Struggling Succession for German Managers Identified as a Mounting Concern by DIHK Analysis
A pressing issue is unfolding in the German business landscape, as the lack of qualified successors threatens the continuity and growth of small and medium-sized enterprises (SMEs) across various sectors, including hospitality, retail, transport, and service/IT.
According to the German Chamber of Industry and Commerce (DIHK), there are only 4,000 potential successors available, while around 9,600 companies nationwide are facing age-related succession issues[1]. This shortage is largely due to the retirement of baby boomer business owners and the reluctance of younger generations to take over perceived demanding, less profitable, or less prestigious businesses[1].
The hospitality and retail sectors are particularly vulnerable due to their reliance on owner-operators and family-run businesses. Succession planning is often informal, and the technical and managerial demands of modernising businesses in fast-evolving fields like IT and service further complicate matters[1].
Despite the successor shortage, about three-quarters of SME successions are expected to be resolved by the end of 2024, though this still leaves a significant minority of businesses at risk of closure or forced sale[1]. Sentiment among German SMEs has worsened, reflecting broader economic uncertainty, which may further deter potential successors[1].
The economic context, including the predicted stagnation, may further aggravate the succession issues in German businesses, as the economic downturn could contribute to an imbalance in the supply and demand of companies in various sectors[1]. In the transport sector, the supply of companies exceeds demand by more than four times, while the situation is particularly tense in the hospitality and retail sectors, where the supply of companies exceeds demand by more than three times[1].
The consequences of the successor shortage are far-reaching. Without successors, many SMEs face closure, leading to job losses and reduced local economic activity. The lack of new leadership can stifle innovation and adaptation, particularly in sectors like IT and services where keeping pace with technological change is critical[1]. Some businesses may be forced to sell to competitors or private equity, leading to consolidation and potential loss of diversity in the marketplace[1].
Addressing the successor shortage requires proactive succession planning, better access to financing, and efforts to make business ownership more attractive to younger generations[1][2]. The structural challenges of succession remain unresolved and continue to weigh on the German Mittelstand, even as there are signs of a consumption-driven recovery as inflationary pressures ease[1].
- [1] DIHK (2021), "Succession deficit in German SMEs: More than 9,600 companies at risk." - [2] DIHK (2019), "The succession gap in German SMEs nearly doubled since 2019."
In light of the impending succession crisis in German SMEs, community policy discussions may need to focus on vocational training programs to prepare a larger pool of potential successors, especially in sectors like IT and service. To support businesses during this transition, there should be targeted financial aid for vocational training and initiatives designed to make entrepreneurship more appealing to the younger generation.
