How early is early enough?

Starting your succession planning: How early is early enough?

Thinking about their succession plans in good time is one of the most important strategic tasks of every business owner.

Small and medium-sized business are a distinctive feature of the Swiss corporate landscape. Securing their continued existence is essential due to their economic relevance. That is why thinking about their succession plans in good time is one of the most important strategic tasks of every business owner. But how early is early enough?

Retirement, the desire to take on a new professional challenge or a decision made for strategic reasons: there are many varied and personally relevant reasons for having a succession plan. SME owners have several options open to them for passing on their business. Which solution is the right one depends on both the individual situation and the prevailing circumstances in each case. It is a question of which succession option is the most appropriate to best fulfil one's personal and business goals.

  • When a company is transferred within the family, this is referred to as a family buyout or FBO. Many business owners prefer this option because it means that their life's work lives on within the family. However, due to demographic changes and the widespread decline in people's sense of family duty, it is not always possible to pass on a company in the form of an FBO. A further consideration is that the successor must not only be willing to take over but also capable of doing so.
  • In the case of a management buyout or MBO, a company is sold to one or several of its senior executives. Suitable successors can thus be continuously trained up for the role and a sense of loyalty to the company can be developed at an early stage. As a result, the person taking over the company will be very familiar with it and a trusting relationship between successor and predecessor will already exist. However, if the person concerned lacks entrepreneurial skills, this can make the change of role from employee to owner more difficult.
  • If a company is sold to a third party outside the family and the company, this is referred to as a management buy-in or MBI. Potential buyers might be private individuals or other companies. The sales process takes an average of 12 months, which is a comparatively short time, and the selling price achievable is generally higher than is the case with the other types of succession. At the same time, transferring the company to an "unknown" buyer often involves considerable effort on the part of the seller and is emotionally challenging as a result. A clearly structured sales process is therefore indispensable.

Do you need to create a succession plan in the near future? Irrespective of which form of succession you decide to pursue, it is imperative, in every case, to take into account the time aspect. A time horizon of 5 years is considered the benchmark, but initial preparatory steps can definitely be taken much earlier. It is essential to create a clear picture of your wishes and plans at an early stage and also to establish the requirements of any other parties involved. Thus, it is important to clarify, for example, whether a potential successor is actually interested in taking over the business. Or are you thinking of passing it on to an employee? If you still have to find an external buyer, you will also need to plan for a sufficient amount of time to do so. A timely needs assessment will therefore form the foundation for preparing and implementing your succession. Because time pressure not only impairs your negotiating position, but can also compromise your entire succession planning. A carefully structured succession plan is time-consuming and calls for an organised process. Therefore, as the motto goes: the earlier the better Contact us today to make an appointment for a free and non-binding consultation.

Contact form.

Share this artice