Familial Succession Processes
Which entrepreneurial type are you?
In American literature, four basic types of Succession Processes regarding family businesses are very demonstratively distinguished from one another:
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The Monarch
This type of business owner is removed from power by a "coup d'état" and more or less forced into retirement.
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The General
This type of business owner is ousted from his position of power, but plans his "heroic" return to previous glory and plots with corresponding vehemence.
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The Ambassador
This type of business owner plans his departure voluntarily and ahead of time and furthermore makes himself available in a consulting capacity to the successor.
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The Governor
This type of business owner plans his departure and the transferal voluntarily and ahead of time in order to separate completely from the company. Then he dedicates himself completely to another main occupation in a business and/or corporate role.
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While in the U.S., most business owners already carry out the Succession Process when they are in their fifties, most German business owners are still at the helm on the average until they are in their seventies. Then often great haste is necessary, the familial successor is not present, not appropriately trained, not yet ready to take over and/or simply not interested (anymore).
"When one is fifty, one observes that one's energy is subsiding; when one is sixty, the others recognize it also; when one is seventy, only the others will recognize it," so goes the self-critical acknowledgement of a business owner. It is sometimes dramatic to watch the step-by-step decline of a flowering company. Formerly successful business owners fail to utilize the perspective in their own affaires that they otherwise possess in business affaires.
The Succession Process of the company is a complex process in which many aspects have to be taken into consideration. In addition to the psychological questions regarding the right successor, the worry to see one's life's work ruined by others in a short time, there are familial questions to consider, including the difficult areas of family and inheritance rights. Finally, a formation which is ill-considered may lead to very unfavorable results with respect to taxes. In particular the tax law demands an intelligent and long-term solution which is thought out in a timely manner, even if the company will be sold only in a few years.
The following recommendations apply to succession for the business owner:
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The succession question has to be recognized early. |
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A familial succession solution has to be discussed and analyzed in the family by the "family council". |
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If necessary, a qualified consultant may be helpful as a moderator for making decisions within the family. |
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Important questions, such as the takeover of legal and business power but also the responsibility connected with it, must be discussed openly and cleared up in advance. |
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Well-directed specific precise theoretical and practical training of the successor and the obtaining of experience outside of the family business are important requirements for success. |
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Clear communication of the agreed/decided succession process in the business. |
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Reciprocal respect and tolerance prevents having to deal with familial conflicts in the business. |
M & A Strategie GmbH supports you comprehensively to find a suitable solution for your succession which is specific for the business owner and the business.
The commissioning of consulting services should certainly be carefully considered on the part of the business owner. The costs of a well-founded consultancy and support of a Succession Process nevertheless outweigh in all cases by far the costs of a failed succession. Such support prevents a significant destabilizing of the business through expensive and nerve-racking years'-long inheritance disputes which are usually inevitably connected with a paralyzing of all important business decisions.
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