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Demographic trends pose major challenges for the skilled trades sector, not only in terms of securing a skilled workforce but also in finding successors to take over businesses. An increasing number of self-employed master craftsmen and women will be retiring in the coming years, while at the same time the number of potential successors is declining. In approximately 125,000 skilled trades businesses, business succession will be necessary over the next five years because the owners are retiring due to age. Looking ahead, as many as 45 percent of business owners who are currently over 50 years old will hand over their businesses in the next ten to 15 years. However, only about one-third of master craftsmen and women actually decide to take the step toward self-employment, as the Research Institute for Vocational Training in the Skilled Trades (FBH) at the University of Cologne found.
While the majority of business owners still hand over their businesses within the family, this happens less often today than in the past for various reasons. Therefore, there will be an urgent need in the coming years for young master craftsmen and women who are eager to become self-employed and are ready to run their own businesses.
Fear of Bureaucracy Deterring Self-Employment
However, excessive bureaucracy is holding many newly certified master craftsmen and women back from taking the leap into self-employment—even though this was their stated goal and often even their primary motivation for earning the master craftsman title. In an FBH study, a good quarter of all master craftsmen and women stated that they were deterred from self-employment by a “fear of paperwork.” This trend is particularly concerning, as suitable successors are already difficult to find.
Succession exchanges help with the search
Today, there are numerous opportunities to take over a business without having to start one from scratch. Anyone looking for a successor can contact the business advisory offices of the 53 Chambers of Crafts or the trade associations.
Advantages of taking over a business: The workforce is already in place
Those who take over an existing business benefit from many advantages: the workforce is already in place, the machinery and equipment are ready to use, and there is an established customer base. Taking over a business means preserving jobs and valuable expertise while also offering the opportunity to further develop the company. Especially given the shortage of skilled workers in the skilled trades, it is a definite advantage when the business already has experienced employees on staff.
Challenges of Business Succession
There can be many reasons why it may still be difficult to find a successor for a skilled trades business in individual cases. Bureaucratic hurdles, complicated transfer procedures, or unrealistic asking prices can hinder the process. An unattractive business location or low return prospects can also be obstacles. It is important to prepare for business transfers well in advance. Business owners should clarify succession plans within the family or within the company itself in a timely manner, or look for successors externally.
According to the 2023 FBH Graduate Study, around 40 percent of the self-employed individuals surveyed had taken over an existing business, while about 60 percent had opted to start a new one. This shows that the potential for business takeovers could be leveraged even more to future-proof the skilled trades sector. There is still room for improvement.
