Family businesses

51,500 companies will soon be handed over

A timely handover of the business should create clear conditions.

(Bild: Thinkstockphotos.de)

Every tenth family business is about to be handed over in the next five years. What happens to them will affect almost 700,000 jobs. The Junge Wirtschaft is now calling for less bureaucracy and better financing to boost successful business successions.

Many companies are faced with the challenge of finding a successor for the business, and family businesses in particular are faced with decisions on the direction to take. Around 70 percent of predecessors are of retirement age and half of the successors are female. "A successful handover is of central importance for the location," says Bettina Dorfer-Pauschenwein, Head of Young Business. After all, if a business is passed on within the family, it is most likely to remain in Austria, as loyalty to the location is higher. "The businesses are rooted in the region," says Dorfer-Pauschenwein.

Many restaurateurs are looking for a successor
Over the next five years, most handovers will take place in the catering industry, followed by management consultants, accountants and IT. Several hundred companies in the retail sector will also soon change hands. In addition to family members, employees are often also considered for succession, but some are sold to external companies, sometimes even from abroad.

Head of Junge Wirtschaft Bettina Dorfer-Pauschenwein appeals for more support for company handovers

(Bild: (c) www.annarauchenberger.com / Anna Rauchenberger)

This is often successful. Turnover and investments often increase again after a handover, as many successors not only want to manage the success, but also expand it. Investments that have built up until the handover are then implemented. However, it is all the more important that clear conditions are in place soon. 

Call for more incentives for investment
Dorfer-Pauschenwein is calling for better tax conditions to ensure that more business transfers are successful. The tax-free amount for capital gains has not been adjusted since 1975 and currently stands at just 7300 euros. Junge Wirtschaft is calling for a six-fold increase to 45,000 euros. An investment allowance of 100,000 euros should also be deductible over five years. In addition, a state succession investment fund should be created to step in for a limited period when the company's capital is scarce. The transferee can then buy back these shares in his business within ten years.

Inheritance tax would be poison for business transfers.

Bettina Dorfer-Pauschenwein, Chefin der Jungen Wirtschaft

However, she does not think much of 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 have been given everything without any effort. Social policy therefore also plays a role. The fact that many simply take a different career path due to their interests also makes it more difficult to find a successor. A search outside the family will probably become more important in the future. 

Currently, 50 percent of all companies are family businesses in the narrower sense, generating 55 percent of turnover. This proportion is higher than in other countries, as the domestic economy is particularly fragmented and companies are often passed down through generations, especially in rural areas.