For a long time, you have been the heart and soul of the company. From the development of a company strategy to thinking about whether you need a third coffee machine, you have been the contact for any and all issues. You've deliberated, calculated, weighed out options and carefully guided your business to the next commercial level. Stepping down is no small matter, either emotionally or for your business, and you're asking yourself who might be the best choice of successor.
Most managers of family-run companies, which make up 88 percent of all businesses in Switzerland, would like to hand down their businesses to their offspring. However, it is becoming more common that the next generation is unwilling to take on their parents' business. According to Bisnode D&B, only 41 percent of companies in Switzerland are handed down within the family (family buy-out = FBO). In 40 percent of cases, existing employees take over the company (management buy-out = MBO), while in 19 percent of cases the company is purchased by an external management team (management buy-in = MBI).
It is crucial to pass off the reins to the right person if you want to be able to enjoy peace of mind in retirement. However, the point in time and the way that you step down are other factors that also need to be weighed out carefully.
"When I grow up, I want to do the same job as you." This is something you may well have heard when your child was small enough to sit on your lap. And no doubt you thought: "How satisfying it must be to be able to hand your business down to your own child." This would not only mean that your company would continue to be run with the same mindset, but would also be a pleasing testament to you having been a role-model for your child.
If you hand your company down within your family, you can determine the time of your retirement for yourself. This does mean, however, that you need to be well advised when it comes to your retirement provision. After all, it's a complex matter. If you step down at the point when you hand over operational management of the company to your offspring, then you need to be sure that you have accumulated sufficient savings in the second pillar. After all, once you step down you will no longer be insured under the occupational retirement provision.
In an ideal scenario, you would hand over operational management of your company and continue to work full-time. Thanks to an executive plan, your high salary would remain secure and you would continue to accumulate capital in your pension fund.
If you decide to continue working part-time, then you will still be insured in the second pillar with annual income starting from 22,050 Swiss francs.
The lower income will limit the amount you save and thus also the accumulation of your assets. The question also arises of whether you wish to receive your retirement benefits as a pension or as capital. If you decide on a lump-sum withdrawal, then for tax reasons you should check whether you want to retire gradually and thus only have parts of the capital paid out to you.
Once you have managed to complete the handover, you can watch with satisfaction as your son or daughter settles into the managerial role. It's important to note that the new role will be associated with a higher income, which should be insured accordingly in a pension fund. The pension fund solution that is most suitable depends on the size and legal form of the company. There are various possibilities for this, ranging from a standard pension fund solution for everyone to special executive plans.
Your longstanding employees will be relieved to see the company remain within the family. They can assume that the company philosophy will not change drastically and that their working environment and jobs will not be affected. To remain an attractive employer in the future, retirement benefits should stay at the same level or even be expanded in the future to ensure employee loyalty.
You've been thinking about it for a long time, and you've finally decided to sell your company – to not one, but several of your employees. On the one hand because it's financially difficult to purchase a company and keep it financially stable as an individual, and on the other hand because it is not up to just one person to have all the skills required. Rather, the new owners can each take on the tasks that best suit their areas of expertise.
Regardless of whether you as the boss step down at the point of handover or later on, you need to make sure that you continue to build up your retirement savings in your pension fund. For the new owners who are now taking on your previous role and being remunerated accordingly, it's important to review occupational pension benefits and ensure coverage for their higher income. When there is a change in management, employees often feel a sense of insecurity. It's worth assuring them of consistency. If the new management keeps the occupational retirement provision at the same level as before the takeover, or even optimizes it, it will reassure employees.
Choosing an external buyer represents a particular challenge for you. You will have to assess whether the new owner is trustworthy. There are countless companies and online portals that specialize in finding suitable, solvent successors.
If your company is integrated into another one, it is likely that you will step down as the boss. By that point, you will need to have made provisions for the company's and your personal assets. Depending on the structure and legal form of the new company, your successors will need to adapt their occupational retirement provision accordingly.
Employees feel particularly insecure when a company is being sold to an external party. Which rules and retirement benefits will apply now? The rules and retirement benefits of the previous employer or those of the new firm? It makes sense for the new owners to get an overview of the existing pension provisions and to find an optimal pension solution in order to gain trust.
Succession planning is not easy: One in three companies goes into liquidation because no one can be found to take over the company. There are a lot of different reasons for this according to the Confederation's SME portal. Frequently, owners start looking for a successor too late, are unable to find anybody who is suitable or are too inflexible about the sale price. For you as the manager of a company, it's crucial – even just in terms of your retirement provision – to be smart about choosing the point in time when you will cease operations. If you are retiring early, you need to accurately calculate your pension and review your pension fund solution. You will only benefit to the full extent from your occupational retirement provision if you retire in the normal way. As a responsible employer, you should of course consider your employees when dissolving your business. You should inform your staff early on, so they have time to decide what to do.
Regardless of the way you choose to end your working life, timing is everything. Experts recommend addressing the issue of succession planning as early as the age of 50, since the process of stepping down generally takes longer than expected. Who your successors may be, how your company is managed in the future and how you will be able to build up sufficient personal assets are all considerations that take time.
Ideally, you should hand over operational management as early as 15 years before you retire and continue working: initially full-time and eventually part-time. This way, you will save enough capital for retirement and, at the same time, you will be able to influence how the company continues to develop. Once you are less involved in managing the business, it would of course be the right time to discover your talent for carpentry, become a lifeguard or get yourself a dog. Good preparation in every aspect will make it easier for you to hand down the company to your successor when you reach 64 or 65 and to feel good about it.
