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SME succession: Digitization as a crucial factor

Over the next few years, hundreds of thousands of SMEs will face a change of ownership. Analysis of the IT infrastructure is often forgotten in takeover negotiations. This can be expensive.

Uta Engelmann

August 22, 2022 . 5 minutes read

The baby boomer generation is approaching retirement. This is an issue affecting not just companies that are losing experienced employees, but also SMEs that are facing a change of ownership and management. It is a problem for the whole economy: According to a recent study from 2022, around 93,000 SMEs have no succession plan in place. What is striking is that only around 7.1 percent of medium-sized enterprises with more than 49 employees are affected by this. The situation is quite different for smaller companies: More than 15 percent of them say they don’t know who will take over the business in the future.

It is difficult to establish exactly why these companies find themselves in this predicament. Certain regions (Eastern Switzerland) and industries (printing and publishing, architecture) stand out with above-average figures. But one reason why the search for a suitable successor has been so sluggish may also be digitization. Smaller SMEs in particular still underestimate the challenges posed by digital transformation. For example, just 18 percent of Swiss SMEs worry about becoming the target of a cyber attack. As a result, they do not make sufficient investments in this area. The assumption that older entrepreneurs in particular are not investing heavily in digitization is not absolutely certain, but is probably not entirely wrong either.

Succession planning is not always that easy for SMEs (Symbol image; source: Unsplash)

Outdated IT infrastructure and a lack of vision on how the company should adapt to the changing technological environment – an explosive combination for young entrepreneurs. The issue is being addressed by the KMU Next network, which has set itself the challenge of tackling the crisis. The KMU Next network provides independent and neutral advice, raises awareness of the issue and offers support with succession planning (see box). To address the challenges surrounding digitization, the association maintains a strategic partnership with Sunrise Business.

Optimizing the IT infrastructure in good time

A company’s IT infrastructure is often recklessly overlooked in the process of clarifying any acquisitions. More importance seems to be attached to the bare figures: Revenue, profit, customer base, etc. A tour of the offices reveals that every desk has a PC, so everything must be fine. But maybe it isn’t! It is essential to take a closer look at the company’s digital set-up. When doing this, it is well worth bringing in a specialist to produce a reliable overview. With the free consultation offered by Sunrise Business, the current situation is recorded and options and optimizations along with measures to implement any changes are highlighted. The focus here is on workflows, such as the digitization of all customer contacts, data storage, network connectivity and cyber security. Another important topic is basic digital collaboration solutions, such as working from home, sharing files or mobile solutions for working on the go. To be able to offer the best possible advice, the structure of the discussions is adapted to reflect the size of the company. Click here if you have more than 20 employees and here if you have fewer than 20 employees.

Simply adopting these measures to stabilize and modernize the IT system may in some circumstances be enough to eliminate any serious concerns about a successor. In this context, digitization should above all boost efficiency, save costs, increase security and facilitate collaboration. This is because SMEs nowadays also have access to technical possibilities that until just a few years ago were only available to very large companies: A variety of different cloud services now also enable small companies to use high-end solutions.

Exploiting the opportunities of digitization

The second step involves no longer focusing exclusively on optimizing the company’s IT, but exploring further digitization opportunities. Here too, the experts from Sunrise Business will advise the new generation of company owners. Topics such as new forms of collaboration, the Internet of Things (IoT) and automated processes will be the main focus. This requires careful analysis. What do customers want? How can digital resources support production, marketing and sales? How can innovative ideas be implemented using new technologies?

Sandro Isteri, Senior Director of SMEs at Sunrise, talks about the challenges of digitization for Swiss SMEs in an interview.

(This video is only available in German; Source: Fokus KMU TV Feature)

Don’t forget about employees

Especially for those SMEs that are lagging behind, it is advisable not to try to do everything all at once. Of course, new owners often have plenty of ideas and see countless opportunities. But the infrastructure needs to be up to modern standards first. And don’t forget that you need employees and customers to be on board right from the word go. Dramatic rifts can quickly occur if people’s needs are not considered, particularly when it comes to companies in which no profound changes have taken place for many years. The consultants from Sunrise Business and the KMU Next network are well aware of this risk. Because, ultimately, every endeavor is designed to create an employer that is attractive to talented young people.

Conclusion: More than just a change in generations

A change of ownership can and should prompt smaller companies to shift their focus. When a company is taken over, particular attention should be paid to the IT infrastructure. This will prevent any unpleasant and expensive surprises. As a first step, the IT infrastructure will be modernized. This is primarily done to boost efficiency and save costs. In a second step, the digital opportunities should be carefully explored to make the company fit for the future.  The Sunrise Business IT experts will be there to support the company throughout the transformation process – from the initial consultation and customized measures through to migration and ultimately, if desired, the operation of the IT infrastructure as well. The IT processes in the company should be lean, uninterrupted and easy to understand. This is so that all employees understand the processes and new technologies are quickly established throughout the company.

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About the KMU Next network

KMU Next has been around since 2005. One of the initial reasons and motivations for founding this independent association was the fact that many viable and economically important SMEs are not managing to make the generational switch. The network platform offers SMEs support with managerial and business changes and arranges for experts (such as Sunrise) to answer questions about business development. With the SME Marketplace, KMU Next also brings together suitable buyers and sellers.

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