A “silver tsunami” is coming: a generation of owners who built their businesses over decades are preparing to step away. Succession planning is how you do that on your own terms — protecting the business, your family relationships, and the wealth tied up in what you’ve built. It’s also the most postponed job on every owner’s list.
1. What succession planning actually means
Succession planning is the process of preparing to transfer your business to someone else when you leave. It has two distinct parts: management succession (who runs the business day to day) and ownership succession (who owns the equity). Confusing the two is where many plans come unstuck.
2. Why it matters now
Baby Boomers own around 40% of Australia’s small and medium businesses, and roughly a million owners will be seeking an exit over the coming decade. Yet survey after survey finds fewer than a third have a documented plan. Without one, value leaks away and families make high-stakes decisions in a crisis.
“Most owners tell themselves they’ll deal with succession later. Too often, later comes too late.”
3. When to start
Far earlier than feels necessary. A focused exit plan typically takes 12 to 18 months to design and implement, but family successions are best begun five to ten years out — long enough to train a successor, restructure for tax, and let the next generation earn their stripes.
4. Your succession options
There are more paths than “family or sale”. The main options are: passing to family; a trade sale; a management buy-out or buy-in; an employee ownership scheme; private equity; or a staged combination. If a clean sale is your likely route, our guide to selling a business covers that path in detail.
5. Choosing a successor
Choose on capability, vision and commitment — not birth order or sentiment. Draw up the competencies the role needs, then assess candidates honestly. Often the strongest successors spend time working outside the business first. Build a development plan and phase responsibility across.
6. The family conversation
This is where most family successions succeed or fail. Open the conversation early, separate the roles of owner, manager and family member, and don’t assume the next generation even wants the business. Transparency about expectations prevents the resentments that quietly destroy both businesses and relationships.
7. Tax, structure and buy-sell agreements
Tax-effective succession usually depends on structures put in place well ahead of time. A buy-sell agreement sets out, in advance, how ownership transfers on retirement, death, disability or dispute. The small business CGT concessions can play a major role — see the CGT concessions guide.
8. Documenting the plan
A plan in your head protects no one. Document the timeline, the successor, the ownership structure, the handover activities, and what happens if someone steps away unexpectedly. Then review it regularly — succession is a living plan, not a one-off event.
9. Funding the transition
How will the successor pay for the business — and how will you fund your retirement from the proceeds? Vendor finance, staged payments, earn-outs and external lending all play a role. A current valuation anchors these conversations; see what your business is worth.
10. Common pitfalls to avoid
The usual traps: leaving it too late; assuming the business will simply pass to the kids; choosing a successor on emotion; neglecting the tax structure; and failing to communicate. When you’re ready, an exit adviser who specialises in succession can guide the hardest parts.
This guide is general information only and does not take account of your personal circumstances. It is not financial, tax or legal advice. Speak to a qualified adviser before acting.