Succession Options

Three Main Ways to Hand Over Your SME: Family, Management, External Buyer

For many SME owners 60+, “succession” feels like one vague idea: someday I’ll hand over the business and step back. In reality, you are choosing between three very different paths — passing the company to your family, selling it to your management team, or bringing in an external buyer. Each option has its own logic, risks and requirements.

This article is about seeing those paths clearly, so that “selling the business” stops being an abstract thought and becomes three concrete scenarios you can actually prepare for.

Why your exit route matters

When you’ve built a company over 20–30 years, you rarely think in pure financial terms. Of course, price matters. But you also care about:

• what happens to your people,

• whether clients stay,

• how your reputation and legacy look after you step back.

From a buyer’s side, the picture is just as complex. An investor-operator like me is not only asking “what is the EBITDA multiple?” We are also asking:

• Who will actually run this company the day after closing?

• How will the bank view this transaction?

• Where are the biggest risks in the first 3–5 years?

Family succession, management buyout and sale to an external buyer all answer these questions differently.

Three basic scenarios at a glance

Let’s start with a simple overview.

• Family succession
  You transfer ownership and control to someone in the family — often a son or daughter, sometimes several heirs. Values and identity are more likely to stay, but it requires someone in the family who both wants and is able to run the business.

• Management buyout (MBO)
  Your existing management team buys the company. They already know the business, clients and staff. But they usually don’t have enough capital, so the deal often mixes bank debt, your own seller financing (vendor loan) and sometimes an external investor.

• External buyer
  You sell the company to someone from outside — a strategic buyer (bigger company in your industry) or an investor-operator who specialises in buying and running SMEs. They bring capital and experience, but owners often worry: “Will they break the culture and change everything?”

There is no single “right” scenario. The right path depends on the state of your business, your family’s wishes, the strength of your management team and your comfort with an external partner.

Family succession: keeping the business in the family

For many founders, the first instinct is simple: “I want the business to stay in the family.” It sounds natural, but behind this idea there are a few tough questions.

Key questions for family transfer

1. Is there someone who really wants it?
   Not just “not against it”, but genuinely willing to take responsibility for people, clients, risk and banks.

2. Is this person ready — or at least on a path to readiness?
   Have they worked in the business beyond a family name on the door? Do they lead people today? Do key clients and suppliers see them as a real decision-maker?

3. How will this look to banks and potential investors?
   If the next-generation leader has no track record and only a title, lenders and future partners may see the company as more risky.

Family succession can be powerful when a capable next-generation leader has grown into the role over years. It can also be dangerous if the company is “given” to someone out of obligation rather than fit.

Pros and cons for the business

Pros:

• Values, relationships and culture are more likely to stay.

• Staff and clients may feel more continuity and loyalty.

• You can stay involved as a mentor or board member, not as a daily operator.

Cons:

• If the chosen family member is weak, the company may slowly lose competitiveness.

• Other heirs may feel treated unfairly if ownership and control are not clearly structured.

• Financing growth or buyouts between family members can become emotionally complicated.

If the family option is attractive, it helps to treat it with the same discipline as any other scenario: define roles, train the successor, and make sure banks and partners see a real management team, not just a surname.

Management buyout (MBO): when your team becomes the new owner

A management buyout means your existing managers buy the company from you. For the business, this often feels like the most natural scenario: the people who already run the company continue, but as owners.

When an MBO is realistic

An MBO can work well when:

• You have a strong second line already making decisions in sales, operations and finance.

• The team has earned the respect of staff, clients and suppliers.

• You are willing to support them with a fair structure and possibly seller financing.

Managers rarely have enough capital to pay full price in cash. So an MBO usually combines:

• bank debt based on the company’s EBITDA and cash flow,

• a vendor loan (part of the price paid to you over time),

• and sometimes a minority investor who brings extra capital and experience.

What investors and banks look at

From an investor-operator or lender’s point of view, the key questions in an MBO are:

• Can this management team handle both running the business and carrying debt?

• Is their internal dynamic healthy, or are conflicts likely once they become co-owners?

• Will they maintain the performance that supported the valuation?

If the second line is strong and already runs the business day-to-day, an MBO can feel lower-risk than bringing in a completely new owner. If the second line exists mostly on paper and depends on you for every key decision, an MBO becomes fragile.

Pros and cons for the business

Pros:

• High continuity: same faces, same relationships.

• Staff often welcome managers they know becoming owners.

• You can design a gradual transition, staying involved for a time while the team adjusts.

Cons:

• Financing is tight; too much debt can stress the company if results weaken.

• If team members are not aligned, ownership conflicts may appear.

• The price you receive may be more constrained than in a competitive external sale.

An MBO is not “the easy option”. It requires honest assessment of your team, careful structuring of debt and clear agreements between managers.

External buyer: capital and fresh perspective, with more perceived risk

Selling to an external buyer can feel like the most radical option. Someone from outside — a larger company, a private investor, or an investor-operator — comes in, buys your business and takes over.

Why owners hesitate

Common fears are:

• “They will break the culture and fire people.”

• “They will push everything only for short-term profit.”

• “My life’s work will disappear inside a bigger group.”

These fears are understandable. At the same time, an external buyer often brings exactly what a growing SME needs:

• more capital for investment,

• professionalisation of systems and processes,

• access to new markets, clients or technology.

What makes an external sale work

From a buyer-operator’s side, a smooth external acquisition depends heavily on preparation:

• Transparent, clean numbers – so banks and investors can understand the real performance.

• Formalised processes and contracts – so the business is not just in your head.

• Clear plan for the transition period – how long you stay, what you do, and how the handover to new leadership is managed.

If these elements are in place, an external buyer can often pay a competitive price and support the company’s next phase of growth. If not, they will either walk away or demand a discount and heavy conditions.

Pros and cons for the business

Pros:

• Access to capital and know-how beyond what the company could generate alone.

• Potential for new products, markets or efficiencies.

• You can usually exit more fully, instead of being tied to the business for many years.

Cons:

• Higher perceived risk of cultural change.

• Staff may initially feel insecure until they see how the new owner behaves.

• Negotiations can be more demanding, especially on warranties and earn-out terms.

The key for you as an owner is to choose the right type of buyer and to prepare the company so that it can stand on its own feet, not only in your shadow.

How to choose your path

There is no universal formula, but four questions can help structure your thinking:

1. Family:
   In 5–10 years, do I realistically see a specific family member leading this business well — and do they want it?

2. Management:
   Do I have a second line strong enough that, with the right structure, they could take ownership without breaking under the weight of debt and decisions?

3. External buyer:
   Am I open to an outside partner who brings capital and operational discipline, if I can trust them to treat the business fairly?

4. Timing and preparation:
   Which path has the best fit with where my company is today — and what can I realistically strengthen in the next 1–3 years (team, processes, numbers)?

You do not have to decide everything this week. But avoiding the decision completely is also a decision — usually the worst one.

If You’re an SME Owner 60+

If you are 60+ and planning to sell or hand over your business in the next few years, a simple first step is to see how an outside buyer would look at your numbers today. Imagine each of the three paths — family, management or external buyer — and ask: “What would they see in my EBITDA and cash flow? Where are the risks?”

If you’d like an indicative, non-binding view of what your company might look like to a buyer today, fill in the short seller form on my website. Based on your current EBITDA and a few basic parameters, you’ll receive a first, high-level sense of value and readiness — a starting point for deciding which succession route fits you and your business best.

👉Seller Form Step-1 link here>>