Psychological Barriers in Business Transfers - How to cope with the transfer of SME Ownership 

This thesis investigates how company owners cope with the psychological barriers experienced in business transfer situations. Across Europe, about 450.000 firms with 2 million employees are being transferred each year with limited success. We believe that psychological barriers and difficulties to overcome them are at the core of the low transfer rate. Gaining more knowledge on this topic is important as non-transferred businesses have a significant negative impact on (inter) national economies as well as on personal finance. The topic becomes increasingly urgent, as the group of companies owned by baby boomers and now coming up for sale, is growing rapidly.

Transfer of ownership mostly happens only once in a lifetime. Thus business owners are relatively unfamiliar with the process. During the transfer process, attention is typically paid to tangible issues such as operations, integration, synergies, finance and legal matters. Intangible aspects such as psychological challenges hardly come up for discussion in transfers themselves or in research. This study will partly fill that gap. The investigation is embedded in the transactional model of stress and coping, used in the context of psychology and behavioural finance. A hidden group of entrepreneurs in the business transfer context is investigated with a multi-method approach. With the help of the Dutch Chamber of Commerce and professionals in the work field, a large group of respondents has been investigated. Explorative case studies and quantitative studies have been done.

The contribution of the dissertation to the existing body of knowledge is multifaceted. Firstly, a definition of psychological barriers is proposed. Secondly, the perceived psychological barriers of business owners are partially confirmed from a qualitative and quantitative point of view. Fear for emptiness, letting go of firm engagement, choosing between children, distrust in the successor & underestimation of the process and handing over leadership & stepping down emerge as most notable. Thirdly, we find that related psychological stress levels of entrepreneurs differ depending on transfer delay or cancellation events. Fourthly, we discover a consistent range of coping strategies that entrepreneurs use during business transfers. We discover passive coping styles to be dominant. Finally, we find evidence that psychological barriers are associated with company owners’ emotional pricing. We conclude that classical economic theory, as well as behavioural finance, contribute to a better understanding of entrepreneurs and the transfer of ownership of their businesses. Further research could investigate other behavioural finance phenomena such as heuristics, affect, herd behaviour and framing techniques. We encourage more scholarly work on business transfers as many questions remain unanswered. Also, we emphasise the importance of takeover entrepreneurship and mutual understanding between incumbent and successor to ensure prosperity in the future business.