One in ten family businesses is about to be transferred in the next five years. What happens next will impact nearly 700,000 jobs. The young economy is now calling for less bureaucracy and better financing to stimulate successful business successions.
Many companies are faced with the challenge of finding a successor to the company, especially in family businesses, decisions about direction must be made. About 70 percent of their predecessors are of retirement age and half of their successors are women. “A successful transfer is crucial for the location,” says Bettina Dorfer-Pauschenwein, head of the Junge Wirtschaft. If a business is given away within the family, it will most likely remain in Austria because loyalty to the location is greater. “The companies have regional roots,” says Dorfer-Pauschenwein.
Many restaurateurs are looking for a successor
Over the next five years, most transfers will take place in the hospitality industry, followed by management consultants, accountants and IT. Several hundred companies will also soon change ownership in retail. In addition to family members, employees are often also eligible for succession, but in some cases sales are made to external companies, sometimes from abroad.
This is often successful. Sales and investments often increase again after a transfer, because many successors not only want to manage the success, but also want to expand it. Investments that have accumulated until the transfer is cleared will then be executed. But it is all the more important that clear conditions apply quickly.
Call for more incentives for investments
To make more business transfers successful, Dorfer-Pauschenwein calls for better tax conditions. The tax-free allowance for capital gains has not been adjusted since 1975 and is currently only 7,300 euros. The Young Economy calls for a sixfold increase to 45,000 euros. A participation allowance of 100,000 euros must also be deductible in five years. In addition, a state successor investment fund will be established, which will intervene for a limited period if the company’s capital is scarce. The acquirer can then buy these shares back into his company within ten years.
However, she rarely thinks about a wealth or inheritance tax. That would be ‘poison for business transfers’. The image of the entrepreneur should also change. While starting a business is considered “cool,” people who take over a family business are often told that they get everything without any performance. Social policy also plays a role. The fact that many people simply choose a different career path because of their interests also makes finding a successor difficult. Searching outside the family will probably become more important in the future.
Currently, 50 percent of all companies are family businesses in the narrow sense; they generate 55 percent of the turnover. The share is higher than in other countries because the local economy is structured very small and businesses, especially in rural areas, are often passed on over generations.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
