KfW: Around 100,000 German SMEs Seek Successor Annually
Approximately 100,000 of Germany's 3.8 million small and medium-sized enterprises (SMEs) are looking for a new owner each year. While two-thirds of short-term succession plans are already settled, a lack of new entrepreneurs persists.
Frankfurt am Main – Annually, around 100,000 German small and medium-sized enterprises (SMEs) plan to transfer or sell their businesses to a successor. This is according to a new analysis by KfW Research, the research institute of KfW, Germany's development bank. Although two-thirds of short-term succession plans by the end of 2023 have already been arranged, the primary challenge for companies lies in finding suitable successors.
The issue is expected to become more pressing in the coming years, as a continuously increasing number of business owners are reaching retirement age. Currently, 31 percent of business owners are 60 years or older, a threefold increase compared to two decades ago. Only one in ten owners is under 40 years old. This situation creates a "succession gap," stemming partly from demographic shifts and partly from a sustained decline in entrepreneurial interest.
The most significant hurdle identified by owners is the scarcity of suitable successors, a problem faced by 79 percent of SMEs. This succession gap is a structural issue driven by smaller succeeding generations and a persistently low rate of new business formations. The second most cited obstacle is reaching an agreement on the purchase price, which affects 34 percent of companies.
The preferred method for succession remains an internal family transfer, favored by 53 percent of businesses. This is followed by sales to external parties (45 percent) or to employees (26 percent). However, family transfers are increasingly complicated by smaller successor generations and evolving career paths.
Dr. Fritzi Köhler-Geib, Chief Economist at KfW, emphasizes the ongoing importance of business succession: "The question of company succession continues to be a top issue for German SMEs. The existing succession gap means that many businesses may face unplanned closures. Early and thorough consideration of all available alternatives will increasingly become a key factor for success."