Demographic change is no longer an abstract prediction of the future, but is now a reality in the management levels of German SMEs. According to a recent KfW study "Ageing: an underestimated obstacle to investment in the SME sector", more than 54% of entrepreneurs in small and medium-sized enterprises (SMEs) are already 55 or older - and the trend is rising. This structural ageing has a serious impact on investment behavior, innovative capacity and ultimately on the economic vitality of companies. And one aspect is particularly problematic: company succession, which is often inadequately regulated.
Almost 80% of SMEs with older owners have negative net investments - they invest less than is lost through depreciation. Only 22% manage to increase their net capital stock. This substantially weakens the future viability of the company. This reluctance is primarily due to a shortened planning horizon. Many investments only pay off over several years. For entrepreneurs approaching retirement, long-term capital commitments appear risky or simply unattractive. Investments are therefore often not made at all or are limited to mere replacement purchases. The result: a systematic weakening of assets due to wear and tear.
Older entrepreneurs who settle their succession early not only create security for themselves, but also retain investments, strengthen their workforce and secure the future of their companies. The link between unresolved succession and a declining propensity to invest is well documented empirically. Companies with short-term succession planning (within two years) invest on average 32% less than SMEs as a whole. This decline reflects a double uncertainty: existing owners are less motivated to make new commitments, while potential buyers or successors often remain reluctant to invest if necessary investments are postponed. Conversely, as soon as a concrete succession plan is in sight or under negotiation, investment increases sharply. Companies in negotiations invest around 160% more, while completed succession plans even lead to investment intensities that are up to 270% higher than those of companies without concrete succession plans.
This finding makes it clear that dealing with the issue of company succession in a timely and concrete manner, and in case of doubt also by selling the company, is not only a question of strategic foresight and social responsibility, but also a factor directly relevant to investment.
If you are looking for a succession solution and are also considering selling your company, please contact us at any time, confidentially and without obligation.
You can find the KfW study here.
Time and again, we see successful entrepreneurs being asked directly and without any reference, "out of the blue" so to speak, whether they would be interested in selling their company....
Time and again, we see successful entrepreneurs being asked directly and without any reference, "out of the blue" so to speak, whether they would be interested in selling their company....
