A few years ago, a rather unusual “cake fight” erupted over the frozen-cake manufacturer Coppenrath & Wiese. With the death of the company’s patriarch, Aloys Coppenrath, in 2013, the successful medium-sized business was thrown into a leadership crisis. This was because none of his children wanted to commit to the company long-term. This, in turn, led to a family feud that for a long time made business decisions impossible. It’s an example that speaks to many companies: Owners wait too long to plan their succession. German small and medium-sized enterprises are facing a generational transition. One in three company leaders is now in their mid-50s or older. According to estimates by the Institute for SME Research in Bonn, approximately 27,000 entrepreneurs will need a successor each year through 2018.
MAKING THE MOST OF TIME
Time is a crucial factor in a successful handover. Experts estimate that the transition phase will last three to five years. “An entrepreneur can’t start succession planning early enough. A handover takes several years from the initial consideration to implementation. Therefore, an entrepreneur should make this a top priority by the time they reach their mid-50s at the latest,” says Christoph Weigmann, a partner at the management consulting firm K.E.R.N.
Business succession is extremely complex. This is reason enough to seek help from experts such as management consultants, tax advisors, and attorneys. An outside perspective is indispensable, particularly when it comes to realistically assessing the value of the business.
Another advantage: Differing positions among the parties involved—which can complicate the succession process—can be reconciled more easily with professional support. “In many cases, the business handover fails due to differing visions for the company’s future. The necessary ‘harmonization’ of the various stakeholder groups and their expectations generally requires external support,” says Dr. Norbert Wieselhuber, founder of the management consulting firm Dr. Wieselhuber & Partner.
FAMILY FIRST?
It is no longer a given that a son or daughter will take over a family business after the senior owner steps down. The next generation of entrepreneurs does not view succession as a “family automatism,” according to a report by the DIHK. Senior owners should therefore think outside the box. “Business owners can only find a suitable successor by keeping an open mind in all directions. Too often, alternatives to succession within the family—such as hiring external executives or selling the business—are not considered. Fundamentally, the best person should lead the company so that it can remain competitive,” confirms Wieselhuber.
Once a suitable candidate has been found, the senior and junior leaders should plan the handover phase together. This must be well thought out but should not take too long. This is because responsibilities often overlap during this period, which can cause confusion within the company and among business partners. And then it’s time for the former boss to let go. For the successor and the company, however, this presents an opportunity for a fresh start. Wieselhuber adds: “Without the heavy burden of the past’s baggage, but instead with fresh motivation and new approaches, the path to new horizons becomes easier.”
