Nils Koerber Discusses the Challenges of Business Succession
More than a million family-owned businesses will need to find a succession solution in the coming years. Surely most business founders would prefer succession within the family—or have you had different experiences?
Nils Koerber: Yes, I would generally confirm that there is a very strong desire for succession within the family on the part of those handing over the business. At the same time, however, there is increasing reflection on both sides—among those handing over the business and those taking it over—as to whether this is truly the best solution for everyone. And so, understandably, there is more freedom and open discussion surrounding this weighty life and business issue.
What if your own child doesn’t want to take over at all or simply isn’t suited for the role?
Nils Koerber: In individual cases, that’s a truly painful realization for a father and/or mother. It’s important to address this and establish clarity early on. Because then external solutions must be sought, and those, first and foremost, take time.
The legal and financial hurdles of business succession can be resolved. But what if the owner isn’t yet mentally ready to hand over the business to someone else?
Nils Koerber: Then it becomes truly challenging. After all, the younger generation—and possibly also an external successor who wants to gradually acquire a majority stake—wants to be able to act independently and on their own responsibility. Having too many kings in one kingdom—that is, one company—is really not conducive to success. This calls for a sensitive and focused dialogue that should establish the terms of the handover through written agreements.
You advise many companies on business succession. When is the right time to let go?
Nils Koerber: Oh dear, that’s of course completely different for every business owner handing over the reins. There’s no universally applicable guideline for this. What’s crucial, however, is that every handover process—whether internal or external—really takes a lot of time. According to studies by the Chamber of Industry and Commerce (IHK), on average up to three years. So if I’ve set a target date for myself, I need to realize that the work is only just beginning, and rushing things will lead to mistakes and a loss of value.
From your experience as a consultant, can you give an example of a handover that went particularly well?
Nils Koerber: Yes, there are always succession cases that turn out exceptionally well and can truly serve as examples. The most important factors for a successful handover are inner clarity (what do I want and how…), commitment (please put everything—absolutely everything—in writing…), and lots and lots of communication. Sometimes it also helps to bring in an external “interpreter” to address the concerns of both sides.
The COVID-19 crisis will hit German small and medium-sized businesses hard. And with it, countless entrepreneurs who have spent decades building their companies. What’s your advice now? Is it better to wait until the economic situation possibly stabilizes, or to take the plunge?
Nils Koerber: Both approaches are valid. It really depends on the company’s specific situation. If the company was in good shape before the pandemic and its business model will remain viable during and after the pandemic, then there’s likely little standing in the way of a succession plan at this time. Even the company’s value will remain stable. However, if a trend toward more difficult times had already become apparent before the pandemic, or if the business model is likely to face problems in the post-pandemic era, then it’s best to wait and see how the situation develops and prioritize stability. It may then take another 1–2 years to be able to present a sound financial picture for a successor.
You’ve written a book on “The Art of Letting Go in Business Succession.” Who should read your book? Might it also help the new successor better understand the fears, hopes, and concerns of the entrepreneur who now has to hand over “his” company?
Nils Koerber: Absolutely. The book is an inspiring guide for both the transferor and the successor, offering insight into the background, perspectives, and obstacles faced by business owners. In my view, it’s beneficial for both sides to understand one another and, in doing so, to gain inner clarity about their own goals. And the book is a great gift idea for all business owners who are about to embark on or are currently in the process of finding a succession solution.
Let’s be honest—you’re an entrepreneur too. Have you given any thought to your own succession yet?
Nils Koerber: Yes, very specifically (laughs). In fact, as a shoemaker, I don’t want to end up with the worst last. At KERN—our consulting brand for family businesses—we’ve set up a program that will broaden the shareholder base in the future and thus secure the company’s future independently of me personally.
