Australia is heading into one of the largest generational transfers of business ownership on record, with baby boomers who own an estimated 80% of the country's small and medium-sized businesses preparing to make way for new owners.
Around $3.5 trillion in assets is expected to change hands over the next two decades, yet most owners have done little to prepare for the transition.
Nearly half of baby boomer business owners intend to exit within the next one to five years, most citing retirement as the driver. Despite this, only a quarter have a formal succession plan in place, according to Mary Tamvakologos (pictured), director of operations at business marketplace AnyBusiness.com.au.
"A large number of Australian business owners are reaching retirement age without a realistic succession or exit plan," Tamvakologos said.
The gap matters because many of these businesses remain heavily dependent on the founder for day-to-day operations and client relationships, a factor buyers weigh carefully.
"Buyers are not only purchasing current revenue. They are assessing whether that revenue will continue once the founder is no longer there," Tamvakologos said.
According to the research, roughly a third of departing owners are counting on sale proceeds to fund their retirement, while close to a fifth plan to hand the business to family. But Tamvakologos cautioned that profitability alone won't guarantee a smooth exit.
"If the business cannot operate without its current owner, the buyer is effectively purchasing a job with a significant amount of risk attached. That can reduce what they are willing to pay," she said.
Tamvakologos recommends owners begin the process years in advance, using the time to document processes, strengthen management teams and clean up financial records.
The wave of retiring owners could open doors for younger buyers seeking an established business rather than starting from scratch. But Tamvakologos flagged a financing hurdle: many modern businesses derive value from recurring revenue, brand reputation, and customer relationships rather than physical assets, which lenders are typically less comfortable financing than property or equipment.
With more businesses expected to list simultaneously, buyer selectivity is likely to increase, putting further pressure on unprepared sellers.
Not all business exits reflect succession planning. Separate Equifax data found voluntary SME wind-downs rose 37% year-on-year, as tax debt pressure and tightening cash flow pushed more operators to close before entering formal insolvency, a distinct trend from the retirement-driven transitions Tamvakologos describes.
That scale of ownership transition is playing out against a large ownership base — more than 500,000 of Australia's roughly 2.6 million SMEs are owned by people aged 60 or older, according to figures cited by SmartCompany.
For the full report, head over to AnyBusiness.com.au.
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