Private companies in Serbia yet to face business transfer – Owners unprepared for generational shift

Over 12,400 companies in Serbia, with around 68,000 employees, comprise a risk group in the process of business transfer, due to a considerable number of owners who will face this issue in near future, as well as because of the underestimation of the complexity of the problem and the duration of the process, an insufficient number of examples of good practice and the lack of systemic support.

Also, 450,000 companies in the EU, with around two million employees, go through the process of business transfer each year, and it is estimated that, in around 150,000 of those companies, the problem is not addressed in an adequate manner, bringing into question around 600,000 jobs.

Business transfer entails the transfer of a company's operation to another person or company, thereby ensuring the continuity of existence and business activities, and the Business Transfer Barometer survey in Serbia, presented at the regular meeting of the Slovenian Business Club on September 21, 2017, looked into transfer of ownership and managerial positions in companies.

The survey was conducted from January till March 2017 by the MASMI agency from Belgrade for the needs of Adizes SEE, and it involved 205 owners of companies older than 55 and employing more than 20 workers. The results were very close to those in Croatia (survey conducted in 2015), and the 2013 survey in Finland was another point of comparison.

– Company management can be transferred to family members or a professional management, whereas ownership is transferred to family members either in life or after the founder's death, to another natural person, which can belong to the management, be one of the employees or an external investor, or to a company, taking the form of an acquisition or a merger. No doubt the least popular option is the liquidation of the company following the death of the founder – explained Boris Vukic, a partner at Adizes SEE, presenting the results of the survey.

He pointed out that one of the mistakes company owners make was to insist on having their children take over the business and continue running the company even when they have no interest in doing so. Vukic said that, in Serbia, according to the Business Registers Agency data from 2015, over a fourth of the companies (28.1%) were owned by people aged 55 and above. According to him, it seems that they don't put enough effort in planning their companies' futures regarding the transfer of business to the coming generations and that those plans often consists of expectations, wishes and hopes rather than concrete solutions.

– As many as 92% of the owners are also the founders! They are “the first owners”, then, and have not gone through the complex process of a business transfer so far. Still, 76.6% of them expect the company to continue being owned by the family after they retire, whereas 77.5% believe that the company could be run by a family member – Vukic says.

Trust more important than education

Nearly all those surveyed, as many as 99% of them, consider that being a “person of trust” is the most important characteristic their successor should have, whereas expertise and familiarity with the way the company operates, as well as adequate education and willingness for further development, come second.

(From the meeting of the Slovenian Business Club) – The majority of the owners (57%) claim that they are intensively discussing, or have already discussed, the future of the company and the challenges of business transfer with their children, though the practice shows this not to be quite true. There have else been examples where the owner claims, at a meeting with consultants, that the son “is not yet mature enough” to take over the running of the company, where the said son has just become a grandfather – Vukic talks about his experiences.

A large majority of the surveyed company owners (69.3%) believe that the time needed to prepare the selected person for the managerial position is measured in years, and that their role in running the company will change in the next 5 to 10 years.

In reaching a decision regarding the company's future, they point out that the company's interest would be the priority, and then the interests of their children (27.3%).

– The difficulty with which they decide to leave the company is shown by the fact that 45.4% of the owners say that, following the completion of the business transfer process, they will withdraw from the daily activities, but continue to act as advisers – Vukic explains and notes that the desire of retired owners to come to the office whenever they have an advice to give and the new management's intention to only ask them for advice when they believe it is necessary are most often not complementary.

Also, nearly 25% of them plan to continue helping around the company's operations or providing advice, whereas only 41.5% of them say that they expect only income from their pension following the retirement. Over a half of them count on an additional source of income, among other things, on compensations paid by the company.

“A single sheet of paper” for the future

The survey also lists recommendations for subjects influencing improvements in the business environment, as well as for company owners, advising, for example, the initiation of campaigns for raising awareness among the owners of small and medium companies of 55 and more years of age of the complexity of business transfer and the importance of a timely preparation for the process. Adopting the definition of family companies and implementing statistical monitoring of those companies in Serbia, as well as development and co-financing of programs of support directed at strengthening their capacities for a successful generational transfer, are also recommended.

One should also point to potential alternative solutions for business transfer and the creation of financial instruments for a facilitated purchase or acquisition of a company whose owners are retiring.

Owners are recommended to prepare the company by securing sustainability, profitability and transferability following their retirement, and defining “a single sheet of paper” which will prepare the owner, potential successors and the whole family for the business transfer is cited as a very useful instrument.

Club 2040

In the past years, more attention has been paid to family business in Serbia and there have been several business forums, seminars and panels dealing with this topic, although it seems that institutional support remains insufficient. Adizes SEE has thereby founded Club 2040, which brings together young people aged 20 to 40, who, as they emphasize “are expected to succeed their parents as heads of family businesses by 2040, if not earlier”. Their future and preparations for business transfer are being discussed intensively at meetings.

Marko Andrejevic

Slovenački poslovni klub Beograd

ASEE d.o.o. Novi Sad

Masmi d.o.o. Beograd

Slovenian Business Club

Business Transfer Barometer Serbia

Danijela Fisakov

Boris Vukic

family companies

family businesses

business transfer

transfer of business to the next generation

generational shift

successors in business

small and medium enterprises

SME

entrepreneurship