Succession planning for SMEs is more than a future concern – it’s a present-day priority.

Most small and medium-sized business owners are so busy managing the day-to-day that they rarely stop to ask, “What happens if my key people leave?” Yet, that’s exactly the question every business should be asking, and answering, through a succession plan.

Recent years have seen a surge in unexpected resignations, career shifts and early retirements. Without a clear plan in place, even one departure can create chaos lost knowledge, delayed projects and, in some cases, serious financial setbacks.

What Is Succession Planning and Why It Matters

Succession planning is the process of identifying and developing employees who can step into key roles when the time comes. It’s not just for big corporations, it’s a critical risk management tool for SMEs.
When a business depends heavily on one or two key people, a founder, senior manager, or specialist, a sudden departure can leave the organisation vulnerable. Proactive succession planning ensures you have the right people, skills, and structures in place to keep the business running smoothly, no matter what happens.

Why SMEs Often Delay Succession Planning

Many business owners think succession planning is something to worry about “later.” Common reasons include:

• “We’re too small.” But smaller teams are more exposed when one person leaves.
• “We don’t have anyone ready.” That’s exactly why planning ahead matters.
• “It feels uncomfortable.” Talking about people leaving (or retirement) isn’t easy, but ignoring it is riskier.
• “We don’t have time.” Without a plan, you’ll spend much more time in crisis mode later.

The reality is simple: succession planning isn’t about replacing people, it’s about protecting your business.

The Hidden Costs of Ignoring Succession Planning

When a key employee walks out the door, the costs can pile up quickly:

• Lost productivity while you recruit or retrain
• Missed opportunities due to leadership gaps
• Declining morale among remaining team members
• Reputational damage if clients or stakeholders lose confidence

According to LinkedIn’s 2024 Global Talent Trends report, replacing a skilled employee can cost between 1.5x and 2x their annual salary, a significant hit for SMEs.

How to Build a Succession Plan That Works

Here’s a practical, step-by-step approach you can adapt for your business.

1. Identify Key Roles
   • Start by pinpointing which positions are critical to your operations or revenue. Think beyond titles, consider roles that hold unique knowledge, client relationships, or strategic influence.
2. Assess Potential Talent
   • Look internally first. Who demonstrates leadership qualities, problem-solving skills, or growth potential
3. Develop Future Leaders
   • Once potential successors are identified, invest in their development:
     • Cross-training across departments
     • Leadership mentoring
     • Job shadowing and acting opportunities
     • Targeted training for key skills gaps
4. Document and Communicate the Plan
   • Put your plan in writing. Outline who’s responsible for what, how transitions will be managed, and how progress will be reviewed.
Then communicate transparently. This builds trust and helps employees see a path for growth.
5. Review Regularly
   • Succession plans aren’t “set and forget.” Revisit them annually or after major changes in structure, leadership, or strategy.

Business.gov.au — “Develop your succession plan” 

Business.gov.au — Tools & templates finder (allows access to a succession plan template) 

Succession Planning for Founders and Family Businesses

For owner-led or family-run SMEs, succession planning has an added layer of leadership transition. Many founders plan to “eventually hand over” but never formalise the process.

A clear, early plan ensures:

• Business continuity if unexpected events occur
• A smoother financial and legal handover
• Time to mentor and upskill the next generation of leaders

Whether it’s transitioning to a family member, co-director or external buyer, a structured plan preserves business value and legacy.

Fair Work Ombudsman — Best practice guides section (useful for broader HR/strategy context)

Conclusion

Succession planning isn’t just about replacing people, it’s about building a future-ready business. The best time to start was yesterday; the next best time is now.

By identifying key roles, nurturing internal talent, and creating clear plans for leadership transition, SMEs can protect their operations, culture and profitability no matter what the future holds.

Don’t wait until it’s too late. Take the first step toward securing your business’s future today.