Impact of business succession in a corona crisis

The corona pandemic is causing family business owners to reflect more on their succession. This is shown by research by Nyenrode Business University. Farmers are the family businesses par excellence. That is why the results are interesting.

The research was conducted among larger SMEs and is equally interesting for farmers. The statement 'the current corona crisis is a reason for me to think about succession earlier' was less confirmed in April than in July 2020. The lockdown is likely to have a reinforcing effect on entrepreneurs' personal reflections on the future. Roberto Flören, who holds the chair of 'Family businesses and business transfer' at Nyenrode, states: "Entrepreneurs realize more than before that life is less malleable than previously thought."

Underestimation of business succession
Nyenrode previously investigated business succession in family businesses, the results of which are current. Strangely enough, a majority of entrepreneurs are still not involved in business succession. This also applies to entrepreneurs who are almost ready for their retirement. One reason for this is underestimation of business transfer.

Firstly, they greatly underestimate the duration of the succession process. It is thought to take 1,5 years, while in practice it takes 5 to 7 years. Half of the entrepreneurs start too late. Arranging too much in too short a time leads to too quick choices and too little communication. This has financial consequences, emotional and rational damage. Business transfer is between transferor and successor, but others - such as children - play a role. Very important if you all want to go under the Christmas tree in December.

When making a transfer, the advice is to first check very carefully what you really want. Discuss emotions first, then financing and tax topics. For a healthy company there are enough arrangements to make things right.

taking years off
According to the survey, the most important things of the transferors are: continuity, harmony in the family, return on capital and old age provision. Furthermore, the effect of the corona crisis on companies that are experiencing financial difficulties is striking. In that case, many transferors (usually parents) appear willing to use up their future retirement reserve in order to be able to keep the company.

Procrastination and delusion of the day
Emotional issues cause entrepreneurs to postpone business succession. Many people find it difficult to face the finiteness of their existence and to work towards their dispensability. Parents are at the center of 3 overlapping circles: that of the company itself, the family and the property. Suddenly, after succession in all 3 areas, they are no longer the central person. Moreover, a focus on the issues of the day - especially in this corona crisis - delays the moment when the business succession process is started. Know what you want, don't tinker and get advice in time. Consultants think in numbers and structures, make sure you understand it yourself and can explain it to each other.

Winners have a plan, losers arguments
Arranging succession is perhaps the most important task of entrepreneurship. You see the end of your career coming. There is always a reason not to start: when things go bad - perhaps now because of the corona crisis - you are indispensable. If it goes well, you want to stay with it 'just now'. You are obliged to yourself and your successors to find out what you can do to transfer the company properly.

I don't know what you think. It just came to my mind: hurry if you have time, then you have time if you are in a hurry. Perhaps that also applies to you, we listen to your story. Farmers Funding & Advies helps you with the takeover and realizes the most suitable financing. Curious if we can help you too? Click here to ask your question. 

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Peter Pals

Peter Pals is an entrepreneur at Farmers Funding & Advies and grew up on a farm. From his farming heart, he has decided to build up a business for business, financial and tax advice for agricultural entrepreneurs.