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, “Aging: An Underestimated Obstacle to Investment in SMEs,” more than 54% of business owners 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, the capacity for innovation, and ultimately the economic vitality of these companies. One aspect is particularly problematic: the often inadequately planned succession of business ownership.
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.
