Retiring “Baby Boomer Family Businesses”: A golden opportunity for strategic investment.

SMEs, predominantly family businesses, are the engine of the Spanish economy. Their deep roots and significant contribution are fundamental to the country’s stability and development. Some key figures to highlight: 9 out of 10 businesses in Spain are family-owned (92.4%). These family businesses generate 70% of private sector employment in Spain. They represent approximately 57.2% of our country’s private sector Gross Value Added (GVA). In countries like the USA, almost 60% of SMEs could disappear due to a lack of generational succession.

The problem: the lack of generational succession poses a significant threat to their continuity. A staggering 70% of these companies do not have a succession plan. This overwhelming lack of foresight directly translates into a high business mortality rate as generations succeed one another. Only 30% successfully transition to a second generation, 15% to a third, and a mere 4% reach the fourth generation. This reality paints a clear ‘survival cliff’ after the founding generation, directly linked to the absence of an adequate succession plan.

Although the problems are diverse, they often stem from a lack of motivation or the inability to find suitable talent to transform and scale their businesses , or the founder’s resistance to ceding control. The absence of a suitable successor or a genuine lack of interest from the next generation are critical factors that hinder a smooth transition. Even when there is interest, insufficient training in business management or leadership skills can compromise the long-term viability of the business.

According to an IESE survey, 50% of surveyed entrepreneurs state they will ‘never retire’ even if their businesses lack continuity. This mindset often leads to postponing planning, despite succession being a ‘process, not an event’ that ideally requires at least five years of anticipation to be effective.

Furthermore, the tax burden can be a decisive factor if not properly planned. Poor fiscal and financial planning can turn taxes or a lack of liquidity into an ‘unsustainable burden’. Requirements for accessing tax benefits are more stringent for donations than for inheritances , which can complicate the choice of transfer method. For SMEs with an EBITDA exceeding €1 million, this is a crucial moment to act and secure their future, as a lack of liquidity to cover Inheritance and Gift Tax (ISD) can even force the sale of the company to meet tax costs.

Proven strategies exist to transform this risk into an opportunity for growth and professionalization.

• Proactive Planning: Initiate the process at least 5 years in advance and establish a Family Protocol that regulates the relationship between family, business, and assets. This document is a crucial exercise in “self-regulation” and a pact designed to anticipate and resolve future issues, clarifying aspects such as succession, salary structure, fees, and organizational charts.
• Professionalization of Management: Assign roles based on competencies and skills, not solely on family ties, and integrate external talent if necessary. This ensures that decisions are based on professional criteria, avoiding the overlap of family and business roles that often cause problems.
• Transparent Communication: Foster open and honest dialogue among all generations to align expectations and prevent conflicts. A shared vision for the company’s future is essential, jointly answering the question: “Why do we want the company to continue?”
• Specialized External Advice: Engage experts (financial, legal, mediators, etc.) who can provide objective perspectives and strategies for a smooth transition. These advisors can act as neutral arbiters, facilitating dialogue and resolving differences.

For businesses that cannot find an internal successor or are seeking a new impetus, M&A and Private Equity operations are becoming established as strategic solutions. It is estimated that over 1.1 million family SMEs in Spain lack a clear successor, and by 2030, more than half a million entrepreneurs will retire without a continuity plan. The injection of external growth capital or the sale of businesses not only guarantees business continuity but also injects capital to face the future with greater certainty , professionalizes management with support in defining medium and long-term strategies , facilitates growth, and offers liquidity to the founder.

This allows the entrepreneur to monetize the accumulated value of their business, ensuring their economic independence and a dignified retirement plan. The sale of a family business has ceased to be a taboo, transforming into a symptom of success and strategic vision.

At teamOn, we understand the complexity of these processes. We are experts in corporate finance, M&A, Private Equity, and generational succession, and we are here to help family businesses and SMEs design a strategy that guarantees the continuity and success of their business.