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Fit for the succession
The process of succession is not just about finding a successor, but involves long-term planning and some preparation. There is no patent remedy for this. However, it is possible to take precautions in advance to facilitate the succession.
Early planning
The search for or establishment of a successor ties up a lot of resources, but planning should nevertheless begin early. Is a restructuring of the sole proprietorship into a company planned before the handover to the successor? Then a 5-year lock-up period must be observed. Only after the expiry of this period can the company be transferred to a third party without damage. The following measures also require sufficient lead time.
Substantially facilitate the company
Financing the succession is often difficult. Can the purchase of the company be financed at all? Real estate in particular increases the price considerably. In order to facilitate the succession, assets that are not necessary for the business, such as the management's vehicle or real estate (which is held as investment property), should be withdrawn from the company. The withdrawal of a mixed-use property (business and private residence in the same building) should also be examined. However, the various withdrawals can have various tax consequences. The private withdrawals can lead to VAT demands on the part of the Federal Tax Administration (own consumption tax for sole proprietorships, turnover tax for companies).
Improve operational profitability
Larger companies with several divisions can also reorganise within the company. Unprofitable business branches can be dissolved or spun off. This can make succession more attractive. Higher profitability increases the value of the company and a higher sales price can be achieved. Such strategic decisions must be made early on, as the implementation of the measures can take months or years.
Measures can also be taken without dissolving or spinning off branches of the business. It is advisable to invest more in the post-calculation of orders in order to find out which orders are profitable and where there is potential for improvement. In this way, forces can be bundled in profitable orders. However, this is not possible in every case, as sometimes unprofitable work has to be done to procure orders or to utilise capacity.
Building a powerful team
A well-coordinated team with well-distributed know-how is essential for a succession. Regardless of whether the succession takes place within the company, within the family or externally. With a stable basis, nothing stands in the way of the company's future success. If the outgoing manager combines know-how and customer contacts in one person, the handover is made unnecessarily difficult. The employees or the successor should be introduced to their new work at an early stage. Contacts and competencies should be transferred at an early stage in order to strengthen the clients' confidence in the future of the company. We recommend planning the transition thoroughly. How long will the outgoing management remain with the company? What activities does she take over during this time?
Adjusting the financing ratios
In addition to the adjustment of assets not required for operations, the situation on the liabilities side should also be simplified. We recommend dissolving or repaying internal family loans and complex cross-financing in advance so that the company can start the future without worries.
Conclusion
A successful succession requires a lot of foresight, good planning and great commitment from all involved. Every business takeover is individual.
We are happy to support you with solutions that are tailored to you and your business. Succession planning rarely starts too early. We are ready to start the final chapter of your business with you.
This article has already appeared in CORE Newsletter 31 of June 2022.
