Business Succession in Family-Owned Enterprises

My previous article addressed the preparatory work and decisive choices required for succession. The discussion centered on strategic planning and the distinct dynamics of family businesses, where commercial priorities and interpersonal relationships are deeply intertwined.

The next step concerns practical execution: How is succession implemented in concrete terms? What requires particular attention during the transition period? And how can a company successfully preserve its core identity while simultaneously creating scope for future development?

Practical Experience: Identifying Common Pitfalls

Potential for friction may emerge or become apparent as the business succession process unfolds. A 2025 study by PwC Switzerland illustrates the issues that give rise to conflict in practice. By surveying 132 members of the next generation from family businesses and entrepreneurial families, aged between 18 and 47, the research provides valuable insights into their experiences with succession planning. Although the survey captures only the perspective of the next generation, it offers useful findings on the realities of planning a handover.

Common Sources of Friction During the Handover. When asked what issues most frequently sparked disagreements, the next generation placed individual role definition first at 42%, followed by family matters at 28% and the distribution of ownership at 25%. Conversations with the father were perceived as the most demanding hurdle (46%), ahead of exchanges with siblings (33%). One statistic appears paradoxical at first glance: 90% of respondents do not view their siblings as competitors during the succession process, yet 33% report experiencing conflicts with them. The study attributes this partly to childhood rivalries that can resurface under the pressure of a handover.

These findings point to several practical takeaways. Ultimately, a successful handover does not purely rely on the formal transfer of ownership and responsibilities but on transition management. The critical issue is not simply who steps into a given role, but how duties are transferred incrementally, how expertise is passed on, and how the next generation establishes its authority both internally and with business partners and clients. Naturally, corporate law, tax, and financial matters continue to require specialised professional advice.

Step 4: Implementation – Timeline, Communication, and Knowledge Transfer

Experience from mediation shows that certain recurring issues can make or break a handover. Addressing these aspects early on not only prevents friction but can provide a decisive competitive advantage during the transition. The following section examines these key areas in detail:

The Role of the Predecessor. For decades, many family-owned businesses have grown around a single, dominant entrepreneur. Customer relations, supplier contacts, banking discussions, and key decisions are frequently tied directly to this individual. As long as the predecessor fills this role, the structure remains viable. However, the handover requires examining which elements of this role can actually be passed on: certain leadership styles, rapport, and decision-making habits are so deeply personal to the founder that they cannot simply be handed down to a successor. The real challenge is therefore not trying to clone the founder's role, but designing the new corporate structure that will replace it.

Knowledge Transfer as a Core Process. Much of a company's institutional knowledge is tacit and entirely undocumented. It lives in unwritten agreements, informal workflows, custom customer terms, and day-to-day experience, often driving daily operations far more than any formal process manual or contract. This knowledge cannot be conveyed in a single handover meeting; instead, it develops through observation, shared experiences, and the gradual assumption of responsibility.

Early Involvement of the Next Generation. In many succession processes, it proves beneficial to involve the next generation early on. Trust among employees, clients, suppliers, and banks develops over time and cannot be generated merely at the moment of a formal handover announcement. A successor who only steps into view when the transition is officially declared may take on a role, but does not automatically command the necessary backing of trust within the company's network.

Consequently, a decisive factor is often when and to what extent successors become visible, take on responsibility, and forge their own relationships. The 2025 Deloitte Family Business Report - based on a global survey of 1,600 family enterprises with annual revenues exceeding 100 million US dollars - identifies uncertainty regarding responsibilities and decision-making powers at 37%, alongside leadership succession planning at 36%, as core governance challenges. Ambiguous responsibilities do not only impact the internal dynamics of the family and firm; they are readily observed by clients, suppliers, and financial institutions alike. Transparent expectations and a clear timeline provide orientation, supporting an orderly transition for everyone involved.

From Successor to Leader. The appointment to managing director does not automatically confer leadership legitimacy. In family businesses, many employees have known the succeeding generation since childhood. While this personal familiarity can build trust, it can simultaneously influence how they are perceived as leaders. Long-serving employees are particularly relevant; they often form a key pillar of the company and have built loyalty towards the predecessor over many years. The generational shift reveals whether the new leadership role is genuinely accepted in daily operations. If not, informal parallel structures often emerge: employees double-check decisions with the predecessor, continue directing inquiries to them, or bypass designated responsibilities.

Setting the Course for the Future. A generational shift frequently changes both corporate leadership and the strategic direction of the company. This raises two interrelated yet distinct questions: What elements that have made the company successful over the years should be preserved? And what must be further developed to prepare the enterprise for the future? Decisions regarding digitalisation, artificial intelligence, or new business models often have an impact long after the handover, unfolding their effects at a time when the next generation bears responsibility. At the same time, the way these changes are shaped will also be influenced by the personality and strengths of the new generation. Early involvement in such landmark decisions makes it possible both to build upon proven foundations and to jointly develop necessary future changes. If the next generation is brought in only at the formal handover, they are left to manage a future whose core decisions were made without them.

When the Handover Happens Earlier Than Expected. According to KMU Forschung Austria, only 27% of company owners have made provisions for an unplanned exit (as highlighted by the Junge Wirtschaft succession strategy). Financial security and liquidity usually take priority, typically addressed through life insurance, reserves, or retirement plans. While this protects the family, it leaves a critical question unanswered: who takes over in an emergency to keep operations running? An unprepared crisis quickly exposes how vital clear roles and decision-making structures are for a company's stability.

Communication and Clarification as Success Factors

The PwC Switzerland study referenced earlier also highlights the factors respondents consider critical to a successful transition. Open family communication ranked first, followed by a shared understanding of goals and early planning anchored by a clear, binding timeline. Furthermore, the findings show that conflicts were resolved twice as fast when mediation or coaching was involved, compared to approaches relying solely on technical guidance from legal or financial experts.

This points to the need for alignment across different levels. Once roles, expectations, and shared objectives are established, the next step is to evaluate how they can be implemented under corporate law, tax law, and economic principles. This ensures that the reasoning behind the chosen structure remains clear to everyone involved. Reaching this level of clarity, however, calls for discussions that rarely focus strictly on technical or factual matters.

Family History as a Filter in Communication. Conversations about succession, corporate strategy, or financial planning never happen in a vacuum; they are shaped by shared history and deep-rooted relational patterns. For example, a simple question about an investment choice can easily feel like a challenge to someone's authority or competence. Similarly, professional feedback intended constructively may be misread as a personal attack. Taking the time to untangle these misunderstandings is often what brings real clarity to the underlying dynamics.

Uncovering What Lies Beneath. During generational handovers, parties frequently adopt firm positions: one party insists on staying involved in major decisions, while the other finally wants to act independently. Their underlying interests, however, are rarely so simple. A senior leader wishing to stay involved is usually seeking reassurance that their life's work and achievements will prevail and recognition for what they built, not control for the sake of it. A successor demanding a free hand wants to be trusted by the senior generation rather than just given a title. And a long-serving family member operating without a formal remit is often looking for belonging and recognition of their place in the business, rather than additional duties. Uncovering these core needs completely shifts the dynamic. Once the underlying interests are clear, discussions become far more targeted. What initially looks like a direct contradiction often turns out to be a simple misunderstanding. As a corollary, potential solutions might surface that were completely out of reach as long as both sides remained entrenched in their initial positions.

Giving Structure to the Solution. Once interests, expectations, and responsibilities are clarified, translating this mutual understanding into concrete structures is often well worth considering. In Austrian practice, instruments such as family constitutions and advisory boards can serve this purpose. As the 2025 PwC Switzerland study highlights, these instruments remain relatively uncommon: only 13% of respondents report having a family constitution, and merely 4% have established formal conflict-resolution mechanisms.

Takeaway

Beyond tax and legal arrangements, a successful succession requires a sober assessment: Which operational roles lack a clear definition? Where do individual participants truly excel, and what are their limitations? Furthermore, how should family collaboration be shaped for the next generation and the generations to come?

Addressing these questions demands an open dialogue which, in practice, is rarely straightforward. Family history inevitably shapes these discussions, making it difficult to discern the capacity in which someone is speaking. Is it the managing director seated at the table, or the father? Is it the shareholder, or the mother? Disentangling these overlapping roles and bringing clarity to these distinct layers is one of the central challenges of succession.

A sound transition takes time to prepare. The earlier the process begins, the more effectively responsibilities and expectations can be aligned, institutional knowledge transferred, and future leadership roles developed. This helps ensure that the transition is not merely completed in legal and organisational terms, but is also sustainable in practice in terms of responsibility, cooperation and leadership.

Dive Deeper: There are a number of insightful studies on the topic of business succession. Alongside the PwC Switzerland study cited here, these include the 2025 Deloitte Family Business Report, the 2025 PwC Family Business Survey for the DACH region, the Women in Power Report, and the succession strategy of the Junge Wirtschaft.