Selling an SME: In light of demographic change, succession planning is becoming an increasingly important strategic challenge for many small and medium-sized business owners.
Demographic change is no longer an abstract forecast for the future, but has now become a reality even in the executive suites of German small and medium-sized enterprises. According to a recent KfW study titled“Aging: An Underestimated Obstacle to Investment in SMEs,”more than 54% of entrepreneurs in small and medium-sized enterprises (SMEs) are already 55 years old or older—and the trend is rising. This structural aging has serious implications for investment behavior, innovation capacity, and ultimately the economic vitality of these companies. And one aspect is particularly problematic: the often inadequately regulated issue of business succession.
Nearly 80% of SMEs with older owners have negative net investment—they invest less than the amount lost through depreciation. Only 22% manage to increase their net capital stock. This substantially undermines the company’s long-term viability. This reluctance is primarily due to a short planning horizon. Many investments only pay off over several years.
For business owners approaching retirement, long-term capital commitments may seem risky or simply unattractive. As a result, investments are often avoided altogether or limited to mere replacement purchases. The consequence: a systematic erosion of the business’s value due to wear and tear. This is precisely why the issue of selling SMEs and succession planning is becoming increasingly important from a strategic perspective for many business owners.
Older business owners who plan their succession early on not only provide security for themselves, but also attract investment, strengthen their workforce, and secure the future of their companies. The link between unresolved succession planning and a declining propensity to invest is well documented by empirical evidence. Companies with short-term succession plans (within two years) invest, on average, 32% less than small and medium-sized enterprises as a whole.
This decline reflects a twofold uncertainty: existing owners have little incentive to take on new commitments, while potential buyers or successors often remain cautious when necessary investments are postponed. Conversely, as soon as a concrete succession plan is in sight or under negotiation, investment levels surge. Companies in negotiations invest approximately 160% more, and finalized succession plans even lead to investment levels that are up to 270% higher than those of companies without concrete succession plans.
Please feel free to contact us at any time—in complete confidence and with no obligation—if you are looking for a succession plan and are also considering selling your business.
For small and medium-sized business owners in particular, early and structured planning is crucial to securing the long-term value of the business and preparing for a successful transition. Anyone looking to sell their business should not wait until just before retirement to begin succession planning.
Timely preparation provides clarity, strengthens your position with potential buyers, and increases your chances of securing the best possible terms for the transaction. Together, we will analyze your unique situation, develop tailored succession solutions, and guide you discreetly through the entire process. Throughout this process, the long-term future of your business, the interests of your employees, and your personal goals will always be at the heart of our advice.
You can find the KfW study here.
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