only through lawyers. The impact on the business is catastrophic. So: Who is the best possible owner for your business—and might that person be from outside the family? Taking responsibility for the future of your own business means, above all, taking responsibility for clarifying the issue of ownership.
Asset Allocation: How Can You Mitigate Risks?
The business often accounts for 80–90% of an entrepreneur’s net worth. How often have I heard: “I know best what’s going on in my company; that’s where I generate the best returns. Why should I entrust parts of my assets to banks when I can invest them more effectively in my own company?”
Now, banks aren’t the only option for investing assets outside your own business. The strategic question is: What portion of your total assets do you invest in your business, what portion in other companies, what portion in real estate, and what portion in liquid investments?
I am convinced that the answers should follow exactly this order. And: There is no right or wrong—and there will always be the armchair analysts who claim they knew beforehand what the right move would have been. It’s important to view the future—with all its opportunities and risks—as two sides of the same coin. Given the increasingly volatile market conditions, I believe greater diversification of assets makes sense.
Retirement Planning and Estate Planning: What happens if …?
Hopefully, the rather unpleasant “family tree question” regarding ownership has been clarified. And what about providing for your partner and children? My answer to that is usually: Enough should be set aside for your partner to live on, and it should be kept separate from your own business assets. And as for the children, entrepreneurs—indeed, parents in general—“owe” their children the opportunity for a good education—and nothing else.
In this context, the question of succession on the business management side inevitably arises—in my experience, today and then again and again. The explicit and/or implicit pressure on children to take over the business is psychologically understandable. Despite all the assurances to the contrary, I know exactly one entrepreneur whom I believe when he says he really doesn’t care about succession. Otherwise, I’m familiar with every entrepreneur’s dream that the company will remain in the hands of their own family—even, if necessary, for a time without family-owned management.
But: What child actually wants to be professionally active all the time? Who wants to “copy” their parents’ life? Such decisions require time, patience, the ability to tolerate uncertainty, and genuine openness on the part of the entrepreneur. As an entrepreneur, you can set an example by finding joy in your work and in shaping your own path, and by taking responsibility for yourself and many others.
Conclusion: Wealth
Ownership comes with responsibilities—and gives you opportunities to shape your life, hopefully bringing you joy most of the time. Creating something for yourself and others from your own diverse assets, and finding satisfaction in that—in my opinion, you can’t ask for more. It’s all about your assets.
