Why Are There More Bad Succession Planning Stories Than Good Ones in Australia?
Succession planning is often described as one of the most critical yet overlooked aspects of business continuity. However, a significant number of Australian businesses lack formal succession plans, leading to numerous challenges during leadership transitions. Whether it’s a family-run farm or a large commercial enterprise, the reality is that poor succession planning leads to more horror stories than success stories in Australia. But why is this the case? Why do so many businesses struggle to transition smoothly to the next generation?
Let’s explore the key reasons behind this recurring issue.
The Reluctance to Talk About Succession
One of the biggest obstacles to successful succession planning is the unwillingness to discuss it. In family businesses, especially in agriculture, succession conversations are often avoided because they feel too personal. Farmers and business owners have typically spent decades building their enterprises, and the idea of handing them over is confronting.
Common barriers include:
Fear of conflict within the family or among business partners
Emotional attachment to the business or farm
Uncertainty about the future, leading to procrastination
Concern about fairness in asset distribution
Lack of Formal Plans and Professional Advice
Many business owners assume that succession will “work itself out.” They may have informal understandings with family members or employees but fail to document a clear plan. Without formal agreements, businesses often face legal and financial complications when an unexpected event occurs, such as the death of an owner or a sudden retirement.
Key issues include:
No clear governance structure for decision-making
Absence of legal agreements outlining roles, responsibilities, and financial distributions
Lack of professional input from accountants, lawyers, and business advisors
Complexity of Family and Business Dynamics
Succession planning is not just about transferring assets—it’s about ensuring the business can thrive under new leadership. However, personal and business dynamics can create significant challenges.
Common issues include:
Multiple family members having different expectations and levels of involvement
A lack of clear leadership succession—who is the best person to take over?
The need to balance fairness with business viability (e.g., dividing assets between farming and non-farming children)
Financial Pressures and Tax Implications
Many business owners underestimate the financial complexities involved in succession planning. In agriculture, where land values have skyrocketed, transferring ownership can trigger significant tax liabilities. Similarly, commercial businesses often struggle with funding buyouts or managing cash flow during ownership transitions.
Challenges include:
Capital gains tax (CGT) implications
Inheritance tax considerations and stamp duty
Funding succession while keeping the business financially stable
The risk of undervaluing or overvaluing the business
Failure to Prepare the Next Generation
Even when succession is planned, the next generation is not always ready to take over. In farming and business, skills are developed over time, and new leaders must be equipped with financial, operational, and strategic expertise.
Reasons for failure include:
Inadequate training or exposure to decision-making before succession occurs
Unwillingness of the next generation to take on leadership roles
A skills gap, particularly in financial and business management
Unexpected Events and Lack of Contingency Plans
Business owners often assume they have plenty of time to plan for succession. However, unforeseen circumstances such as health issues, accidents, or market downturns can disrupt even the best-laid plans. Without contingency strategies in place, businesses can struggle to survive these transitions.
A robust plan should include:
Emergency decision-making structures
Financial safety nets (insurance, funding strategies)
Clarity on who steps in if the intended successor is not ready
A Culture of ‘She’ll Be Right’
Australia has a strong culture of resilience, particularly in farming communities. While this is an asset in many ways, it can also lead to complacency when it comes to business planning. The mindset of “We’ll figure it out when the time comes” often results in crisis-driven decision-making rather than proactive succession strategies.
Not Thinking Outside the Box
Many succession plans fail simply because people assume there are only two options—pass it to the family or sell it. But there are so many other possibilities.
An employee could take over: Long-term staff members often know the business inside and out. A structured buy-in arrangement could allow them to gradually take control while maintaining stability.
Transferring only part of the business first: The next leader doesn’t always have to take on everything at once. They could start managing one section, help grow it, and eventually take over completely when they’re ready.
Joint ownership or staged succession: A new successor could come in as a co-owner first, learning the ropes and helping expand the business before fully taking over.
These options provide flexibility and allow for smoother transitions rather than forcing a "one-and-done" handover. A well-structured plan should look at all possibilities rather than sticking to traditional paths that may not be the best fit.
Every Business and Family is Different
Look, there are way more variables to list, and every single business and family is unique. You can’t pop them in a box or follow a cookie-cutter plan. Succession planning isn’t something you can sit down and sort out in an afternoon—it’s a long-term strategy that needs careful thought, time, and adaptability. The best succession plans are built over years, ensuring that the transition is smooth, financially sound, and right for everyone involved.
Turning the Tide: What Can Be Done?
While bad succession planning stories may dominate, good ones do exist—and they share common success factors:
Early Planning: Starting succession discussions well before they are needed
Professional Guidance: Engaging accountants, legal advisors with sucession planning expertise
Open Communication: Ensuring all stakeholders are part of the conversation
Formal Documentation: Legal agreements that outline roles, responsibilities, and financial arrangements
Leadership Development: Preparing the next generation to take over effectively
At Frontgate Advisory, we work with agribusinesses and commercial enterprises to create clear, structured succession plans that work.
Let’s make your succession story a good one. Contact us today to start the conversation.
Disclaimer: This content provides general information only, current at the time of production. Any advice in it has been prepared without taking into account your personal circumstances. You should seek professional advice before acting on any material.