Whether commercial, craft or industrial, SMEs, 70% of which are family businesses, are an essential component of the Luxembourg economy. However, the question of their transfer is becoming increasingly important. In the next ten years, many managers will have reached retirement age. If you don't want to see the fruits of a lifetime's work collapse overnight, here are the four questions you should ask yourself.

When should I think about transferring my business?

It is not easy to pass on your business, especially when you have built it with your own hands and devoted most of your professional life to it. Unfortunately, most of the time, managers attach a strong emotional value to it, which often complicates the transfer process, or even delays it. To avoid this emotional trap, keep a cool head and prepare yourself as early as possible. At the latest from the age of 50, as recommended by the IDEA Foundation, an idea laboratory created on the initiative of the Chamber of Commerce. A successful transfer project can take up to five years.

What will my future sources of income?

Do you have sufficient pension coverage? If your income, independent of the business, is insufficient to cover your expenses, you will need to choose a type of transfer that will provide you with additional income. For example, is it better for you and your family to keep control of the business or is it better to sell it to the management, an investor, a private equity fund or another company?

How will my life be after the transfer?

Passing on your business means losing a naturally assigned status based on hierarchical relationships and legitimized by the family and business environment. Admitting a successor means moving from an essential and rewarding role to a more discreet position, where advice and opinions will no longer necessarily be followed. The business, which is an extension of yourself, will no longer be. You will have to reinvent yourself and look for new reference points.

To anticipate your future new life harmoniously, do not run away from this reality that risks blocking the transmission. Instead, project yourself into the future and decide when you will be ready to hand over your business beyond any strategic and economic considerations. Then make sure that you will share the same values and vision of the company's future with the new owner, whether they are a family member or not. Finally, encourage the passing of the baton to the new generations, whether the second or third, by providing yourself with long-term tools such as relevant articles of association, a shareholders' agreement or a family charter. These various tools will enable you to establish a long-term vision of the company based on solid values and to set the rules of power, each person's behaviour, the methods of arbitration and conflict management, etc.

How to choose my successors?

 As a mother or father running a business, it is very tempting to want to ensure that your business continues by choosing your child as your successor. But they must have the desire and necessary skills. Otherwise, you risk imposing on your employees and shareholders a manager who does not have the required legitimacy.       

The situation becomes more complicated when there are several children in the family. What will you say to your children who will not be elected to the company’s management or will even be excluded from the shareholding? What might their reactions be, and what have you envisaged as compensation for this exclusion?

Don't lose sight of the psychological aspect if the buyer is your child. Even with the best governance tools, even as the sole director of the family business, there will always be a responsibility to succeed towards your parents. This responsibility will be even greater if other family members are shareholders, members of the management or simply employees.   

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