Almost 90% of Spain's business landscape is made up of family businesses. In total, 1.1 million companies, responsible for 67% of private-sector jobs (6.5 million jobs) and 57.1% of GDP, according to data from the Instituto de Empresa Familiar (IEF), Spain's Family Business Institute. And many of these businesses were built by the baby boom generation, which means that in less than a decade they will begin to retire.
However, a lack of planning or, simply, the absence of a successor puts so much of the founding generation's effort at risk. In fact, only a third of family businesses make it to the second generation. Of those, 10% are still active in the third generation and only 5% in the fourth, according to IE University.
The challenges of leadership succession in Spanish SMEs
The problems that tend to arise around succession in SMEs need to be addressed with time and planning; otherwise, they can jeopardize the continuity of the business. The most significant include the following:
- Lack of strategic planning: many SMEs lack a clear plan that identifies successors and prepares them to take on leadership roles. This can lead to poor management and a lack of long-term vision.
- Current leaders' resistance to change: some business owners are reluctant to give up control or delegate to the younger generation. In addition to causing intergenerational conflict, this can undermine the company's competitiveness, which depends largely on its ability to adopt new technologies and strategies.
- The younger generation's lack of skills and experience: this lack of leadership leads to a decline in the organization's operational effectiveness and to poor strategic decision-making.
- Insufficient training of heirs: not all SMEs invest in training and preparing their successors. As a result, failure is common when they take the helm.
- Family conflicts: as we've seen, a high percentage of Spanish companies are family businesses. So succession from parents to children is common. This particularity can cause tensions and personal challenges that are difficult to manage.
What's the solution when an SME has no successor?
Without a doubt, the best option is to sell the company while it's still at its best. This solution has many advantages. Here are some of them.
Capitalizing on the effort
It's about realizing the value of years of effort spent making the company profitable. This allows the business owner to retire or change their life plans without feeling that their hard work has been lost.
On the other hand, there are now many potential buyers, which helps drive up the price. Some new business owners find it more advantageous to buy an established company than to start their own from scratch. That way, they not only avoid the paperwork and waiting time involved in setting one up, but they can also capitalize on its established reputation.
The option to retire
Thanks to this alternative, business owners can retire whenever they wish. That way, they not only look after their health and gain quality of life, but their age-related fatigue doesn't erode the organization's competitiveness.
How to make the most of selling your business
Here are four tips you'll find very helpful:
Find out what it's worth
You need to consider both its financial and its emotional value. You can calculate the financial value based on profit margins, the revenue it generates, the value of its assets, etc. As for the intangible value, consider aspects such as brand reputation, good relationships with customers and suppliers, employees, etc.
Find the right buyer
Ideally, this would be someone with a vision similar to yours who is willing to pay a fair price. However, while not impossible, this is usually unlikely. That's why M&A platforms like ours are invaluable. Thanks to digitalization, we connect SMEs with potential investors, reducing the average time to complete a sale to 90 days, compared with the 9–12 months a traditional deal usually takes.
Get professional advice
This way, you'll understand all the legal and tax implications of selling your company. Advisors will also help you find a buyer and mediate to close the sale at the best possible price.
As you've seen, the problems caused by the lack of a successor in many of our SMEs can be solved thanks to technology. Want to find a partner? First, value your business in just 2 minutes, free of charge and confidentially.
