Business transfers and the long-term approach in SME business development
Tall, Juha; Sorama, Kirsti; Varamäki, Elina; Matalamäki, Marko; Viljamaa, Anmari (2017)
Tall, Juha
Sorama, Kirsti
Varamäki, Elina
Matalamäki, Marko
Viljamaa, Anmari
European Institute for Advanced Studies in Management
2017
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-201803083150
https://urn.fi/URN:NBN:fi:amk-201803083150
Tiivistelmä
The aim of this paper is to compare successions and business transfers on farms and other SMEs, particularly from the perspective of business development. To address the need for continuous change in the business environment, entrepreneurs can only apply foresight, and develop and renew their businesses. Farms are now coming to resemble other traditional businesses; and their numbers are decreasing. The study highlights what the two groups of businesses can learn from each other, and that rural regions need entrepreneurs who develop and expand their businesses.
The study was conducted by utilizing a multiple case study method with themed interviews. The study consists of 12 cases; six farms, three firms with fewer than five employees, and three firms with over 20 employees. The case studies reveal the details of nine successions and three asset deals. Most of the interviews were conducted in person (23 interviews) but a few had to be conducted by telephone (3 interviews). The data were analyzed using content analysis methods.
There are a few key similarities in terms of business transfers between farms and other SMEs. First, the negotiation process is likely to require somewhere between a few months and two years, with a period of around a year apparently being quite typical. Second, in some cases, the transferor and successor agree on the succession funding between themselves without resorting to external funding. Third, knowledge transfer is often a long process that begins years before the business transfer and will continue for many years afterward. However, in the case of asset deals, there is no more than minimal need for knowledge transfer and often a few meetings are sufficient. Fourth, gradual business renewal and development are an essential part of daily management activities after the business transfer.
There are also some key differences in the area of business transfers between farms and other SMEs. Families on farms prepare themselves for succession perhaps decades before actual implementation, whereas in other SMEs, any preparation period is considerably shorter. Second, on farms liability for the transferor’s debts is often assumed by the successors. In the case of other SMEs, the firm’s bank and perhaps a government enterprise development organization often play a key role in financing successors. Third, external experts often have a key role in farm business transfers, while in other SMEs, the role of an expert varies far more, and external experts may not be used at all.
Taxation and subsidy policy play a vitally important role in successions of farm businesses. Delivering business profits takes hard work and the business margins are slim. The majority of SME business transfers are successful. Common success factors in business transfers are business renewal and business development after the business transfer. They also represent key challenges for management, which also include the management of the firm's everyday operations. In addition, the gradual development of the firm is important during business transfer negotiations. The use of external expertise in business transfer negotiations is a key success factor as well. There are two key recommendations in this study. First, a business transfer should be an exit option considered even when starting the business: Second, it is worth developing the business even while negotiating a business transfer.
The study was conducted by utilizing a multiple case study method with themed interviews. The study consists of 12 cases; six farms, three firms with fewer than five employees, and three firms with over 20 employees. The case studies reveal the details of nine successions and three asset deals. Most of the interviews were conducted in person (23 interviews) but a few had to be conducted by telephone (3 interviews). The data were analyzed using content analysis methods.
There are a few key similarities in terms of business transfers between farms and other SMEs. First, the negotiation process is likely to require somewhere between a few months and two years, with a period of around a year apparently being quite typical. Second, in some cases, the transferor and successor agree on the succession funding between themselves without resorting to external funding. Third, knowledge transfer is often a long process that begins years before the business transfer and will continue for many years afterward. However, in the case of asset deals, there is no more than minimal need for knowledge transfer and often a few meetings are sufficient. Fourth, gradual business renewal and development are an essential part of daily management activities after the business transfer.
There are also some key differences in the area of business transfers between farms and other SMEs. Families on farms prepare themselves for succession perhaps decades before actual implementation, whereas in other SMEs, any preparation period is considerably shorter. Second, on farms liability for the transferor’s debts is often assumed by the successors. In the case of other SMEs, the firm’s bank and perhaps a government enterprise development organization often play a key role in financing successors. Third, external experts often have a key role in farm business transfers, while in other SMEs, the role of an expert varies far more, and external experts may not be used at all.
Taxation and subsidy policy play a vitally important role in successions of farm businesses. Delivering business profits takes hard work and the business margins are slim. The majority of SME business transfers are successful. Common success factors in business transfers are business renewal and business development after the business transfer. They also represent key challenges for management, which also include the management of the firm's everyday operations. In addition, the gradual development of the firm is important during business transfer negotiations. The use of external expertise in business transfer negotiations is a key success factor as well. There are two key recommendations in this study. First, a business transfer should be an exit option considered even when starting the business: Second, it is worth developing the business even while negotiating a business transfer.