Why it matters for the economy, regional communities, and the next generation of owners
Australia is quietly heading into one of the largest transfers of business ownership in its history.
Depending on how you cut it, somewhere between A$1.6 trillion and A$3.5 trillion in privately held business wealth will change hands over the next 10 to 20 years as founders and family business owners retire.
Handled well, that is an extraordinary opportunity for managers, employees and the financiers backing them. Handled badly, it is a real risk to Australia’s economy, and especially to regional communities that rely on these businesses for jobs, services and local investment.
How big is the succession challenge, really?
There is no single “official” number, but several credible Australian sources now frame the problem in the multi‑trillion dollar range:
- A$1.6 trillion in the next decade CPA Australia cites research showing that over the next 10 years, the retirement of family business owners will trigger the transfer of around A$1.6 trillion in wealth, and explicitly calls succession planning “one of the most significant issues facing SME owners today.”
- A$3.5 trillion of Baby Boomer–owned SMEs. Recent family‑business commentary summarising Australian research notes that over 80% of Australian SMEs, with a combined value of about A$3.5 trillion, are owned by Baby Boomers, and that most of those owners have not completed a succession plan.
- Fresh warnings from the Family Business Association A 2025 report highlighted by national media estimates that A$3.5 trillion in intergenerational business wealthwill change hands in Australian family businesses over the next 20 years. Those firms collectively account for over half of Australia’s GDP and workforce, yet only about a quarter have a documented succession plan.
Why this matters for the Australian economy
Small and medium‑sized businesses are not a side story. They are the economy.
- The Australian Small Business and Family Enterprise Ombudsman estimates that small businesses contributed A$506 billion to GDP in 2021–22, around one‑third of Australia’s total GDP.
- In 2023–24, small businesses employing 0–19 people provided jobs for over 5 million Australians, or 39% of the private‑sector workforce.
- Earlier analysis for IAG found that in 2018–19, small businesses contributed A$418 billion to GDP, again just under a third of national output, and highlighted their role as “the backbone of regional and rural economies”.
Treasury’s recent National Small Business Strategy goes further, emphasising that small businesses are critical in manufacturing, tourism and agriculture, and that larger companies rely on them for local knowledge, supply chains and services, particularly in regional communities.
Overlay the succession wave on top of those structural facts and you get the real story:
A significant slice of the businesses that generate a third of our GDP and employ close to 40% of the private workforce will need new owners and new leadership within the next 10–20 years.
If too many of those transitions fail, we are not just talking about individual exits that went badly. We are talking about:
- Local employers disappearing from regional towns
- Services and supply chains collapsing or being swallowed by distant consolidators
- A drag on productivity and investment as uncertain owners “wait and see” rather than grow
The regional risk: what happens if succession fails?
The risk is not theoretical. Family‑business data shows that:
- Only a small minority of family businesses globally make it to the third generation, and very few manage to grow wealth beyond what the founding generation created.
- In Australia, the Family Business Association warns that poor succession planning is now the single biggest threat to family business survival, citing examples of long‑standing regional firms that have closed or been sold primarily because a succession plan could not be resolved.
When a regional transport company, engineering firm, mill or multi‑generation retailer disappears, the impact is not limited to shareholders. It hits:
- Local jobs: reduced employment options and loss of apprenticeships
- Community fabric: sponsorships, donations and informal support that larger external owners rarely replicate
- Economic resilience: fewer decision‑makers living and investing locally
For policy makers and lenders, allowing a large portion of A$3.5 trillion in regional and family‑business value to drift into forced sales, closures or distressed outcomes is a systemic risk.
The flip side: a once‑in‑a‑generation opportunity
For all the risk, this is also a huge opportunity if we enable the right people to step up.
1. Opportunity for managers
Many founders already have capable management teams who understand the business, the customers and the culture better than any external buyer.
Well structured management buyouts (MBOs) allow those managers to:
- Acquire meaningful ownership without needing personal wealth up front, using tools like vendor finance and cash‑flow lending
- Keep decision‑making local and preserve customer relationships
- Align their upside directly with the long‑term performance of the business
Global and Australian experience shows that owner‑managers often deliver stronger engagement and better long‑term performance when they are supported with the right governance and coaching.
2. Opportunity for employees
In many regional and values‑driven firms, the real succession story is not “one manager buying out the founder”, but employees more broadly becoming stewards of the business.
Models such as:
- Employee‑led buyouts (ELBOs)
- Employee Share Ownership Plans (ESOPs)
- Employee Ownership Trusts (EOTs, used extensively in the UK)
allow employees to acquire a collective stake in the business over time, usually financed by the business itself rather than by personal borrowing.
Where these models have been used internationally, data points to:
- Higher employee engagement and lower turnover
- Stronger culture and continuity during ownership transitions
- Positive community stories that reinforce the brand
Australian policy is still catching up with the UK on formal EOTs, but the global direction of travel is clear.
3. Opportunity for financiers and advisors
This multi‑trillion dollar transition will not happen on goodwill alone. It needs capital and expertise.
For lenders and investors:
- Succession‑backed deals are typically cash‑flowing, asset‑backed and relationship‑rich
- The risk can be managed through staged exits, vendor finance, and conservative leverage
- Returns can be attractive when capital is aligned with experienced managers and employees who have real skin in the game
For advisors – accountants, lawyers, bankers and specialist succession firms – there is a mandate to move beyond “list and sell” and instead help clients:
- Evaluate internal options (MBO, ELBO, partial employee ownership) alongside trade sales
- Design tax‑efficient, financeable structures that do not over‑burden the business
- Put in place governance, 100‑day plans and leadership coaching so the transition works after completion, not just at settlement
At Blue Harbour Capital, this is exactly where we focus: combining transaction advisory with post‑deal coaching and cadence, so new owner teams are supported through the crucial first 12–24 months, not left to sink or swim.
What needs to happen next
If Australia is going to turn this A$1.6–3.5 trillion succession wave into a positive, several things need to happen in parallel:
- Founders need to start earlier The data is clear: most owners still have no documented plan, despite clear retirement intentions.
- Managers and employees need pathways to ownership That means practical education on buyouts and employee ownership, not just theory.
- Financiers need dedicated succession products Succession lending and investment should be recognised as a distinct asset class, with structures tailored to internal transitions.
- Advisors need to integrate coaching and governance Succession is not only a legal or tax event. It is a leadership and culture transition. Deals that ignore that reality create risk for everyone.
- Policy makers should support internal transitions, especially in regions This could include targeted tax incentives or guarantee schemes for employee and management buyouts in strategically important regional sectors.
Closing thought
Over the next two decades, Australia will decide what happens to trillions of dollars of productive, often intergenerational businesses.
We can allow a large share of that value to leak away through closures, distressed sales and lost regional capacity. Or we can help the people who already know and care about these businesses – managers, employees and aligned capital partners – to step into ownership with confidence.
If you are a founder, manager, or lender looking at one of these situations today, now is the time to treat succession as a strategic opportunity, not a last‑minute problem.
That is the work we do every day at Blue Harbour: designing and backing employee‑ and management‑led transitions that protect legacy, keep businesses locally anchored, and give the next generation of owners the support they need to succeed.
References
- CPA Australia – INTHEBLACK (business succession & A$1.6 trillion figure) INTHEBLACK
CPA Australia (2021), "Why you need a documented succession plan", INTHEBLACK.https://intheblack.cpaaustralia.com.au/business-and-finance/why-you-need-a-documented-succession-plan - Intergenerational wealth transfer – core research & summary (~A$3.5 trillion) PC.gov.au+1
Productivity Commission (2021), "Wealth transfers and their economic effects", Research paper, Canberra.https://assets.pc.gov.au/research/completed/wealth-transfers/wealth-transfers.pdfFindex (2023), "Intergenerational Wealth Report" (summarising PC estimate of ~A$3.5 trillion over the next two decades).https://a-ap.storyblok.com/f/3000455/x/e16fd099ea/findex-intergenerational-wealth-report.pdf - Succession gap – Boomer exits vs lack of plans (article) Dynamic Business
Dynamic Business (2025), "Australia’s trillion-dollar succession problem nobody’s talking about".https://dynamicbusiness.com/featured/australias-trillion-dollar-succession-problem-nobodys-talking-about.html