Determining the appropriate approach for business succession planning is crucial to its success. Picking the right person to carry on the company can often be complex and is determined by many factors. Here we will outline some key considerations when choosing the route to pursue in business succession planning.
Keeping it in the Family
Many businesses in Germany are family-run, so it can be tempting to keep it within the family. Such a move also may seem like an easier decision for business succession.
The advantage of having a family member as an heir is that entrepreneurs can prepare their family members for running the company. They can get a clearer insight into what the heir may plan for the business going into the future. The advantage of keeping it in the family is that the successor may have loyalty to the company and be determined to maintain and grow the family company.
In families with more than one possible successor, decisions will need to be made on who the successor is or how the succession will occur. Early planning and open discussions need to be considered here, as late planning or a lack of a clear plan can lead to chaos.
Determine and consult with trusted advisors about which of your family members displays the required skills and aptitude to make the big decisions and bring the company forward.
On the succession front, it may be worth considering buy-sell agreements where heirs who are not interested in running the business can be bought out by those who are keen on it. Our lawyers can advise you on all the options available when planning for family succession and oversee the paperwork to make it a reality.
Passing to a Business Partner/Business Partners
Founding business partners have already demonstrated their qualities and abilities in running the business and may appear like a safe pair of hands for future business success. With close business partners, the advantage is that you can often trust them and determine their plans for the company going into the future.
Let our team advise you on the critical considerations in such a step. We recommend communicating with family members and those who may have considered themselves potential heirs to ensure that the reasons for the decision are outlined.
Our lawyers will support you in designing the necessary agreements with your business partners. As expert negotiators, our team will ensure that your aims are at the forefront of any plan. We will also conduct the necessary due diligence when determining the value of your business for the sale of your share to your business partner(s).
Business Succession Planning: Key Employee or Management
It is not uncommon for the person most able to take the reins of the company to be within the company itself. Identifying a key employee or someone within the management structure who can continue your work can be difficult.
Key considerations should be whether they have performed at a high level for a more extended time, have a consistent drive for success, possess the necessary leadership qualities, and commit to the company’s mission and values.
Should a key employee have the essential characteristics, experience, and track record to be considered a potential successor, it is vital to provide them with the opportunity to grow and give them crucial responsibilities at the right time.
An experienced employee can bring ideas from elsewhere into the business. Having dedicated their working lives to that industry, they may be best placed to acknowledge the current trends and future opportunities. Their fresh approach may be what your business needs going into the future.
As with all aspects of business succession planning, clear communication and a detailed plan must be considered. Impartial advice from outside sources is recommendable when making such decisions.
Selling the Company
Selling the company needs to be considered should no obvious successor present itself.
Selling the company can be difficult for entrepreneurs, especially when they have dedicated themselves to the success and growth of their business. The right sale can lead to you and your family benefiting from that hard work, allowing you to plan for retirement in confidence. However, selling a business can bring its own complications and is the most unpredictable of the above options.
Our lawyers will provide the expert guidance needed when selling a company. Our team will carry out the necessary due diligence to determine the value of your business and closely examine those interested in purchasing the company. Assessing your company’s value will consider vital aspects such as intellectual property, premises, and brand.
Also, remember that plans can change. Exploring the selling option does not mean it must be set in stone. The entrepreneur can implement alternative options if a successor emerges during the process.