Succession in family businesses – Practical experience

Handing over your own company is a challenging topic. Many entrepreneurs struggle with succession. Even when they address it early on, as one of our clients did: Frank S., a mid-sized business owner in his early sixties, had started dealing with the subject of succession in his mid-50s. He was well ahead of the curve. It had been clear early on that his only son would not take over the company. So, what was the next step? Sell the company? To ensure he made all the right moves in this complex decision, Frank S. brought in an expert.

Succession has (too) many facets

In the time that followed, many options were opened up and many potential solutions were developed. The seasoned entrepreneur found it very difficult to decide which path was the right one for him. Inquiries and discussions with the expert led to even more possibilities and variations. For the entrepreneurial family, the "succession" chapter thus became an increasing burden. It was an unsatisfactory, long-winded, and exhausting process for everyone involved. It wasn't just the question of "to whom" the succession should go that was hard to grasp, but also the "how." In the end, there was a lot of analysis and discussion. And nothing happened. The feeling of "we can't pull this off" overshadowed the otherwise well-functioning day-to-day business. This is where we entered the process, and it quickly became clear: there was an urgent need for focus to prepare and make a decision.

Focus on objectives

Of course, identifying an individually suitable succession solution is not easy: intra-family succession, sale, MBI, MBO as a succession solution, or external management. These are just the major questions, which branch out into many sub-topics as things become more concrete. That is why we at THE MAK'ED TEAM place great importance on a structured approach. Because no matter what the individually optimal solution looks like, one thing is clear: you cannot keep all your options open (even) during a succession process.

Structured succession processes

Subsequently, we used a systematic approach to develop a succession solution that is viable and satisfactory for the entrepreneur, the entrepreneurial family, and the family business. To achieve this, Frank S. and his family engaged intensively with their ideas and wishes for the future. And initially, this was completely independent of technical questions regarding succession and practical implementation, but with a clear focus on the question of which constellation could create satisfaction. The family spoke with us a great deal about their identity as an entrepreneurial family, and it became clear that they wanted to remain one. Thus, the option should be kept open for the two daughters of his only son, who had pursued a successful career in another industry, to lead the family business in the future.

‍

After Frank S. had previously always felt the need to keep one or two options open, the succession planning was now clearly focused on a goal that is being consistently pursued. The earlier, the better. Because everything requires systematic preparation geared toward the company to make the succession step successful and secure the company's future viability. In succession management, long before the generational change, this can involve, for example, the acquisition of skills by the next generation of leaders. Or relevant details that must be considered in the future circle of shareholders. Whatever the succession looks like in a given company: in most cases, it entails a complex task that can, however, be well managed with a clear objective. THE MAK'ED TEAM therefore works not only with broad expertise. We also accompany succession processes with the necessary sensitivity. Our structured approach has already proven itself in many succession processes. In the case of entrepreneur Frank S., the intra-family succession shifted to the shareholder level, while an external managing director was appointed. In preparing this step, the interaction between the circle of shareholders and the external management was designed, as was the transfer of company shares to Frank S.'s son and his children. Furthermore, steps were defined for how the daughters could prepare for a potential role in company management over the coming years. The time until the next decision—whether the entrepreneur's granddaughters might take over management—is bridged. To this end, the right managing director was sought, and the management team within the company had its skills further developed.

Our mid-sized client Frank S. is one example of many. We repeatedly observe that the succession process drags on because many entrepreneurs find it very difficult to make a decision—the right decision. In succession processes, THE MAK'ED TEAM focuses on an approach intended to provide the entrepreneur with the necessary clarity about their goals and what is feasible in the end. This creates a good foundation for preparing and making decisions.

You can find more on succession here.

‍