Choosing the right succession plan isn’t just about exit value. It’s about what happens when you leave. Founders who care deeply about the people, culture, and continuity of their business often find that selling internally aligns more closely with those priorities than selling to external buyers.
The Strategic Case For An Internal Succession Plan
Continuity and Stability
Internal transitions reduce disruption. The same leaders, staff, systems, and client relationships stay largely intact. That reassures customers, suppliers, and stakeholders.
Flexibility in Timing
A third-party sale often forces a full exit at once. Internal succession allows staged transitions. Founders can step back gradually, retain minority stakes, or remain as advisor or chair if desired.
Long-Term Resilience
Evidence from Australia suggests urgency in this area:
- Research by MYOB finds that only 24 percent of SME owners currently have a succession plan in place. myob.com
- Almost half of Baby Boomer SME owners report planning to exit within the next 1–5 years. myob.com
- Inside Small Business notes that nearly 30 percent of Australia’s 2.6 million small businesses are led by owners aged 50 or older, and about 340,000 of those are at or past retirement age. Inside Small Business
These data point to a wave of succession being forced upon Australia’s SMEs, many without preparation.
The Cultural Case For An Internal Succession Plan
Protecting Values
Founders often care deeply about their business’s values. Internal succession helps those values live on by placing ownership in hands that already embody them.
Rewarding Loyalty
Employees who have contributed to the growth of the business deserve to share in its upside. Ownership bridges the gap between contribution and reward.
Engagement and Motivation
When employees become owners or stakeholders, their perspective changes. They think like owners, act like owners, and often deliver better outcomes as a result.
The Emotional Case For An Internal Succession Plan
Letting go is hard. The business is your identity. Internal succession offers a more natural path for many founders — handing over to people you trust and believe in.
Coaching plays a key role here. Founders benefit from structured guidance in letting go; successor managers benefit from having a coach to help them step into new ownership responsibilities, mindset shifts, and leadership challenges.
Explore 3 internal business succession options available to founders here!
When Internal Succession Planning Makes Sense
Internal succession is especially attractive in situations where:
- The founder values continuity, culture, and legacy as much as financial return
- There is a capable leadership team or a solid base of trusted employees
- The business has stable cash flow to support staged payments or debt
- The founder prefers a gradual, less disruptive transition
- Maintaining independence (vs selling to PE, competitors) is a priority
Key Takeaways
- Internal succession is often chosen by founders who care as much about what comes after as they do about the exit
- It offers strategic benefits: continuity, timing flexibility, and resilience
- It delivers cultural advantages: protecting values, rewarding loyalty, and improving engagement
- Emotionally, it eases the transition by keeping ownership inside trusted hands
- Coaching is a powerful support — for both founders letting go and teams stepping up
- The statistics in Australia reveal urgency: only 24 % of SMEs have a succession plan, and many owners are nearing retirement
Next Chapter: The Management Buyout (MBO)