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Risk of Failure in Small-Medium Enterprise Succession Planning

Small- and medium-sized enterprises (SMEs) in Germany face a significant issue: Approximately 400,000 SMEs are expected to encounter the problem of succession by 2027, as stated by KfW. Many entrepreneurs tend to disregard the potential risks involved in an impromptu transfer of business...

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Small- and medium-sized enterprises (SMEs) in Germany face a looming issue: Approximately 400,000...
Small- and medium-sized enterprises (SMEs) in Germany face a looming issue: Approximately 400,000 of these businesses are expected to undergo generational change by 2027, as per KfW. However, numerous business owners fail to recognize the risks of an ill-prepared succession. If this transition is not managed effectively and in a timely manner, it may lead to the shutting down of numerous businesses, as well as...

Title: Navigating Succession in Germany's Medium-Sized Businesses: Tips from the Experts 💰🇩🇪

Risk of Failure in Small-Medium Enterprise Succession Planning

A looming issue for Germany is the impending succession of around 400,000 medium-sized businesses by 2027, as per KfW. Unplanned successions could result in thousands of job losses, business closures, and economic disruptions in the region. To help entrepreneurs tackle this daunting task, the "Succession Planning Guide 2025" has been published.

This comprehensive guide offers practical advice and deep insights into all phases of the succession process, from strategizing to execution. Ayse Mese, the editor of the book, explains, "A well-structured succession process is critical to ensure the long-term survival of a company."

Twelve renowned experts, including Deloitte, FalkenSteg, and GÖRG, have contributed their expert knowledge, providing valuable guidance throughout the entire succession process.

Interested in digging deeper? Ayse Mese is more than happy to discuss common challenges, success factors, and potential solutions in succession planning.

About the Editor: Ayse Mese is the CEO of DUB.de GmbH, DUP Media, and JDB Holding. DUB.de, Europe's leading succession platform, has been assisting small and medium-sized enterprises since 2011.

For more information, contact DUB.de at Schanzenstraße 70, 20357 Hamburg, or email: [email protected].

Now, let's explore some expert insights and recommendations:

Expert Insights 💡

  1. Identify Successors Early: A successful succession plan requires early identification and development of potential successors. This involves providing training and experience across various business aspects.
  2. Foster Family Participation: In family-owned businesses, family participation plans provide clarity on roles, expectations, and succession paths. These plans should address job responsibilities, management roles, compensation, and exit strategies.
  3. Engage Outside Advisors: external experts can offer valuable insights and guidance throughout the succession planning process.
  4. Address Stock Transfer and Valuation: In family firms, succession plans must include details on stock transfer or redemption upon shareholder death, defining permitted transferees, valuation methods, and payment terms.
  5. Separate Personal Identity from Business Status: Effective succession requires a clear separation between a leader's personal identity and the business's status, preparing the incumbent to let go of control.

Challenges and Recommendations 🛡️

  1. Importance of Succession Planning: Inadequate succession plans can lead to poor leadership performance and negative business outcomes.
  2. Medium-Sized Business Challenges: Medium-sized businesses, such as Germany's Mittelstand, face significant succession challenges due to their size and familial nature, requiring careful planning for continuity and growth.
  3. Balancing Tradition with Innovation: Family businesses must balance traditional values with modern innovation to sustain generational wealth and adapt to changing business environments.

For German medium-sized companies, incorporating these recommendations into their succession plan can help ensure a smooth transition and maintain competitiveness. This involves engaging in strategic planning, fostering intergenerational communication, and adopting a holistic approach that addresses financial, legal, and personal aspects.

In the realm of finance and industry, a well-structured succession plan is paramount for the long-term survival of medium-sized businesses, as these organizations are set to undergo succession by 2027. To tackle this issue, experts recommend early identification and development of potential successors, engaging outside advisors for valuable insights, and balancing tradition with innovation to sustain growth.

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