German Small Businesses Face Rising Risk of Closures Due to Succession Shortfalls
KfW research reveals that an increasing number of German small and medium-sized enterprises plan to cease operations as owners reach retirement age.
One in four small and medium-sized enterprises (SMEs) in Germany is considering closing operations following the retirement of current owners. Data from KfW indicate that up to 114,000 businesses could be liquidated annually through 2029, marking the first time that projected closures outnumber plans for business succession.
Age demographics are a driving force, with 57 percent of business owners now aged 55 or older—a notable increase from 20 percent two decades ago. Among those planning closures, 47 percent cite a lack of interest from family members to continue operations, while 42 percent point to excessive bureaucratic requirements. KfW chief economist Dr. Dirk Schumacher stated that securing the future of these companies is vital to German economic competitiveness and that resolving succession issues is essential to encourage further corporate investment.
Financial hurdles also complicate the landscape, as price expectations for business sales have risen significantly. Owners targeting a succession within five years now seek an average price of 499,000 euros, compared to 372,000 euros six years ago. This increase, which outpaces inflation, suggests that bridging the valuation gap between sellers and potential buyers has become a significant obstacle to maintaining business continuity.