Every generational succession unique. In most cases, external buyers are involved unless there are relevant heirs in the family.

More on that later in the article. First, let's look at different types of generational succession.

generational succession business – two typical variants

Overall, there are two different models for generational succession:

• A change of ownership where the seller sells the business and retires
• A change of ownership where the seller sells the majority of shares and enters into an agreement with the new owners to continue working for the company. This is called a gradual generational succession and is quite common.

Succession planning is easier to manage if you have prepared an exit strategy for the owner of the business in advance and if the business is ready for sale - you can check it here.

generational succession companies with multiple owners

A third type generational succession be relevant in companies that are managed by agroup of owners, where the owners have different wishes regarding continued ownership.

Claus Bruun , business broker and partner at Business Broker :

"When a co-owner considers withdrawing from a company, the other owners can either buy them out or find an external buyer for the seller's shares. That way, the ownership structure can remain unchanged," explains Claus Bruun .

Plan generational succession well generational succession advance

The amount of time a business owner needs to spend on successful generational succession varies from case to case.

However, Claus Bruun recommends starting to familiarize yourself with the process at least four years before you plan to relinquish control completely.

There are 4 good reasons for this:

• You need time to find the right buyer candidate. It can easily take a year to find a buyer and negotiate an optimal deal.
• It should be possible to offer a transitional period of 2-3 years where the salesperson can stay with the company. This gives peace of mind and time to recruit a new manager and pass on knowledge and relationships. This solution doesn't always come into play, but it can be a good card to have in your hand.
• There may be some market or economic conditions that make the timing wrong. In this case, it may be necessary to postpone plans to sell your business until the right time.
• Perhaps there should also be time to optimize the value of the business before a generational succession. You can achieve a higher net proceeds if you can optimize working capital items. These include, for example, your capital tied up in inventory and accounts payable or your order backlog. This is where an advisor can be well worth the investment.

Business Broker partners throughout the country and experience with over 200 ownership transfers. We can provide an overview and momentum in a sales process. This allows the owner-manager to continue to focus on running the business, ensuring that the company does not lose momentum during the sales process.

"We would be happy to visit you for a no-obligation coffee meeting and talk about how you, as a business owner, can plan for generational succession well generational succession advance," says Claus Bruun .

Answers to 3 key questions about generational succession

When Business Brokers are invited to a non-binding meeting with company managers, there are three recurring questions about generational succession. Claus Bruun provides the answers:

How attractive is our company to potential buyers?

A company's market value depends on a number of parameters. When Business Broker owners in a sales process, we first prepare an analysis of the company's strategic opportunities and financial results. The analysis forms the basis for the valuation.

Who is interested in buying our company?

In a structured sales process, we typically cover the market broadly. We look for both international and Danish buyers. We bring both industrial buyers and capital investors from our broad buyer network into play.

Read also How we find the right buyer for your business

How does the sales process work in a generational succession?

A structured sales process for generational succession in four phases – following the same model as other business transactions.

Claus Bruun has been a sales advisor in a large number of generational transitions. His advice to owners considering generational succession is:

"We always start by negotiating a tailor-made solution that takes into account the seller's desired future role and ownership share in the company."

We have compiled knowledge about the various aspects of generational succession a series of short articles.

You can also learn more about selling your business. And if there are words and concepts you don't understand, we've gathered the most important explanations in this FAQ.

Read also Three former owner-managers share where they are today after selling their business.

See the latest ownership changes that Business Broker advised on.

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