The Countdown is On: Businesses Facing Succession Crisis
Imagine your life’s work at stake. Your business, into which you’ve poured years of hard work and passion, needs a successor. Yet, finding one is proving difficult. This is not mere fantasy but the reality many businesses across Europe, particularly in Germany, are facing. Demographic changes and a shortage of successors threaten to destabilize the economic backbone.
The Alarm Bells Ring: Numbers and Facts on the Succession Situation
In Germany, around 600,000 small and medium-sized enterprises (SMEs) are planning a succession by the end of 2025. These are impressive numbers, yet they hide serious challenges. About 190,000 of these businesses are ready for handover, while a total of 772,000 are considered takeover-worthy. Despite these large numbers, a significant portion of businesses remain without a successor. According to a study by the KfW Banking Group, around 28 percent of mid-sized business owners struggle to find a suitable successor. One reason is the declining number of those willing to start businesses, a phenomenon exacerbated by demographic changes.
The Secret Weapon: How Reputation Influences Company Value
The importance of corporate reputation is often underestimated. Reputation researcher Ulrich Bihler has explained that “a significant portion of reputation arises from the image conveyed through media and social media posts.” A positive reputation can make the difference between success and failure in business succession. Companies with a good reputation enjoy higher sale prices and have better chances of finding suitable successors.
The Value of the Invisible: Tangible and Intangible Assets
Business valuations consider not only tangible assets like machinery and real estate but also intangible assets such as brand image and employee know-how. The company’s reputation plays a central role here. It influences stakeholder trust and thus the overall value of the company. According to a Deloitte study, companies with a strong brand and good reputation achieve higher sale prices and are more successful in succession planning.
The Downsides: Risks and Pitfalls of a Bad Reputation
A poor company reputation can have significant negative impacts. Buyers and investors are often willing to pay less or not invest at all if they have concerns about the reputation. High-profile examples like the bankruptcy of Thomas Cook and the Volkswagen emissions scandal (“Dieselgate”) illustrate how a negative reputation can affect company value and strategic decisions.
Thomas Cook: A Lesson in Lost Trust
The bankruptcy of Thomas Cook in 2019 demonstrates how devastating a bad reputation can be. The loss of customer and investor trust made it significantly difficult to find successors or buyers for parts of the company. The uncertainty and lack of trust led to a rapid devaluation of the company.
Dieselgate: The Abyss of a Reputation Crisis
The Volkswagen emissions scandal, better known as “Dieselgate,” is another example of the consequences of a bad reputation. The scandal not only damaged the company’s value but also had profound effects on strategic decisions and executive succession planning. Once trust is lost, it is hard to regain and affects all levels of the company.
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The Cultural Dimension: Differences in Succession Planning Across Europe
Perspectives and attitudes of the next generations (Next Gens) in various European countries differ significantly. While self-realization is paramount in Sweden, other countries have a collectivist view where the welfare of the entrepreneurial family is prioritized. These cultural differences directly affect the succession process and the fundamental values in a company succession.
The Power of Transparency: Measures to Improve Reputation
To improve corporate reputation, Maximilian Bausch recommends the following measures: Transparent Communication: Open and honest communication with stakeholders helps build and maintain trust. Quality Management: Continuous improvement in product and service quality strengthens reputation over the long term. Corporate Social Responsibility (CSR): Engagement in social and environmental projects can enhance the company’s image and positively contribute to reputation. Swift Responses: Managing Reviews Correctly
Companies should respond quickly and factually to every review. Particularly with negative reviews, a prompt response is crucial to prevent a public backlash. A sympathetic yet factual comment shows the community how the company handles criticism.
The Battle Against Fake News and Defamation
Companies do not have to passively accept false or defamatory statements. They should check if the review violates the guidelines of the review platform and report any potential violations. This protects the reputation and demonstrates active engagement with criticism.
The Path to Perfect Reputation: A Collective Responsibility
Achieving a perfect reputation requires comprehensive measures that go beyond company management. Every employee shapes the company’s external image through their behavior and interactions. Transparency, integrity, and accountability in all areas are essential. Family and friends of employees also contribute to corporate reputation as informal ambassadors.
The Role of Employees
Every employee contributes to the company’s reputation. Whether through friendly customer service, conscientious work in production, or respectful teamwork – every individual is important. A culture of responsibility and engagement must be fostered to heighten awareness that a company’s reputation is a valuable yet fragile asset.
The Key Factor for Investors and Buyers
A positive reputation is important not only for sellers but also for buyers and investors. If a company is known for fair and ethical behavior, treating customers and employees respectfully, and investing in the community, it becomes more attractive to potential buyers and investors. Such a reputation signals that the company is likely to be successful long-term and less likely to face legal or ethical issues.
Conclusion: Reputation as the Key to Successful Business Succession
Corporate reputation is much more than just an intangible value; it is a strategic asset that significantly influences company value. Companies that consciously invest in building and maintaining a good reputation create a solid foundation for successful succession planning. The challenges of demographic change and the shortage of successors can be mitigated by a strong, positive reputation, as it builds trust and enhances the company’s value over the long term.
Maximilian Bausch and his team at ABOWI Reputation UAB offer tailored solutions and a holistic strategy to help companies protect and strengthen their reputation. Through proactive monitoring and targeted communication strategies, companies can ensure that their reputation is not only maintained but continuously improved.
Entrepreneurs in Europe and Germany should not underestimate the importance of corporate reputation and should take targeted measures to successfully manage their succession. Investing in a positive reputation is an investment in the future of the company.