← All articles

Here is a version of a conversation that happens regularly with Australian small business owners:

"I don't really need a succession plan. That's for the big end of town — corporates, family dynasties, companies with boards and shareholders. I run a plumbing business with eight staff. It's not that complicated."

And then, a few years later, the owner is ready to sell — and discovers that without a plan, what they built over two decades is worth far less than they thought, or is genuinely unsellable in the time frame they need.

The belief that succession planning is only for large businesses is one of the most expensive misconceptions in Australian small business. This article is about why that belief is wrong, and what a realistic succession plan actually looks like for a business with three staff or thirty.

The size threshold that doesn't exist

There is no rule that says your business needs to be worth a certain amount before succession planning matters. The threshold exists in people's heads, not in the market.

What succession planning actually is — at its most basic — is answering three questions:

Those questions are relevant whether your business turns over $600,000 a year or $60 million. The answers and the process differ in complexity. The need for answers doesn't.

In fact, for smaller businesses, the stakes are often higher in proportion. A $1.5 million sale might represent thirty years of someone's working life. There is no second chance if the process goes badly. There is no diversified portfolio cushioning the outcome. For most small business owners, this transaction is the retirement plan.

What actually happens without a plan

Research on Australian small business exit outcomes is consistent: most businesses don't sell. They close.

Estimates vary, but figures regularly cited suggest that around 80 to 92 per cent of Australian small business owners who intend to "sell one day" will end up closing their business instead — often because the business couldn't be transferred to a new owner, or because the owner ran out of runway before they could fix the things that made it unsellable.

That's not a failure of ambition. It's usually a failure of preparation time.

The typical pattern looks like this:

A succession plan — even a simple one — breaks this pattern by starting the preparation before the pressure arrives.

The key insight: A succession plan is not a document you file with a lawyer. It's the decisions you make, and the work you do, that turn "I want to sell one day" into an actual sale at a price that reflects what you built.

What buyers think about small businesses

Let's be direct about what buyers look for, because it matters for understanding why planning ahead is valuable.

A buyer — whether that's an individual looking to buy their first business, a small operator looking to expand, or a trade buyer in the same industry — is buying a stream of income. They are asking: will this business keep generating money after I take it over, without the person who built it?

The answer to that question drives the price more than almost anything else. And for most small businesses, the honest answer is: not as reliably as the owner thinks.

This is not a criticism. It's the natural result of how small businesses grow. The owner is usually the main reason the business works — they have the relationships, the skills, the reputation. That's a strength while you're running it. It becomes a problem when you want to sell it.

Buyers call this "key-person risk," and they price it in. Sometimes that means a lower multiple. Sometimes it means a longer earnout (where you only get paid if the business keeps performing after you leave). Sometimes it means a buyer walks away altogether because the transition risk is too high.

The work of succession planning — for a small business — is largely the work of reducing that risk before a buyer sees it.

What a succession plan actually looks like for a small business

You don't need a consultant, a formal board presentation, or a fifty-page document. For a small business, a practical succession plan is really just a clear set of answers to specific questions, and the actions that follow from those answers.

1. Know your exit path

There are a few realistic options for most small Australian businesses:

Each path has different timelines, different requirements, and different tax implications. Knowing which path you're aiming for shapes everything else.

2. Get an honest read on what the business is worth

Not what you hope it's worth. Not what your accountant mentions when they're being generous. What a buyer would actually pay, based on adjusted earnings and a realistic view of the risks.

For most small businesses, this starts with understanding normalised EBITDA (earnings before interest, tax, depreciation and amortisation) — which means stripping out owner salary above market rate, personal expenses run through the business, one-off items — and then applying an appropriate multiple for your industry and risk profile.

A small trades business with $300,000 in adjusted EBITDA might sell for 2.5 to 3.5 times that — so $750,000 to $1 million. A professional services firm with $400,000 in normalised earnings and a stable client base might achieve 3 to 4 times, closer to $1.6 million. These are rough ranges, but they're useful as a starting point.

Knowing the number now — even approximately — is valuable for two reasons. First, it tells you whether your retirement math works, and if not, what needs to change. Second, it gives you a baseline to improve from.

Want to understand what your business might be worth to a buyer? Our free assessment gives you an indicative valuation based on your actual numbers.

Get a free valuation estimate

3. Identify the gaps

Once you have an approximate number, the natural next question is: what's holding it down?

Common answers for small businesses:

None of these are fatal. All of them can be addressed over 12 to 24 months. But you have to know about them before you can fix them — and the only way to know is to look honestly, before the pressure of an active sale process forces the issue.

4. Start reducing the gaps well before you intend to sell

This is the part most owners skip. They plan to clean things up "when the time comes." But cleaning things up takes time — and more importantly, the improvements need to show up in the financial record before a buyer will believe them.

A buyer looking at a business where the owner just hired a manager three months ago is going to see that as unproven. A buyer looking at a business where a capable manager has been running operations independently for two years has a very different risk picture.

The same logic applies to customer diversification, process documentation, and financial presentation. These things take time to do credibly. That's why 18 months is the minimum realistic runway, and two to three years is better.

The tax dimension — which matters even for small transactions

One of the most valuable reasons to plan ahead — even for a business worth $500,000 — is the small business capital gains tax (CGT) concessions available under Australian tax law.

If your business meets certain conditions, the tax you pay on the gain from a sale can be dramatically reduced, or in some cases eliminated entirely. The main concessions include:

On a $1 million capital gain, the difference between paying full tax and paying close to zero is hundreds of thousands of dollars. These concessions don't require a big, complex business — they require meeting eligibility tests that are accessible to most small business owners. But they do require planning, because the structure of the sale, the timing, and how the business is held all affect eligibility.

Getting tax advice before you go to market — not after you've agreed terms — is one of the highest-leverage things a small business owner can do.

For more detail: Tax structuring when selling a business in Australia: CGT concessions explained.

The family dimension

For many small business owners, the most important succession question is not about buyers at all. It's about family.

Do the kids want it? Is there a family member who could run it? What happens to the business if something happens to you before you're ready to hand over?

These questions are harder than the financial ones, because they involve relationships, expectations, and emotions that have often been built up over decades. But they need to be answered — ideally out loud, with the relevant family members, rather than assumed.

A common pattern: an owner assumes their eldest child will take over, has never actually had that conversation clearly, and discovers when the time comes that the child has no interest — or has been dreading the expectation for years. The business then needs to be sold externally in a rush, without the preparation time a planned exit would have allowed.

If family handover is the plan, the conversation needs to happen early, the transition needs to be properly structured (legally and financially), and the owner needs to be prepared for the possibility that the answer is no.

For more on this: I built this for my kids. They don't want it. Now what?

The "I'll figure it out when I need to" problem

The honest reason most small business owners don't have a succession plan is not that they don't care, or that they don't understand the importance. It's that the business is demanding right now, and succession feels like a problem for future-them.

That's a rational response to having limited time and attention. But it's worth understanding what it costs.

The owners who get the best outcomes from selling a small business consistently share one trait: they started thinking about it before they needed to. Not in a formal, structured way necessarily — but they started asking the right questions, getting realistic about the numbers, and making small changes that accumulated into a more transferable business.

The owners who get poor outcomes — or who end up closing rather than selling — are usually the ones who let urgency make the decision for them. They started when they were already exhausted, or already unwell, or already desperate to be done. At that point, the options narrow and the price suffers.

A succession plan for a small business doesn't have to be elaborate. It just has to exist — and it has to exist early enough to be useful.

Where to start

If you've read this far and you're a small business owner who has been putting this off, here are four concrete things you can do in the next thirty days that will put you well ahead of most people in your position:

None of these steps commit you to anything. They just give you the information you need to make good decisions — which is what a succession plan, at its heart, actually is.

Find out what your business is worth

Our free assessment gives you an indicative valuation, based on the same method buyers use — adjusted earnings, industry multiples, risk factors. No broker. No obligation.

Start free assessment

Related reading