Business Strategist Fabian Zamzau assists entrepreneurs in effectively and securely bringing their life's projects to fruition through Otter Consult.
For entrepreneurs facing the challenge of passing on their businesses to the next generation, managing this transition professionally is crucial. Here's a guide to help entrepreneurs create a successful and structured succession plan.
Develop a Comprehensive Succession Plan
A comprehensive succession plan is the cornerstone of a smooth transition. It should outline the business's vision and goals, assess current leadership and potential successors, and include development programs for successors. The plan should clearly define the criteria for selecting successors, timelines for leadership transitions, and contingency plans for unexpected events.
Establish Governance Structures
Implementing advisory boards or family councils that include both family members and external advisors can provide oversight, ensure compliance, facilitate communication, and manage conflicts during the transition. Such structures help balance family interests with professional management needs.
Facilitate Open Communication
Regular and transparent discussions with all stakeholders—family members and employees—help manage expectations, reduce conflicts, and ensure that everyone understands future roles and the company vision.
Develop and Train Successors
Current leaders should mentor the next generation, providing guidance beyond business skills—including understanding legacy and family values. It is beneficial to include external mentors or advisors who bring objective perspectives and broaden successors' leadership capabilities outside of family dynamics.
Consider Both Internal and External Succession Options
While internal succession is often preferred in family businesses, external candidates or interim professionals such as finance directors can provide objectivity, help train successors, and ensure a smooth transition.
Regularly Review and Adapt the Plan
Circumstances such as changes in family dynamics or business conditions require periodic updates to the succession plan to keep it relevant and effective.
Address Tax and Legal Implications
Succession planning should also include strategies for tax minimization and legal compliance to protect the business’s continuity and financial health.
Seek External Support for a Smooth Transition
Those who act promptly and seek external support increase the chances of a smooth transition—both economically and personally. Fabian Zamzau and Michael Polit of Otter Consult GmbH guide entrepreneurs through the succession process with a clear roadmap, professional partners, and a focus on the essentials.
Embrace Flexible Models for Complex Cases
In complex cases, flexible models like earn-out arrangements or seller financing can play a crucial role in making the transaction possible. Hybrid handover models can be beneficial in industries with mandatory certification, such as a journeyman acting as a business leader while the outgoing master continues to advise the company.
Avoid Unrealistic Expectations and Be Discreet When Necessary
Unrealistic price expectations or a one-sided customer structure can be off-putting to potential buyers. Developing a communication strategy that fits the situation and company culture is recommended. In some cases, a discreet search for a successor through experienced M&A advisors is recommended.
By following these steps, entrepreneurs can professionally navigate generational change, preserving the business legacy while adapting to future challenges.
- To ensure a successful and structured succession process, entrepreneurs should develop a comprehensive succession plan that outlines the business's vision and goals, assesses current leadership and potential successors, and includes development programs for successors.
- To balance family interests with professional management needs during the transition, establishing governance structures such as advisory boards or family councils comprising both family members and external advisors can provide oversight, ensure compliance, facilitate communication, and manage conflicts.
