There are 3.81 million SMEs in Germany. One sixth of them will be looking for a management successor in the five years from 2023 to 2027: 626,000 in total, or 125,000 per year. These figures from the “Förderbank KfW” are significant. Especially for a business location whose growth and prosperity depends heavily on these craft businesses, family businesses and regionally anchored companies.
A third of the executive floor is now over 60 years old. Like everywhere else, the baby boomer generation is now retiring. And like everywhere else, the number of potential successors is falling. One reason is the lower birth rate. And not everyone is willing to become the new boss either. The degree of digitalization and thus future viability plays a significant role here. "The 'succession gap' in SMEs is growing." This is how Dr. Fritzi Köhler-Geib, Chief Economist at KfW, formulated the challenge of generational transition on the occasion of the publication of the annual KfW Succession Monitoring.
Did you know...? *• 626,000 SMEs will be looking for a successor by the end of 2027.
• 30 percent of entrepreneurs are currently over 60 years old.
• In 74 percent of cases, the handover fails because suitable successors cannot be found.
*Source: KfW-Nachfolgemonitoring (German only)
Six reasons why digitalization is one of the essential levers for a good company valuation and thus the attractiveness for a potential successor.
- Future viability and competitiveness: A high degree of digitalization indicates that a company is fit for the future and can adapt effectively to market changes. This increases its competitiveness and makes it more attractive to successors, investors and lending banks.
- Efficiency and productivity: Digitized companies can make their processes more efficient. This leads to higher productivity and lower operating costs.
- Adaptability: Companies that actively drive digitalization demonstrate their ability to innovate and adapt to market conditions. Digitalized business processes are easier to scale and new business models can be introduced more quickly.
- Transparency and data access: Digital tools and systems ensure better transparency with regard to business processes, financial data and customer information. This creates trust among potential successors and makes it easier for banks and investors to review the business activity.
- Risk management: Companies that use digital tools for risk management can better identify and manage potential risks. This reduces the investment risk.
- Sustainability and social responsibility: Digital tools help to demonstrate how seriously a company takes sustainability aspects and social responsibility. For example, they make it easier to comply with the legal requirements of the Supply Chain Act, an increasingly important criterion for customers, investors and banks.
Well-positioned companies thus also become attractive for start-ups and new entrepreneurs: in times when economic uncertainties and a shortage of skilled workers lead to a decline in the number of start-ups, young entrepreneurs benefit from existing business opportunities with greater economic security and tried-and-tested business models.
Of course, the digitalization of a company can also bring challenges, such as investment costs. Funding programs can help here, and Deutsche Telekom's Schubkraft team (German only) provides a clear overview of the funding jungle. It helps companies to identify relevant federal and state funding programs and, together with partners, supports the preparation of funding applications.
