ISBN 978-952-5721-02-7 (NID)

ISBN 978-952-5721-03-4 (PDF)

KOSEK, Kokkolanseudun Kehitys Ltd

Ristirannankatu 1
FI-67100 Kokkola, Finland

Mainostoimisto Heinäkuu / Kirjapaino A. Välikangas, Kokkola

Kokkola 2007
PREFACE

The transnational project REINO (Renewal and Innovation to Business

Transfers of Micro Companies) is co-ordinated by a Finnish development
company KOSEK and is funded by the DG Employment of the European
Commission under the European Social Fund, Article 6 - “Innovative
Approaches to the Management of Change” -programme. The objective
of the project is to create a support structure and tools that assist
entrepreneurs in carrying out business transfers successfully. During
the two-year project, partners in Denmark, Greece, Finland, and Italy
will map out and test the implementation of support services in different
stages of the business transfer process.

The REINO project includes six specifically focused pilot projects to be

implemented by individual project partners. The aims of these pilots
are to examine, develop and design innovative and transferable models
for methods, tools and approaches on specific themes in the context of
facilitating business transfers of micro companies. Thereby it is possible
to find solutions to problems that are complicating business transfers
throughout the European Union.

The themes of the pilots have been chosen in order to tackle the most
critical problems and shortcomings related to transfer situations and
based on the know-how and expertise of individual partners in Denmark,
Italy, Finland and Greece. In order to include important themes and
to gain new perspectives, partners with special expertise and know-
how were invited to the project to implement the pilots. The partners
in charge of special themes have also been in charge of drawing up
detailed project plans for the implementation of the pilots.

The Anticipation Method is the second publication of the REINO project

and the first published pilot report. It consists of two parts. Firstly,
the project manager of the Anticipation Method pilot Ms Johanna Salmi
(KOSEK) describes the created model and the outcomes of the pilot.
Secondly, Mr Veli-Matti Koljonen (Coop Consult Ltd) presents the results
of the external evaluation.

Kokkola, August 2007

Antti Porko Ari Peltoniemi

Managing director Transnational Co-ordinator
 PART 1

THE OUTCOMES OF THE PILOT PROJECT

“ANTICIPATION METHOD”

Johanna Salmi

Kokkolanseudun Kehitys Ltd (KOSEK)

Johanna Salmi
Contents

1. SUMMARY............................................................................ 1

2. INTRODUCTION................................................................... 3

3. PROCESS CHART.................................................................. 5

4. STATISTICAL INFORMATION PROCESSING.......................... 6

5. LOCAL AND REGIONAL OPERATORS..................................... 8

5.1. Municipal and business line meetings............................................8
5.2. Indirect meetings.......................................................................9

6. CLASSIFICATION OF COMPANIES...................................... 11
6.1. Classification method................................................................ 11
6.2. Results of the classification........................................................12

7. CHALLENGES..................................................................... 15

8. PILOT EVALUATION........................................................... 17
8.1. Self evaluation of the method process development...................... 17
8.2. External Evaluation................................................................... 18

9. PILOT RESULTS AND OUTCOMES....................................... 22

10. CONCLUSIONS................................................................. 23

ANNEXES............................................................................... 25
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1. SUMMARY

The purpose of the Anticipation Method pilot is to create a method for

finding critical micro companies facing a business transfer in the near
future. A proactive stance towards business transfers plays the key role
in the method. By finding companies facing a business transfer, the
services and resources related to the transfer can be directed to the
right companies.

The classification of companies is based on valid statistical data, which

was acquired in this case from Statistics Finland. The statistics were
compared in the meetings that were arranged for the municipal and
business line representatives. These meetings were arranged in order
to find the real life situations and companies behind the statistics. In
forming the classification, the subregional and business strategies
were taken into consideration. Companies representing the focused
line of business in the area were thereby given more emphasis in the
classification of micro companies.

The classification makes it possible to process and identify the most

critical companies, and this information can be used in later phases. For
example, the business transfer services developed through the REINO
project can utilize the classification system in contacting entrepreneurs
facing a business transfer. However, it must be pointed out that the data
used in the classification is not constant and it must be updated at least
every five years.

The evaluation from the participants of the municipal and business line
meetings has taken place and the results are discussed in chapter 8.

In short, the main results of the Anticipation Method are:

1. The development of a method of identifying and finding critical

companies considering a business transfer, companies that are
vital to regional maintenance and development. The method is
also applicable to other environments.
2. Finding the biggest challenges in business transfers in the
anticipation phase and becoming aware of them.
3. Growth of general awareness concerning business transfers in the
region.
4. The base work in the business transfer situation has been done for


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the later phases of the project: an updated list of business transfer

companies has also been constructed.

Anticipation method is a procedure to find clear target groups of micro

companies facing business transfer in the near future. When the groups
of business transfer companies are found, it is possible to head resources
to most critical business transfer processes. Method forms also the
applicable base work for the future pilots in the project.

Project manager Heikki Luukkonen was involved in the making of the

pilot, and KOSEK business advisor Jonne Sandberg has also provided
advisory help in constructing the method.


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2. INTRODUCTION

As the first of the six pilots of the REINO project, the Anticipation Method
concentrates on finding critical micro companies for business transfers.
The pilot is implemented by Kokkolanseudun Kehitys Ltd (KOSEK), a
regional development company in the Kokkola subregion. Regional
developmental goals and focused business lines are playing a key role
in the method, because it is essential to carry through business transfer
in the companies contributing regional development.

This pilot aims to formulate and test a method that will enable business
advisors as well as local and regional operators to take a proactive stance
to tackle the challenge of the increasing number of business transfers.
This method aims to especially address the challenges caused by the
threat that unsuccesful business transfers pose to sparsely populated
areas, where operations of one single company can have a crucial role,
and to the operation of manufacturing chains, where the operations
of producers of key services and products can be crucial for the whole
chain. The pilot project plan in its entirety, as described in the grant
appliction, can be found in annex 1. The partners of the REINO project
can use the results of the Anticipation Method as an example to be
tested and further adjusted according to the operational environment
of each partner country.

During the pilot, a method for identifying approaching transfers in

specific regions or local areas will be created and tested in co-operation
with the local and regional operators of Central Ostrobothnia. Through
the anticipation system companies that are approaching transfers in
specific regions or local areas will be identified, and then the target
groups for direct measures to be implemented by business advisors will
be selected in order to start the transfer preparation process with the
entrepreneur.

The area in focus in this pilot is Central Ostrobothnia in Finland. Most

of the companies in Central Ostrobothnia are family enterprises with
less than ten employees (figure 1). Central Ostrobothnia consists of
two subregions: the Kokkola and Kaustinen subregion. The province
has a strong basis on primary production, which is not taken into
consideration in this case. The reason for this is that the REINO project
does not include primary production, which is concentrated on by other
organizations. The target group of the pilot is the micro companies in
Central Ostrobothnia. The municipality of Ullava did not take part in the


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project so it was left out from the pilot process. Regional aspects are
taken into consideration: half of the population of Central Ostrobothnia
lives in the city of Kokkola. This situation demands that Kokkola is
observed separately in this pilot, and the other municipalities as their
own entity.

By bringing up anticipatory aspects in the discussion on business

transfers, the whole region of Central Osthrobothnia and its industrial
structure will benefit. One of the problems among the entrepreneurs
facing a business transfer is the lack of suitable successors. If the
transfer process was begun well in advance, meaning at least five years
before the actual transfer, there would be more time for seeking and
finding a successor.

Figure 1: Companies in Central Ostrobothnia by the number of employees

Source: Keski-Pohjanmaan tilastoja (Statistics on Central Ostrobothnia), elect.


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3. PROCESS CHART

1. STATISTICS: Collecting the statistical data and selecting the target

group by using the age of the entrepreneur as the main criteria.
2. MUNICIPAL AND BUSINESS LINE MEETINGS: Arranging regional
and business line meetings in order to find out the companies vital
for the region and to gain a general view of the business transfer
situation in each line of business.
3. FURTHER ANALYSIS: Material analysis, making the classification
and finally reaching conclusions.

Figure 2: Process description


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4. STATISTICAL INFORMATION PROCESSING

Statistical information was acquired from Statistics Finland. The material

consisted of information on the companies in Central Ostrobothnia from
2005 to 2006. The acquired material was updated by using the electronic
company registers at KOSEK and the Kaustinen subregion. The age of
the company leaders was included in the material, because there was
no statistics on the actual owners of the companies.

The material was narrowed down to companies employing 1–9 people

(the definition of a micro company) and to an age group of entrepreneurs
aged 52 and over, which is the group facing a business transfer within
the next ten years.

Information about the micro companies include

- The age of the owner or, as in this case, the name and age of
the chairman or ceo, and of other(s) responsible. The intention
was to include the closest equivalent to the actual owner of the
company in the list.
- The official name and trade registry number of the business are
needed in identifying the businesses in later phases.
- The line of business, which is important for two reasons:
Firstly, the information about the line of business is needed
to exclude those micro companies that this pilot is not taking
into consideration (i.e. primary production). Secondly, in every
subregion different lines of business are emphasized according
to the business strategies of the region (See Chapter 5). These
strategies are followed in later phases when certain lines of
business are emphasized.
- The number of employees in the business is important in order to
find significant employers.
- Company residence. Note: because different regions lay varied
emphasis on business strategies, rural and urban areas are
highlighted differently in this pilot.
- Possible export, to find out the companies bringing external
profits to the region.

Companies that are excluded from the classification:

- Companies in primary production: the REINO project does not
concentrate on primary production.
- Companies with more than 9 employees: the project
concentrates on micro companies.


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- Companies as secondary occupations: in most cases, these

companies are linked to primary production, and they are usually
not transferable.


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5. LOCAL AND REGIONAL OPERATORS

Regional, subregional and business strategies draw a picture of the

development goals and represent the focused lines of business in the
region. The focused lines of business in Central Ostrobothnia are
metal, laser, ICT, chemistry, fur, boat, and wood. In the Kaustinen
subregion, food production and adventure tourism are focused on as
well. After the businesses crucial for the project are separated from the
statistical data by the criteria of age and the number of employees, both
regional and municipal representatives, as well as the representatives
of the focused lines of business must be heard in order to find out
the micro companies vital to the service and industrial structure of the
region.

5.1. Municipal and business line meetings

In pilot 1, there were two types of meetings arranged concerning business

transfers. Firstly, the contact was made to regional and municipal
operators (annex 2) in order to find out which micro companies are
considered vital for the regional development and service structure.
In the municipal meetings, it was important to define the municipal
service structure and contractor chains. The regional impacts of losing
a remarkable producer or a link in a subcontractor chain are more
dramatic in scarcely populated areas than in urban environments. In
addition, it was important to find out the major employers but to also
maintain municipal and subregional self-sufficiency.

The representatives convened for the municipal meetings were:

- municipal manager and the chairman of the municipal board
- business advisor in the area in question
- representative of local entrepreneur organization

Secondly, meetings for representatives of the focused line

of business (annex 3) were arranged. The business line meetings
concentrated on future prospects of focused lines of business, and on
the question of business transfers in micro companies.

The representatives convened for the focused line of business meetings

were experts and specialists in the business lines concerned, who know
the field well: for example, representatives in some of the meetings

 Regional Centre Programme: Ministry of the Interior of Finland.


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were from KETEK, which is an industrial development centre of Central

Ostrobothnia; or representatives from local line of business’ trade unions
(e.g. Finnish Fur Breeders’ Association).

The reciprocal discussion with both municipal and regional representatives

and business line experts helps to bring the method to grass-root level:
by hearing the challenges and possibilities of the entrepreneurs in more
wide perspective, business transfer becomes a concrete vision that can
be carried through successfully.

5.2. Indirect meetings

Figure 3: Indirect business transfer meetings concerning the REINO project

Other promotions of the pilot (indirect interest towards the pilot,
further meetings agreed on in the pilot meetings)
When Event Where

8.5.2007 Entrepreneur Event Veteli

10.5.2007 Entrepreneur Event Kälviä
15.5.2007 Business transfer in Fur farming Himanka
16.5.2007 Business transfer in Fur farming Kaustinen
29.5.2007 Business advisory board Kälviä

12/ 2007 Business transfer in Boat industry Kokkola

Business transfer events were arranged by each municipality

(participants of REINO) and focused line of business. In addition,
companies were informed of business transfers and the REINO project
in connection with visits to the companies. Companies in the first
group of the classification in the anticipation method were contacted
personally or by mail.

In the pilot meetings, there was some interest towards additional

informative events concerning business transfers. Project manager
Heikki Luukkonen arranged some of these events, which were based on
the contacts made through the pilot. These meetings were thereby not
directly part of the Anticipation pilot. The timetable of these meetings
can be found above.


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These meetings can also be considered as follow-up meetings of the

Anticipation Method, and they are discussed in detail in the future phase
of the project (Action 2.2. “Anticipation system”).

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6. CLASSIFICATION OF COMPANIES

Classification was used as a systematic method in finding the target

micro companies and results of the classification are applied in the next
phases of the project.

First, the entrepreneurs in the target (age)group in Central Ostrobothnia

were filtered from the information gathered at the municipal and business
line meetings. Generally, it is important to see the micro companies
behind the statistics. After the meetings, the material was collected and
analyzed according to the pilot goals set.

6.1. Classification method

The purpose was to separate three different groups of business transfer

companies, which are given different emphasis by following regional
development strategies. Thus, the companies studied were given either
3 or 0 points. By giving either 3 or 0 points the dispersion was smaller
and the points given formed more distinct groups. Another reason for
the categorization by scoring is based on the statistics. Micro companies
are classified in the statistical data into groups of 0–4 employees and 5–
9 employees. This was a considerable challenge in this pilot and affected
the construction of the classification (annex 4).

The factors emphasized:

- export: 3 points, no export 0 points
- company of focused line of business: 3 points, not focused 0
points
- important company for the service sector of the municipality
(Information gained from the municipal meetings, marked
as “Residence” in the classification system) 3 points, not
remarkable 0 points
- number of employees 5–9 people: 3 points, 0–4 people 0
points

Because one of the pilot goals was to keep especially rural micro
companies alive, all companies in rural areas received one point as
“rural extra” (+1). The classification of rural municipalities is based on
the application used by the Ministry of the Interior, and originally created
by the Ministry of Agriculture and Forestry in Finland.

It must be pointed out that the anticipation method is context-dependent.

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Because the number of micro companies is relatively small in Central

Ostrobothnia, it was possible to observe individual businesses. In a
wider perspective, the option could be, for example, to concentrate
on specific lines of business. Also, other factors could be applied in
the classification method, for example the annual turnover of the
company. Unfortunately, this factor could not be used in this application
of the method, because the required information was not available in
the statistics. Some entrepreneurs do not declare their annual turnover
to the Trade Register due to lack of effective legislation on conveying
the information on the financial statements. Some entrepreneurs want
to protect their privacy and prefer to pay the small sanctions that are
required when an entrepreneur does not declare the turnover. Limited
companies are obligated to declare the annual turnover to the Trade
Register, but in case of sole proprietorship it is based on free will and
they are not obligated to declare the turnover.

Example:
Trade registry number Xxxxx
Official name of the business “Business”
Code and name of the branch xxxx Metal industry 3 points
Number of employees 5-9 people 3 points
Residence Kokkola 3 points
Export no 0 points
= 9 points total

6.2. Results of the classification

The total scores given to the categorized businesses vary in this method
from 13 to 0 points. In later phases, business transfer services are
directed according to the results of the Anticipation pilot. By using the
scoring system, three groups of micro companies were formed.

The first group (13–6 points) is informed and contacted personally all
the way from the beginning of the process until the successful transfer.
In this case, 19,6% of the companies are in the first group. The second
group (4–1 points) is made aware of the business transfer service by
using the media, and attended to personally if the entrepreneur makes
a contact: the business transfer service does not tend to make personal
 Statistic Finland aquires the information on company turnovers from the Trade Register.

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contacts to all entrepreneurs in this group. 42,5% of the businesses

belong to this group. The third group (0 points) is not actively offered
with services but indirectly via accounting businesses, which are
consulted by the business transfer service. This group consist of 37,9%
of the companies (See annex 2). This way all the groups are properly
informed, and the emphasis is still on the focus lines of business.

In the study, the number of companies is applicable to the business

transfer service:
1. group – 188 clients (approx. 16 served clients per month)
2. group – 405 companies
3. group – 364 companies

The total number of companies facing a business transfer in Central

Ostrobothnia in 2007 is 957 (see figure 4).

1000

800
1. group
600 2. group
3. group
400
TOTAL
200

Figure 4: The number of companies facing a business transfer in Central Ostrobothnia

in 2007.

The next phase of the REINO project, which concentrates on developing

the transfer services further, is based on these three groups of companies.
In the pilot process, the micro companies are investigated by clarifying
the possibilities of and obstacles to a successful business transfer.

At some level it must be noticed that some of the businesses that

were found by the anticipation method, cannot be transferred for
certain reasons. The reasons may be issues that involve e.g. debts or
non-profitability, and this information is usually found out when the
entrepreneur is contacted. Although this phase is not a part of the pilot
but a part of the later processes in the project (“Action 2 – Anticipation
system”), this aspect must still be understood and noted at this stage.
Because the method is based on statistic material, which does not show
e.g. possible debts of the entrepreneur or other factors that may cause

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that business is not transferable, factors cannot be known before the

actual visit to the company.

It is a noticeable fact that the process of business transfer may take

several years. In this pilot project it means that although company is
contacted personally by the business transfer service, the entrepreneur
may not be ready to start the process. In the following phase of the
project the selection process must take into consideration this aspect
and try to direct services to companies that are ready to start the
business transfer.

The classification of companies revealed the most critical lines of business

concerning business transfers in Central Ostrobothnia. Fur farming is a
regionally focused line of business, and it struggles with demanding
challenges of business transfer and the lack of successors more than the
other focus lines of business in the area. Additionally, the average age
of the entrepreneurs is considerably high within this business line. Fur
farming is also emphasized in the municipal and subregional industrial
strategies. When using the classification, 188 micro companies (of the
total of ca. 960 businesses) got 13–6 points: 63 of these companies
were fur farms (33,5%). Therefore, 35 per cent of all fur farmers in
Central Ostrobothnia are in the target age group (entrepreneurs aged
52 and over).

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7. CHALLENGES

Challenges for successful business transfers are various. In this Chapter

the possible obstacles and challenges are brought out mostly from
anticipatory perspective but also from general perspective that may
complicate business transfer and even stop the process.

Often the entrepreneurs in rural areas engage in several lines of

business: for example farming, timber harvesting, and tourism. These
multi-business companies can be very challenging when it comes to
business transfers. That is why companies such as these were excluded
from the classification.

Entrepreneurship as a “lifestyle” can be an obstacle for a successful

business transfer; meaning that lifestyle entrepreneurs maintain
the business static without need for development, although it would
be beneficial for the company. Often there have been no material
investments in the company. Usually, a successor is not searched for
in a concrete manner, and the transfer is preferred to occur within
the family. If the entrepreneur does not find a successor in the next
generation, the business operations usually end. Entrepreneurship as a
lifestyle not only has a negative effect on the finding of a successor but
also on the development of the micro company. Interactive information
on business transfers and continuous activation of the entrepreneurs
are the key elements in abolishing this phenomenon. A successor in
these cases could bring a new boost to a company that already has a
market and a working product.

The challenge for municipalities is to become aware of the problems

in business transfers and to develop municipal industrial strategies,
which are now lacking in many cases. In the worst case, without proper
planning of the industrial field in the area, many companies may be lost
without contributory consultation. It may also mean that municipality
may offer consultation for companies but there are no proper guidelines
how the entrepreneurs could utilize them.

Entrepreneurs can be activated and informed about business transfers

actively by taking into account that not all business transfers are carried
out when the entrepreneur resigns. In addition, a business transfer is
considered a silent, even a shameful change among the entrepreneurs.
Attitudes can be changed towards more positive by informing and
making the transfer more of an open issue.

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Without concrete knowledge of the companies, some undeveloped

companies may have been supported over potential ones. This means
that before the actual meeting with the entrepreneurs, some companies
may have many good qualities in theory and in the statistics used as
the basis of the method, but in reality their situation (e.g. economic)
is terrible. As discussed earlier, the situations behind the statistics can
be seen when contacting and visiting the entrepreneur. Nevertheless,
this challenge is studied more in the following phase “2.2. Anticipation
system”.

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8. PILOT EVALUATION

The pilot evaluation consisted of self evaluation, evaluation of the

municipal and business line meetings, as well as external evaluation,
which was implemented by Coop Consult Ltd.

8.1. Self evaluation of the method process development

Self evaluation has been carried out as a part of the pilot. The evaluation
was implemented by the REINO transnational coordinator Ari Peltoniemi
via email.

The statistical data posed challenges to the development of the

anticipation method. There were no valid statistics on company owners
available. This is why it was inevitable to make assumptions by including
company leaders in the study. Eventually, the statistics on the actual
owners will be found out when contacting the company. In addition, the
statistics were in some cases not completely updated. The statistical
data created challenges to the frames of the classification as well, e.g.
the classification of companies according to the number of employees
had only two categories in the statistics.

Many of the rural municipalities were not very interested in being

involved in the project, and some of the representatives in these
municipalities were not easily convinced of the importance of the project.
Without concrete meetings in these municipalities the project would not
have come this close to the municipal and business line level. Many
representatives felt that the information on business transfers in this
form was very important.

Because the pilot was the starting phase of the project, there was in
some cases not enough informative material that could be delivered to
the people interested in the project.

The register of companies in the region of Kokkola maintained by

KOSEK and the database of companies in the Kaustinen region were
an indispensable help. Especially the KOSEK database, because it had
recently been updated when processing the statistics on micro companies
started.

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Nevertheless, all the help needed for the construction of the pilot project
was easily obtained from other personnel in the REINO project at KOSEK.
In addition, when the project website was launched, the material from
the other project partners was more widely available.

8.2. External Evaluation

The municipal and business line meetings arranged were evaluated in

order to find out if the meetings were regarded as informative and if
they awoke the operators to regard business transfer as a more concrete
challenge.

The evaluation was carried out by using the Webropol programme,

and the questionnaires were sent by email to the respondents. The
email address of one of the meeting representatives was invalid and
the questionnaire was in this case returned. 56% of the meeting
representatives answered the questionnaire.

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The municipal and business line meeting evaluation form

(translated from Finnish to English)

1. To what extent is the business transfer project relevant

for the line of business / municipality You are
representing?

Not relevant 1 2 3 4 5 Highly relevant

2. In Your opinion, which factors affect the success of

business transfers?
Informing about business transfers
Entrepreneur Training
Taxation
Change of attitudes towards business transfers
Creation of new forums to sell companies
Easing the access to business transfer services
Early search for successors
Other, what?

3. Was the way of discussing the business transfer situation in

Your line of business / municipality?
Excellent
Good
No opinion
Poor
Very poor

4. How do you see the business transfer situation in Your line of

business/municipality now and in the near future – will
business transfers be successful?

No 1 2 3 4 5 yes

4. Other comments concerning the meetings or the

implementation of the project?

6. Other comments?

7. Would you like to receive further information concerning the

project?
Yes, address ________________________________
No

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The business line meetings: The questionnaire was sent to 15 people,

out of which 7 (46%) answered.

The business transfer project was considered relevant to their respective

lines of business by 57,2% of the respondents. Among the respondents,
the dispersion of answers was large on the factors affecting a successful
business transfer: the most relevant factors were ‘Early search for
successors’ and ‘Taxation’ (71,4%). ‘Informing about transfers’ and
‘Easing the access to business transfer services’ were also considered
relevant (57,1%). Additionally, ‘Change in attitudes towards business
transfers’, ‘Entrepreneur training’ and ‘Creation of new forums to sell
companies’ were considered factors that had an effect on the transfer
(42,9%).

The way of discussing the business transfer situation was considered

good or very good by 57,2%; 42,9% did not have an opinion.

The attitudes towards future business transfers in the line of business

in question were represented in a scale from 1 to 5, in which 1 was
the most negative and 5 the most positive. 42,9% of the respondents
answered 4 (“fairly positive”), 42,9% agreed as 3 (“medium”), and
14,3% answered 2 (“fairly negative”).

The municipal meetings: The questionnaire was sent to 26 people, of

which 17 (65%) answered it.

The business transfer project was considered relevant for their respective
municipality by 76,5% of the respondents. The factors affecting most a
successful business transfer according to the respondents was ‘Informing
about transfers’ (64,7%). Also ‘Taxation’ (58,8%) and ‘Early search for
successors’ (58,8%), ‘Change in attitudes towards business transfers’
(47,1%) and ‘Easing the access to business transfer services’ (47,1%)
were considered relevant. None of the respondents considered creating
new forums to sell companies as a means of fighting the challenges in
business transfers.

The way of discussing the business transfer situation was considered

good or very good by 82,4%: 17,6% did not have opinion.

The attitudes towards future business transfers in the municipality in

question were represented in a scale from 1 to 5, in which 1 was the most
negative and 5 the most positive. 64,7% of the respondents answered 4

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(“fairly positive”), 29,4% agreed as 3 (“medium”), and 5,9% answered

2 (“fairly negative”).

Some examples of the comments of the respondents:

“There is no information in the municipality [among the municipal officers]

on to what extent the project has contacted companies facing a generational
change or how the companies have reacted etc.“

“The meeting was too short and too quickly carried through”

“The most important aspect in the meeting was, in my opinion, that the
importance of business transfers became clear to the municipal officials
and elected officials as well. Now at the latest these people awake to think
about these issues. Hopefully, this increases the appreciation towards the
entrepreneurs.”

“There should definitely be financial resources available in order to buy advisory

services in concrete generational change activities.”

Conclusions from the meeting evaluations:

The meetings were generally considered relevant: 70,8% of all

respondents regarded the project as important or very important for
the business line or municipality they represented. The most important
factors contributing to successful business transfers were ‘Early seeking
of successors’, ‘Informing about business transfers’ and ‘Taxation’ (all
these factors together accounted for 62,5% of the answers). Also ‘Easing
the access to business transfer services’ (50%) and ‘Change in attitudes
towards business transfers’ (45,8%) were considered factors affecting
the success of business transfers.

58% of the respondents took a fairly positive stand towards the future
situation of business transfers. The way in which the business transfer
situation was discussed in the meetings, was regarded as good or
excellent by 75%.

 Translated from Finnish to English

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9. PILOT RESULTS AND OUTCOMES

One of the main results was the construction of the list of companies
facing a business transfer with addresses added for use in later phases.
In addition, 41 people were reached through the 14 meetings that were
arranged with municipal and business line representatives.

The most important outcome of the pilot is the development of a method

to find clear target groups of municipally and subregionally critical micro
companies facing a business transfer in the near future. In addition to
the creation of the anticipation method, one of the objectives of this
pilot was to produce the applicable base work that the future pilots can
utilize. By creating the anticipation method, this goal of the pilot has
been achieved.

During the pilot process, the most critical lines of business concerning
the transfer situation were identified. In the next phase of the REINO
project (“Anticipation system”), the actively served companies from
the classification system (group 1) will be asked to participate in the
project.

In addition, there has been a general growth in the awareness of the

challenges encountered with in finding companies facing a business
transfer and in informing about the transfers in advance, especially
among the representatives participating in the meetings arranged.

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10. CONCLUSIONS

The Anticipation Method pilot was the first pilot implemented in the
REINO project, and one of the main goals was to produce the base work
for the following pilots. These conclusions support the actions in the
next phases of the project.

The anticipation method is a classification system for finding micro

companies that face a business transfer in the near future. The
classification takes into account both regional and branch-specific
development goals, and the company factors emphasized are based on
interactive discourse with business line and municipal representatives.
Regional importance of a micro company and role of the company in the
service structure of the municipality are the key factors in the method.
In this case, the emphasized factors in the classification of companies
are export, regionally focused business lines, importance for the service
sector of a certain municipality, number of employees, and rurality. By
using this classification, three different service groups were formed. The
first group is attended to and contacted personally, the second group
is informed by using the media, and the third group is provided for by
accounting businesses, which are consulted by the business transfer
service. By using this grouping, all business transfer companies receive
proper consultation but also regional and business line emphases are
taken into consideration.

The outcomes of the Anticipation Method are available to be implemented

in the next phases of the REINO project. The application of the anticipation
method requires that every country or region has valid statistical data
on the companies and entrepreneurs. If there is a lack of data, the
method can be applied to some extent according to regional needs. In
other words, not all categories of the classification must be applied as
they are used in this case in Central Ostrobothnia. Nevertheless, it is
noteworthy that the lack of valid statistical data on the companies or
entrepreneurs is an obvious obstacle for development in business life
and in entrepreneurship in general.

Municipalities and cities have been encouraged to take responsibility

of the business transfer services. Company services are subregionally
centralized and this system co-operates with the business transfer
services developed through the REINO project. Further informing of the
entrepreneurs on business transfers can be done in local entrepreneur
training and workshops, and in co-operation with the regional and local

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business lines and the Federation of Finnish Enterprises.

In practice, the significance of the pilot on municipal level becomes

evident through the companies: the process and how it is prioritized
serves the needs of the municipality. When the right micro companies
facing a business transfer are found, the resources can be directed to
the right processes.

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ANNEXES

ANNEX 1

Pilot project plan from the grant application

PILOT PROJECT 1 Anticipation Method (KOSEK)

1. The background and need for this project

This pilot project derives from the comprehension that one of the main
issues hindering successful business transfers is, that today entrepreneurs
do not awaken in to the situation and seek help from business advisors
and experts before it is too late. A period of for instance six months
is not enough for finding a successor, sort the conflicts and emotional
problems often related to the transfer as well as to work out all the
technical issues, such as legal and fiscal issues, setting a value on the
company and financing the transfer. Typically the technical issues by
themselves are handled in a period approximately 1-2 years. However
there should also be time for finding a successor and then transferring
the tacit knowledge of the transferor to the successor. Also there is
always the possibility for problems, delays and obstacles before the
entrepreneur is willing to give up the company. Thus, for ensuring a
successful process, it is of highest importance that the preparation and
thinking process starts at least 5 years in advance.

The disappearance of a single company due to an unsuccessful transfer

process does not necessarily have any wider effects than to the transferor
himself. However, this depends very highly on where the company was
located and what kind of a role the company and its products had in the
economy of the local community. For instance, in smaller municipalities
located in sparsely populated and rural areas the loss of an important
service and or product provider can mean that the customer flow will
seek for the services elsewhere, thus decreasing the buying power of
the community. Also the disappearance of an important subcontractor
can cause problems to the operations of manufacturing chains, with an
effect on the whole branch on the area.

Today it is quite common that entrepreneurs do not awaken early

enough on their own initiative, but only when retirement is inevitable,
thus leaving as little as six months to prepare. It is self-evident that
the entrepreneurs would need to address the situation far earlier and
as the entrepreneurs will not typically start the process themselves,

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there is need to find a method for local and regional operators to take
a proactive stance on the matter. The formulation of an anticipation
system will give the operators basic tools for taking a proactive stance
with systematic measures and focused operations.

A proactive stance that ensures the process to start sufficiently early

contributes directly to the key objectives of the REINO project. Especially
in sparsely populated and rural areas it is highly important from the
point of view of the local economy and employment to secure all viable
companies. This will contribute to the prevention of depopulation as
well. This is highly relevant also from the European point of view, taking
into consideration that sparsely populated areas will be considered as
special focus groups also in the upcoming programme period of the
structural funds.

2. Target groups and beneficiaries

The main target group for testing during the pilot will be companies,
mainly micro companies, in the region of Central Ostrobothnia. During
the process the company and service structures in the municipalities of
Central Ostrobothnia will be examined according to the age structures
of the entrepreneurs, thus enabling service providers working together
with local actors to identify companies that need to be addressed by the
importance of starting to prepare for the transfer. However, as statistical
information is the basis of the identification process, the system is also
applicable on larger areas, such as regions or cities. Thus the level of
examination will proceed from the regional level to local - from local
to business structures according to branches and service structures -
and finally to the single company level. Special emphasis will be made
on the municipalities of smallest population density and that are most
dependent of the operations of micro companies.

As the pilot aims to prevent depopulation and weakening of service

structures in sparsely populated and rural areas, the pilot will especially
benefit the small municipalities and local communities. Also, local
manufacturing chains will benefit of the safeguarding of operations
of important subcontractors. Identifying key producers in cities and
areas of dense population is as important in the smaller communities.
During the pilot the method of the anticipation will be systematized and
described in detail, after which all partners involved in the action 2 in
phase 2 will be able to test the suitability of the method in their own
operations, thus giving partners operating in more densely populated

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areas to test the transferability of the method to different operational

environments. By this process it is possible to estimate, whether the
model created could have a wider target group around throughout the
EU and also see through if the method of anticipation will result in a
lasting anticipation system.

3. Objectives and indicators

The objectives for development (long-term)

This pilot project aims to produce a method for the local and regional
operators to take a proactive and systematic stance to the upcoming
challenge of increasing business transfers. The method will ensure that
the local and regional operators have a basic tool that will help to identify
key companies and service providers for the community before it is too
late. For instance, by examining the situation within the next ten years
period the approximate number of business transfers will be specified
and also branches that are more influenced by ageing entrepreneurs will
be identified. Starting the process on time will improve the possibilities
of finding a successor, transferring tacit knowledge and of maintaining
the company operations on a high level. Thus the pilot will contribute
directly to the objective of enhancing the process of carrying out business
transfers successfully. In the long term, if proven successful in other
areas, the method for anticipation will safeguard the existence of small
communities especially in sparsely populated and rural areas through
secured service structures and customer flows, manufacturing chains
and - all in all - stronger micro companies.

The direct objectives of the project (short-term)

During the pilot, the created system will be tested in the municipalities
of the region of Central Ostrobothnia, putting special emphasis on the
most sparsely populated municipalities. This will result in identifying the
critical companies and ensure that the situation is recognised on time.
Companies for focused measures will be selected, and approached during
the activities of project phase 2. All the activities will be meticulously
documented and the process subjected to an external evaluation. As a
result, concrete instructions and the implementation of the process will
be reported as a guide and presented at the transnational conference
in Denmark.

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4. Key results and outcomes

The main concrete, quantitative outputs the pilot project aims to achieve
documentation of every stage of the process:

- a process flowchart identifying all the aspects of the method in

English
- concrete instructions on how to process statistical information to
identify key companies
- concrete instructions on how to involve local and regional actors
- minutes and agendas of the meetings with local and regional
actors
- concrete instructions of how to implement assessments for
prioritizing companies
- a plan for regular follow-ups in every municipality
- a final report on the above mentioned issues in English
- other relevant guidelines also produced in English

Qualitative outcomes: The number of business transfers/year will be

identified and the number of needed successors will be estimated.
Business advisors together with local and regional operators will identify
relevant target companies in an early stage and then contact the
entrepreneurs in order to achieve awakening. Regular follow-ups will be
done in the municipalities to ensure that the processes start on time in
the future as well.

The systematic anticipation method-model with specific tools and

guidelines for identifying target groups will be described and formulated
in to a publication that may benefit local actors also in other sparsely
populated areas as well as in safeguarding operations of subcontracting
chains. The relevance and validity of created measures will be ensured
by meticulous documentation and followed-up by process-evaluation.
Thus every stage of the process will be documented and the stakeholders
involved in different stages will fill in evaluation forms. Through reflection
and customer / stakeholder feedback measures may be revised and
altered. After implementing the total process, through these documents
a professional evaluation (to be subcontracted) will be implemented.

5. Main activities and work plan

1. A group of local and regional actors will be assembled to act as an

advisory group.

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2. A process flowchart for implementing the method will be drawn

up
3. Statistical information will be obtained (during baseline analysis of
phase 2)
4. Relevant analysis methods will be mapped out and analysis
implemented, gathering data situation in different branches,
different municipalities and service structures.
5. An overall impression of the regional or local situation is formed.
6. Local and regional actors are involved into the priority-setting
process
7. Relevant focus groups are chosen based on the data gathered.
8. Single companies within the focus groups are assessed more
closely and prioritized
9. A plan for contacting companies is made,
10.. Necessary resources are searched.
11. A plan for regular follow-ups on the local or regional area is
made.

- in addition, documentation in every stage of the process to be

formulated as a process report and used as ground material for
defining guidelines for method.

6. Organisation and project management

A project manager from KOSEK is in charge of developing the method,

with the support from business advisors as well as from the project
manager in charge on the implementation of phase 2. Advisory group
and co-operation network will include relevant operators at a regional
and local level such as municipalities, regional council officials as well
as other development organisations and enterprise association. The
process evaluation will be subcontracted.

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ANNEX 2

Business transfers from

Focused business lines in the
municipal/regional point of
Kaustinen subregion:
view: Meeting Follow-Up

Prioritized field: industry

- metal, wood, ICT
1. Municipal/regional focus in
- Other fields in focus food
industrial field
production and adventure
tourism
Potential
Are there criteria for finding
- mining and energy
the businesses vital for the
Other important fields
industrial structure concerning
- fur production
business transfers?

Focused business lines in the

Which are the most important
Kokkola subregion:
aspects for the municipality’s
- wood, fur production
industrial structure and
- ICT, metal, laser
economic life that should be
- boat, chemistry
brought up?

2. Current situation of business transfers and consultation for companies

in the municipality

- How are the companies facing a transfer consulted in the

municipal area?
- How are business transfers noticed on municipal level?
o As a part of industrial strategy?
o Have there been attempts to create solutions for anticipating
future business transfers?
- How has the municipality supported successful business
transfers?

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Strengths

- Which are the strengths of the economic life and service

structure of the municipality?

- Strong companies in the municipality?

- Which are the strengths of the actions on municipal level that

could be used in business transfers?

How can the strengths be maintained, utilized and further

strengthened?

Weaknesses

- Which are the weaknesses of the present municipal economic

life and service structure?
- Which are the present weaknesses in successful business
transfers in the municipality?

How can the weaknesses be avoided, absorbed or eliminated?

Opportunities

- What kind of opportunities may successful business transfers

bring to the municipality?
• Young remigrants?
• New business ideas?
• Development/maintenance of services?
• Other?
- What possibilities are seen in the development of business
transfer services in the area?

How can it be assured that the opportunities are utilized

(also in the future)?

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Threats

- Which are the threats seen in business transfers concerning the

economic life of the municipality?
• decrease of businesses and entrepreneurs and at the same
time fragmentation of service structure
- Which are the threats seen in the services of business transfer
specialists?

How can the threats be avoided, eliminated, absorbed, inhibited or

turned into opportunities?

3. Free word

- Which companies should be brought up in case of successful

business transfers?
- What kind of hopes do the representatives have concerning
successful business transfers?
- What kind of hopes do the representatives bring up concerning
the development of business transfer services?
- How can the companies facing a business transfer be better
activated to start planning (anticipate) the transfer in an earlier
stage?
- Other noteworthy issues about business transfers?
- Agreed actions and goals concerning business transfers.

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ANNEX 3

Business transfers from the The focused lines of business in

focus line of business point of
view: Meeting Follow-Up
Are there criteria for finding
the businesses vital for the
industrial structure concerning
business transfers?
the Kokkola subregion:
- wood, fur production
- ICT, metal, laser
- boat, chemistry
The focused lines of business in
the Kaustinen subregion:

Prioritized field: industry

- metal, wood, ICT
Which are the most important Other focused fields
aspects for the industrial - food production
and economic structure - adventure tourism
that should be emphasized Potential
(important producers, - mining, energy
subcontractors etc.)? Other important fields
- fur production

1. Business transfer services specified by lines of business

1.1 Anticipation and projection of business transfers currently within

the line of business

How are business transfers noticed in the business line strategies, such
as programs, projects, training etc.?

Have business transfers been anticipated within the line of business?

How have business transfers been taken into consideration within the
line of business?

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2. Analysis of business transfers and their success

Strengths
- Which are the strengths of the industrial branch actions?
- Strong actions of the branch that should be maintained and
developed?
- Which are the strengths of the industrial branch concerning
successful business transfers?
How can the strengths be maintained, utilized and further
strengthened?

Weaknesses
- Which are the weaknesses of the present business line actions
and structure?
- Which are the present weaknesses in successful business
transfers in the business line?
How can the weaknesses be avoided, absorbed or eliminated?

Threats
- Which are the threats seen in business transfers concerning the
line of business?
• decrease of businesses and entrepreneurs and at the same
time fragmentation of subcontractor chains?
- Which are the threats seen in the services of business transfer
specialists?

How can the threats be avoided, eliminated, absorbed,

inhibited or turned into opportunities?

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Opportunities
- What kind of opportunities successful business transfers may
bring to the line of business?
• New business ideas?
• Development?
• Employment?
• Other?
- What possibilities are seen in the development of business
transfer services in the area?
How can it be assured that the opportunities are utilized
(also in the future)?

4. Free word

- Which companies should be brought up in case of successful

business transfers?
- What kind of hopes do the representatives have concerning
successful business transfers?
- What kind of hopes do the representatives bring up concerning
the development of business transfer services?
- How can the companies facing a transfer be better activated to
start planning (anticipate) the transfer in an earlier stage?
- Other noteworthy issues about business transfers?
- Agreed actions and goals concerning business transfers

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ANNEX 4

Example of classification of companies (Total number of companies

approx. 960)

Trade Code of Focus line

registry Official business Amount of Export of business Residence Rural Employees
number name line Line of business Employees Residence (0-3) (0-3) (0-3) extra (0-3) Total

XX00XXX0 XX00XX00 151 Fur farming 5-9 people Kälviä 3 3 3 1 3 13

XX00XXX1 XX00XX01 3520 Boat industry 5-9 people Kokkola 3 3 3 0 3 12

XX00XXX2 XX00XX02 121 Fur farming 0-4 people Veteli 3 3 3 1 0 10

Milk and cheese
XX00XXX3 XX00XX03 1550 production 5-9 people Lohtaja 3 0 3 1 3 10

XX00XXX4 XX00XX04 2051 Woodcrafts 5-9 people Kokkola 0 3 3 0 3 9

Gravel and sand
XX00XXX5 XX00XX05 1420 quarrying 5-9 people Lestijärvi 0 0 3 1 3 7
Screen covers and
XX00XXX6 XX00XX06 1749 sails production 5-9 people Kokkola 0 0 3 0 3 6
General house
XX00XXX7 XX00XX07 4511 construction work 0-4 people Lestijärvi 0 0 3 1 0 4

XX00XXX8 XX00XX08 5212 Grocery store 0-4 people Perho 0 0 3 1 0 4

XX00XXX9 XX00XX09 5272 Books retail business 0-4 people Kokkola 0 0 3 0 0 3

XX00XXX10 XX00XX11 1510 Bakery 0-4 people Kokkola 0 0 3 0 0 3

XX00XXX11 XX00XX12 6091 Taxi 0-4 people Kannus 0 0 0 1 0 1

XX00XXX12 XX00XX13 9066 Cargo transport 0-4 people Halsua 0 0 0 1 0 1

XX00XXX13 XX00XX14 8541 Physiotherapy 0-4 people Toholampi 0 0 0 1 0 1

XX00XXX14 XX00XX15 9065 Cargo transport 0-4 people Kaustinen 0 0 0 1 0 1

XX00XXX15 XX00XX16 9321 Hairdresser 0-4 people Kokkola 0 0 0 0 0 0

XX00XXX16 XX00XX17 7409 Advertising agency 0-4 people Kokkola 0 0 0 0 0 0

XX00XXX17 XX00XX18 7423 Architect services 0-4 henkeä Kokkola 0 0 0 0 0 0

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References

Malinen, P, & Kytölä, L, & Keränen, H, & Keränen, R 2006. Suomen

maaseututyypit 2006. Ministry of Agriculture and Forestry.

Kokkolan seutukunnan palvelustrategia ja elinkeinostrategia 2004 –

2008. 2004.

PK-Yritysbarometri 1/2006. Suomen Yrittäjät & Finnvera Oyj. 2006.

PK-Yritysbarometri 2/2006. Suomen Yrittäjät & Finnvera Oyj. 2006.

Electronic sources:

Keski-Pohjanmaan tilastoja. 2007.

http://www.kase.fi/tilastot

Kaustisen seutukunta. Elinkeinostrategia 2007 – 2013.

http://www.kase.fi/webmedia/elinkeinostrategia_2006.ppt

Regional Centre Programme. 2007.

http://www.intermin.fi/intermin/hankkeet/aky/home.nsf

Yhteenveto aluekeskusohjelmaan 2007 – 2010 hakeneista alueista.

2006.
http://www.intermin.fi/intermin/hankkeet/aky/home.nsf/files/
Y h t e e nve t o _ a ko % 2 0 h a ke m u k s e t _ 1 6 0 6 0 6 / $ f i l e / Y h t e e nve t o _
ako%20hakemukset_160606.pdf

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PART 2

EVALUATION OF THE PILOT PROJECT

“ANTICIPATION METHOD”

Veli-Matti Koljonen

Veli-Matti Koljonen
Coop Consult Ltd

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EVALUATION OF THE PILOT 1 ”ANTICIPATION METHOD”

CONTENTS

1. SUMMARY.......................................................................... 40

2. INTRODUCTION................................................................. 42

3. BACKGROUND AND PROJECT DESCRIPTION...................... 44

4. IMPLEMENTATION............................................................. 48

5. EVALUATION METHOD....................................................... 50

6. FINAL REPORT................................................................... 51

7. JUSTIFICATION................................................................. 52

8. EFFECTIVENESS................................................................. 53

9. IMPACTS........................................................................... 54

10. CONCLUSIONS................................................................. 54

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1. SUMMARY

The pilot project Anticipation Method derives from the comprehension

that one of the main issues to hinder successful business transfers is that
entrepreneurs have not awakened to the situation and do not seek help
from business advisors and experts before it is too late. The main target
group for testing the method during the project will be companies in the
region of Central Ostrobothnia. During the process, the company and
the service structures will be examined according to the age structure
of the entrepreneurs, and the companies who need to be addressed
by the importance of starting to prepare for the transfer are identified
together with local operators.

As a result of the classification, three groups of micro companies were

formed:
Group 1 (13-6 points): informed and contacted personally all the way
from the beginning of the process until the successful transfer. This
group represents 19,6% of the companies.
Group 2 (4-1 points): made aware of business transfer services by
using the media and provided for personally if the entrepreneur makes
a contact. This group represents 42,5% of the companies.
Group 3 (0 points): not provided for actively but indirectly via accounting
firms. This group represents 37,9% of the companies.

The evaluation of the project was carried out as a summative evaluation.

In this evaluation, the processes and the outcomes are analyzed from
the following aspects: Justification, Effectiveness, Impacts. In this case,
it was not relevant to evaluate efficiency. The evaluation also includes
the evaluation of the final report.

The final report is written correctly according to the general standards.

The contents include the description of the project environment, pilot
description and main results, project process, target groups, classification
method, challenges in the project, project evaluation, pilot results and
outcomes, and conclusion. To the report are enclosed appendices which
complete the contents of the report. The final report is informative and
is focused upon the key questions.

The conclusions of the evaluation are:

- The project followed the instructions and standards of a well-
conducted project.
- The documents and reports were composed according to the

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instructions.
- In the project, different positive elements – Justification,
Effectiveness, Impacts – were fulfilled.
- The objectives in the project plan could have been analyzed more
thoroughly, but they were specified under the project process.
- The results and information provided by the project were
appropriate.
- The project promoted the overall objectives of the REINO project.
- The project created a solid basis for the following pilots.
- The project was innovative - as a result, an applicable tool for
business transfers was produced.
- The project brought new information on business transfers and
the local economic development.
- The results and outcomes are replicable and transferable. The
key results can be applied in all the European countries.
- The project was a learning process for the project staff.
- The project staff devoted themselves to the project.

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2. INTRODUCTION

The REINO project concerns the sub-theme of management of

restructuring. The selected priority issues are: the development of
anticipation mechanisms and systems at regional level, the development
of anticipation mechanisms and system to better manage restructuring
in a specific context, the development and piloting of specific systems
and tools for supporting restructuring processes in small and medium-
sized enterprises as well as capacity building for stakeholders concerned.
The project derives from a challenge of the ageing of the entrepreneurs
that brings along a growing number of companies that need to be
transferred to new owners. This challenge is the most crucial in all of
Europe and it concerns millions of companies and jobs. Securing the
continuity and sustainability of companies in transfer is a significant
social and economic issue that concerns the economic and employment
policy from the perspective of safeguarding regional economies and
preserving jobs and welfare across the EU.

The main objective of the REINO project is to generate a lasting solution

on how to assist micro companies in carrying out business transfers
effectively and successfully as well as to enhance the overall process by
addressing specific problem points, improve the quality of the services
offered to businesses in transfer, increase the transfer of good practices
created elsewhere as well as to create new methods and approaches to
address the issue. These activities will complement advisory services
and support structures offered for micro companies to cover the entire
life-cycle from the beginning to the end. One of the most essential
objectives in all is to increase the awareness on the importance of
business transfers of micro companies and to achieve change in the
attitudes of entrepreneurs.

In its entirety, the development cycle is in effect throughout the two

years of the implementation of REINO and consists of five sequential
actions, in which activities are based on the results of previous actions
as well as on transnational co-operation. Sequential actions are:
- Baseline analysis
- Anticipation system
- Ideal scenario
- Tool box
- Business Renewal Centre

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In addition to these actions, there are six actual pilots in the

REINO project that create innovative methods.

Pilot 1: Anticipation (Kokkolanseudun Kehitys Ltd,

KOSEK, Finland)
Pilot 2: Vaccination (Studio Centro Veneto, SCV, Italy)
Pilot 3: Female entrepreneurs as transferors and
successors (European Profiles s.a., EPR, Greece)
Pilot 4: Mentoring in action in business transfers
(Jakobstad Region Development
Centre Concordia Ltd, Concordia, Finland)
Pilot 5: Employee-Buy-Out as a means of finding successors
and ensuring the sustainability of the company
(Joensuu Regional Development Centre
JOSEK Ltd, JOSEK, Finland)
Pilot 6: The Bank of Cases - a methodology for business transfers
(Studio Centro Veneto, SCV, Italy)

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3. BACKGROUND AND PROJECT DESCRIPTION

The pilot project Anticipation Method derives from the comprehension

that one of the main issues to hinder successful business transfers
is that entrepreneurs have not awakened to the situation and do not
seek help from business advisors and experts before it is too late. By
experience it can be said that to ensure a successful transfer process it
is of greatest importance that the preparation and thinking process are
begun at least five years in advance.

The disappearance of one single company because of an unsuccessful

transfer process does not necessarily have any other effects than to the
transferor himself. But this depends very highly on where the company
is located and what kind of a role the company and its products have in
the local economy: e.g. in sparsely populated and in rural areas the loss
of an important service or product provider can lead to the customer flow
being directed elsewhere, thus decreasing the buying potential. Also the
disappearance of an important subcontractor can cause problems to the
operations of manufacturing chains, with an effect to the whole branch
on the area.

The formulation of an anticipation system will provide operators with

basic tools for taking a proactive stance with systematic measures and
focused operations. A proactive stance that ensures the process to start
early enough contributes directly to the key objectives of the REINO
project. Especially in sparsely populated and in rural areas it is very
important from the point of view of the local economy and employment
to secure all vital companies.

The main target group for testing the method during the project will be
companies in the region of Central Ostrobothnia. During the process the
company and the service structures will be examined according to the
age structure of the entrepreneurs, and the companies who need to be
addressed by the importance of starting to prepare for the transfer are
identified together with local operators. Statistical data is the basis for
the identification process. The system is also applicable to larger areas,
such as regions and cities. Special emphasis will be on the municipalities
with the smallest population density and which are dependent on the
operations of micro companies.

During the pilot project, the method of anticipation will be systematized

and described in detail, after which all partners involved will be able

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to test the suitability of the method in their own operations. By this

process it is possible to estimate, whether the model created could have
a wider target group throughout the EU and also to define if the method
of anticipation will lead to a lasting anticipation system.

Project objectives

Long-term objectives:
- To produce a method for local and regional operators to take a
proactive and systematic stance on the upcoming challenge of
increasing business transfers
- The method will ensure that the local and regional operators
have a basic tool that will help to identify the key companies and
service providers in the community before it is too late
- The pilot will contribute directly to the objective of enhancing the
process of carrying out business transfers successfully
- The method will safeguard the existence of small communities
especially in sparsely populated and rural areas by securing
service structures and customer flows, manufacturing chains and
- all in all - stronger micro companies

Short-term objectives:
- the created system will be tested in the municipalities and in the
region of Central Ostrobothnia (special emphasis on the most
sparsely populated municipalities)
- to identify the critical companies and to ensure that the situation
is recognized in time
- to select companies for focused measures and to be approached
during the process
- all activities will be documented and the process will be subjected
to an external evaluation
- concrete instructions and the implementations of the process
will be reported and presented at the transnational conference in
Denmark

Key results in the pilot are:

Quantitative:
- a process chart identifying all aspects of the method in English
- concrete instructions on how to process statistical data to identify
key companies
- concrete instructions on how to involve local and regional

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operators
- minutes and agendas of the meetings with local and regional
operators
- concrete instructions on how to implement assessments for
prioritizing companies
- a plan for regular follow-ups in every municipality
- a final report on the above mentioned issues in English
- other relevant guidelines also produced in English

Qualitative:
- the number of business transfers per year will be identified and
the number of successors needed will be estimated
- business advisors together with local and regional operators will
identify relevant target companies in an early stage and then
contact the entrepreneurs in order to achieve awakening
- regular follow-ups will be done to ensure that the processes start
in time in the future as well
- the systematic anticipation method model with specific tools and
guidelines for target groups will be described and formulated into
a publication
- the relevance and validity of the measures created will be
ensured by meticulous documentation and followed up by process
evaluation

Work plan and main activities are:

- a group of local and regional operators will be assembled to act

as an advisory group
- a process chart for implementing the method will be drawn up
- statistical data will be obtained
- relevant analysis methods will be mapped out and the analysis
will be implemented by gathering data of the situation in different
branches, municipalities and service structures
- an overall impression of the regional or local situation is formed
- local and regional operators are involved in the priority-setting
process
- relevant focus groups are chosen based on the data gathered
- single companies within the focus groups are assessed more
closely and prioritized
- a plan for contacting the companies is drawn up
- necessary resources are reserved
- a plan for regular follow-ups on the local or regional area is made

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A pilot project manager from KOSEK is in charge of developing the

anticipation method. She is supported by business advisors and the
project manager, who is in charge of the implementation of phase 2.
Other relevant operators are the advisory group and the co-operation
network.

The process evaluation of the Anticipation Method pilot will be

subcontracted.

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4. IMPLEMENTATION

The project was carried out by Ms Johanna Salmi as a pilot project

manager and Mr. Heikki Luukkonen as a co-operative project manager.
The pilot was started in December 2006 and finished in May 2007 – the
duration was five months.

The project was begun by collecting the statistical data (Statistics

Finland and electronic register of KOSEK and Kaustinen subregion) and
selecting the target group by the age of the entrepreneur as the main
criteria. It was followed by branch meetings; regional and business line
meetings were arranged in order to find out the vital companies for the
region and to gain a general view of the business transfer situation in
specific lines of business. The next stage was material analysis followed
by the classification, and finally reaching conclusions.

The branches in focus were selected by following the regional strategies

of Central Ostrobothnia. These branches are metal, laser, ICT, chemistry,
fur production, and boat and wood industries. Furthermore, in Kaustinen
subregion the branches in focus are also food production and tourism. In
the statistical analysis, the selection was aimed at companies employing
1-9 people and entrepreneurs in the target group, i.e. 52 years old
and older (expected transfer within 5-10 years). Excluded factors were
primary production, companies as secondary occupation (in most cases
these are linked to primary production and can be difficult to transfer)
and companies that have more than nine employees.

During the project, two types of meetings were arranged concerning

business transfers: for regional and municipal operators (representatives
of municipalities, representatives of entrepreneurs and business
advisors) and for industrial branches (experts or specialists of the
processed branches). All in all, 14 meetings were arranged during the
project. The number of representatives reached was 41. After these
activities the classification method could be generated.

As a result of the classification, three groups of micro companies were

formed (the scoring system is explained in the picture above):
Group 1 (13-6 points): informed contacted personally all the way from
the beginning of the process until the successful transfer. This group
represents 19,6% of the companies.
Group 2 (4-1 points): made aware of business transfer services by
using the media and provided for personally if the entrepreneur makes

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a contact. This group represents 42,5% of the companies.

Group 3 (0 points): not provided for actively but indirectly via accounting
firms. This group represents 37,9% of the companies.

It must be noticed that some companies that were found in the

anticipation method cannot be transferred for some reasons, such as
their economic situation or non-profitability.

All the activities during the project are documented in English. These
documents are published on the REINO website: www.reinoproject.eu.
The preliminary results were presented in the 2nd transnational steering
committee meeting in Haderslev Denmark on April 20th 2007. The final
report was finished at the beginning of June 2007.

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5. EVALUATION METHOD

The evaluation of the project was carried out as a summative evaluation.

The purpose of the summative evaluation is to assess the success of
a finished project in reaching its goals (outcomes). The key questions
are:
- To what extend does the project meet the goals of change or
impact?
- Which components are the most effective? Which components
are in need of improvement?
- Can the outcomes be sustained?
- Are the outcomes replicable and transferable?

In this evaluation, the processes and the outcomes are analyzed from
the following aspects:
Justification or relevance
- Is the project essential within the context of its environment?
- Needs and aspirations of the beneficiaries of the project
(strategies, development programmes in the area)
- The context of the project is Finnish companies; how does the
method function in other business cultures?
Effectiveness or sustainability
- To what extent has the project purpose been achieved and to
what extent is the achievement a result of the project?
- How well were the results achieved?
- Sustainability – Which are the positive effects of the project?
- In a signal project the sustainability can be described as a degree
to which the benefits produced by the project continue after the
project has ended
- In this case the sustainability can be described as a relevance for
the main project
Impacts
- What are the consequences of the project?
- As a result of the pilot, have any overall objectives of the REINO
project been achieved?
- Focus on the intended and unintended impacts

The evaluation also consists of the evaluation of the contents and the
structure of the final report. In this case it was not relevant to evaluate
the efficiency of the project, since the project in question was a pilot
and a part of a bigger project, and the project manager of REINO is
responsible for financial issues and management.

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In the evaluation, the materials collected from the project documents

have been analyzed and the project manager, the project staff and the
representatives of the target group (i.e. business advisors) have been
interviewed.

6. FINAL REPORT

The final report was written by the pilot project manager Johanna Salmi.
It was completed in time before 8th June. The report is written correctly
according to the general standards. The contents include description
of the project environment, pilot description and main results, process
of the project, target groups, classification method, challenges in the
project, project evaluation, pilot results and outcomes, and conclusion.
Appendices which complete the contents of the report are attached to
the report.

The final report is informative and focuses on the key questions.

Although the main goal of the pilot was to produce the base work for
the following pilots, the report could have discussed the innovative
dimensions of the project as well. During the project an anticipation
method was developed, which is based on the classification of micro
companies facing a business transfer. In addition to producing the base
work for the following pilots, the pilot 1 has developed a tool e.g. for
business advisors.

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7. JUSTIFICATION

In Finland, approximately 70 000-80 000 companies are facing a

business transfer within the next 10 years. This is about 30-40% of
all companies. In Central Ostrobothnia the percentage is 30-40 of all
companies (total number is 957 companies). The entrepreneurs are not
aware of the details of carrying out a transfer and they are awakened
too late to the necessity of the transfer. Thus there is not enough
time to find a successor for the companies. Especially in rural areas,
unsuccessful business transfers can have effects on the local economy.
The loss of an important service or product provider can mean that the
customer flow is being directed elsewhere. The business transfer is a
growing challenge in the future.

In Finland, the business transfer problem is traditionally considered to

concern only family businesses. However, at the moment in Central
Ostrobothnia only 1/3 of successors come from the immediate family, 1/3
come from outside by buying the company, and 1/3 of the entrepreneurs
resolves the problem by closing the business (Jonne Sandberg). That
is why there is an urgent need of taking actions to anticipate business
transfers.

The outcomes of the pilot project enhance the preparations for the
transfer situation and they also give a tool for a successful transfer,
which has positive effects to a wider area as well.

The goal of the project was to develop a classification method in which

one factor is the company’s importance for the local economy. From this
point of view the project is directly linked to regional development plan
and subregional economic programmes.

The purpose of the project was to create a method that is independent

of national business culture. Thus the method is intended to be applied
to other countries.

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8. EFFECTIVENESS

The pilot project has followed the project plan and the work plan
accurately. Both the short-term and long-term objectives for the project
were clear, understandable and relevant. The project gained its purpose
and its objectives: It has developed a classification method that can be
used as a tool to direct the right activities to relevant companies and for
its part it promotes to safeguarding the existence of small communities.
The pilot carried out the base work for the following pilots.

The pilot produced also unexpected observations. The most significant

observation was that the statistics is not reliable; the data can in many
cases be outdated.

The classification of results (quantitative and qualitative) could have been

more accurate e.g. the number of business transfers is a quantitative
result. However, these factors did not effect the project actions.

The pilot co-operated with experts (business advisors, municipal

authorities, the regional Federation of Finnish Enterprises) in the
implementation and thus took advantage of the know-how which already
exists in the region.

The project has information on the website, which is easy to follow. The
project also followed the instructions set by the EU in its information.

The objectives and results which had been set for the project were
gained.

As a result of the interviews, both the project staff and the target group
evaluated the achievements of the project as nearly excellent (in a scale
from 1 to 5 the project was given a grade of 5-). The results of the pilot
are the fundamental element for carrying out the other pilots.

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9. IMPACTS

The pilot project gained the intended impacts. The results of the pilot
project promoted the overall objectives of the REINO project. The
positive unintended impacts were the actions to develop new services
and information campaigns for different target groups. In addition, a
positive impact was the compiling of a register of the companies facing
a business transfer for further use. During the project process, a wider
view was gained about the needs which small municipalities have.

The branch meetings and municipal meetings were evaluated. Most of

those who participated in the meetings regarded the project important
or very important.

The process of the project increased public discussion about the

importance and the relevance concerning the transfer of ownership.

In the project plan there was also an assumption that business transfers
have a connection to the vitality of the local economy. Interesting
information would be the answer to the question: How does this
connection become evident in practice? But this information we surely
gain when the REINO project has been finished.

10. CONCLUSIONS

The conclusions of the observations concerning the evaluation of the

pilot project Anticipation Method are as follows:
- The project followed the instructions and standards of a well-
conducted project.
- The documents and reports were composed according to the
instructions.
- In the project the different positive elements – Justification,
Effectiveness, Impacts – were fulfilled.
- The objectives in the project plan could have been analyzed more
thoroughly. But they were specified under the project process.
- The information of the process and the results of the project were
appropriate.
- The project promoted the overall objectives of the REINO project.
- The project created a solid basis for the following pilots.
- The project was innovative – as a result, an applicable tool for
business transfers was produced.
- The project brought new information of the business transfer and

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the development of the local economy.

- The results (outcomes) are replicable and transferable. The key
results can be applied in all the European countries.
- The project was a learning process for the project staff.
- The project staff devoted themselves to the project.

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PUBLISHED REINO PROJECT WORKING PAPERS

1. Ari Peltoniemi (ed.). 2007. Baseline Analyses: Denmark, Finland,

Greece and Italy.

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