Why Early Succession Planning Is Crucial for Your Family Business

When I witnessed my father’s sudden passing, I was still a student—an event that changed my life forever. My father, managing director and owner of our family business with over 250 employees, was the heart of the company. Overnight, I was faced with the challenge of running the business alongside my mother, without any succession plan in place.

This experience taught me one thing: succession planning is not just a “nice-to-have” for later—it is a survival issue for every family business. In this article, I share my painful experiences and explain why you should not wait another day to arrange your succession.

What happens when succession becomes an emergency?

The reality hit us like a blow. Suddenly, my mother and I had to assume full responsibility for the family business. The company needed immediate leadership, but there was no preparation, no structured handover documents, and no clear agreements.

Banks urgently requested discussions about credit lines, key customers expressed concerns about the company’s future, and our 250 employees needed reassurance about their jobs. Suppliers demanded guarantees for existing contracts, while authorities required clarification of legal issues. This situation could have been completely avoided with a structured succession plan.

Why do 70% of family businesses fail at succession?

My story is not unique. Recent studies reveal alarming figures: 70% of family businesses do not survive the first generational transition, and only 13% make it to the third generation. Half of all successions fail due to family conflicts, and 30% fail because successors are inadequately prepared.

The most common mistake is the “there’s still time” mentality, with 60% of business owners only starting to address succession two years before their planned exit. Lack of communication also plays a major role—only 40% openly discuss succession with their family. Additionally, 70% attempt to manage the process without external advice, often leading to emotional rather than rational decisions.

What hidden costs arise from lacking succession planning?

What many entrepreneurs don’t realize is that missing succession planning costs not only nerves but also enormous amounts of money when a crisis or emergency occurs. Emergency consulting fees can be 150-300% higher than normal rates, and urgent legal proceedings incur additional expenses. Tax burdens can increase by up to 40%, while banks may tighten credit terms and raise interest rates by 2 to 5 percentage points in cases of unclear succession.

Hidden losses are even more dramatic: customer attrition averages 15-25% within the first six months, and employee turnover ranges from 30-50% amid unclear leadership. Revenue can decline by 20-40% in the first year following an emergency takeover. In the long term, an unplanned emergency succession can reduce the company’s value by 30-50%.

What went wrong with our succession?

Looking back, I can clearly identify what burdened us in this serious situation. There was no documented succession plan with clear delegation of responsibilities and contingency plans for different scenarios, partly because we never really discussed within the family how succession should be structured or what expectations and wishes existed.

At the same time, we as potential successors were inadequately prepared. I only knew parts of the business; important contacts were exclusively managed by my father, and my leadership experience was limited to theoretical knowledge from my studies. I had to acquire the missing industry know-how under enormous time pressure. Moreover, I lacked someone independent of the family with whom I could consult—a neutral person to discuss important issues and support me in taking responsibility for the company.

Why did we ultimately sell the company?

After a long period of intense challenges, we received a very attractive offer that we could not refuse. The decision to sell was emotionally difficult but rationally correct. The buyer guaranteed the preservation of all jobs, opening a promising perspective for the professional development of the company.

Personally, the sale meant the opportunity to focus on my strengths, financial security for the family, and time for qualified further education. In hindsight, I realized I lacked crucial knowledge—especially legal expertise and external advice. An experienced mentor could have provided valuable support during this phase.

What should a structured succession plan look like?

Based on my experiences and work with numerous entrepreneurial families, I have developed a proven system. The process should begin at least five to seven years before the planned handover and includes several crucial phases.

Awareness building: An honest analysis of the current situation, identification of potential successors, and initial conversations about future visions form the starting point. Family strategy workshops with external facilitation help to consider various options.

Strategy development: The four basic options must be evaluated: internal family succession, management buy-out, external succession, or controlled liquidation.

Preparation of successors: For internal successors, this means systematically working through all business areas, gaining possible external professional experience, and developing leadership skills. A structured development plan over several years is essential.

What emotional challenges arise during succession?

What all textbooks state but few truly convey: succession is highly emotional. It is not just about numbers, contracts, and structures, but about letting go of a life’s work and trusting the next generation.

For many senior entrepreneurs, succession means losing an important identity role closely tied to their function in the company. The fear of losing significance and recognition after stepping back, as well as concerns about the entrepreneurial legacy, often weigh heavily. Additionally, perfectionism can complicate the handover process, as doubts about the successors’ abilities are often significant.

Successors, on the other hand, face considerable pressure: they must fulfill the roles of both family member and entrepreneur. Constant comparisons with the senior’s achievements, responsibility toward employees and their families, and complex sibling dynamics in the business environment further increase the challenges.

Open conversations about fears and concerns, professional guidance and support for families, as well as external facilitation in sensitive matters can provide crucial assistance and help guide the succession process constructively.

When do you need to act immediately?

Certain situations require immediate action. Acute warning signs include severe illness or burnout of the managing director, impending divorce or inheritance disputes within the family, as well as liquidity problems or resignations of key employees due to uncertainty.

Medium-term warning signs include a deteriorating market position, critical digitalization backlog, and highly owner-dependent structures without a second management level. Long-term warning signs include a managing director over 55 years old without a documented succession plan, lack of suitable or uncertain potential successors, and profound changes in the industry environment. These factors increase the risk of an unprepared business transfer and can significantly jeopardize the company’s future viability.

What does professional succession planning really cost?

Many entrepreneurs and successors understandably have concerns about the costs of professional succession planning. From my own experience, however, I can confirm: this investment always pays off—it creates security for the company, preserves jobs, and enables a successful handover process that benefits all parties. Early and careful succession planning is crucial for both entrepreneurs and successors.

This includes not only legal and tax aspects but also consulting and internal coordination processes. Over a period of about seven years, costs typically range between €150,000 and €350,000—depending on company size and complexity.

In contrast, unplanned emergency successions can cause significantly higher costs. These arise from urgent financing solutions, potential legal disputes, production downtime, and loss of trust among customers and business partners. In practice, costs can amount to €800,000 up to several million euros, especially for larger companies or capital-intensive industries.

The main advantage of structured succession lies not only in cost savings but above all in securing the company’s future viability and stability. For entrepreneurs and successors, this means less risk and a much smoother handover.

Total costs for structured planning include family consulting and facilitation, legal structuring, tax optimization, and successor coaching. Compared to the enormous costs and risks of emergency solutions, professional succession planning is one of the best investments an entrepreneur can make.

How can my experience help you?

After selling our family business, I decided to expand my knowledge with legal expertise and complete training as a personal and business coach. My goal was to use my experience to advise other entrepreneurial families on succession planning.

Today, I support family businesses with my experience and knowledge during business transfers. My deep personal experience with succession, combined with my studies in organizational and economic sociology and targeted training, enables me to provide comprehensive and competent support. I accompany entrepreneurial families on their individual path through the handover process and help them find tailored solutions for their specific challenges.

Conclusion: Act today, not tomorrow

Succession is a process of collaboration, interpersonal communication, and mutual understanding. It requires open dialogue, genuine empathy, and a willingness to work together on solutions. The goal is a sustainable and harmonious succession that preserves the company’s legacy and secures the future of all involved.

My most important advice: Don’t wait until it’s too late. Start succession planning today—your life’s work and your family will thank you. The time for excuses is over; the time to act is now.

If you have questions about structured succession planning or need support with your individual succession process, I am happy to assist you. Let’s work together to ensure your life’s work is in good hands.