WHAT’S AT RISK WITHOUT SUCCESSION PLANNING 

The Association of Small and Medium Enterprises (ASME) told CNA TODAY that succession is “one of the most widespread yet least prepared-for challenges” facing SMEs, which make up 99 per cent of all businesses in Singapore and employ about 70 per cent of the workforce. 

Its spokesperson said that since SMEs account for nearly 80 per cent of Singapore’s private-sector activity, such widespread succession gaps would have a ripple effect on jobs, suppliers and entire industries.

“The deeper risks lie in the loss of intangible capital, as well as the accumulated trust, tacit knowledge and relationships painstakingly built by founders,” said the spokesperson.

“This kind of capital is difficult to measure, but once it disappears, it takes years to rebuild.”

While new businesses emerge in Singapore’s landscape, experts said this doesn’t fully solve the succession challenge among older SMEs. There is no data on how many firms close because of succession issues, but the concern remains that experience and capabilities may be lost when founder-led firms wind down.

ASME said that Singapore’s vibrant startup scene and new enterprises cannot fully replace what is lost when an established SME folds.

“New enterprises bring fresh ideas, but older family businesses carry irreplaceable continuity such as long-term customer trust, supplier relationships and industry know-how built over decades,” it said.

Protecting the continuity of existing SMEs is equally vital to safeguarding Singapore’s business backbone, it added. 

Without a clear plan, delayed owner retirement reduces business productivity, increasing the likelihood of distress sales and closures, added Dr Julien Salanave, professor of practice in entrepreneurship and innovation at ESSEC Business School.

“Given SMEs’ massive contribution to total employment in Singapore, the macro risk is real. Unresolved succession can also amplify labour-market and competitiveness pressures as ageing firms struggle to adapt.”

Dr Salanave said international evidence shows that raising SME productivity to top-quartile levels could lift the gross domestic product (GDP) in advanced economies by about 5 per cent. If succession gaps stall renewal and scaling, he added, Singapore risks missing out on such gains.

The vulnerabilities are most acute in food and beverage, traditional trades, construction, logistics and light manufacturing – sectors where much of the value lies in tacit know-how, long hours, regulated licences and relationship-based contracts that don’t transfer easily to outsiders, he noted. 

WHY SUCCESSION IS SO HARD

While succession sounds simple in theory – train someone new and hand over the reins – in reality, it’s one of the hardest transitions a business can face, experts said.

Assoc Prof Yupana of NUS Business School said that in many cases, SME bosses assume they will “keep going” indefinitely and since “nothing bad has happened to me” yet, there’s no need to focus on this issue now.  

She added that, given that succession is also a long and complicated process, many SME founders put it on the back burner and instead prioritise their day-to-day operations.  

“Every day, they’re solving problems, so succession gets pushed to ‘later, later, later’. But people don’t realise it should be a priority today. It’s like exercise. You think it’s not important, you say you have no time, but it’s actually very important,” said Assoc Prof Yupana. 

This rings true for fifth-generation florist Ms Gracelyn Lin, whose family members at Sing See Soon Floral & Landscape saw retirement planning as a “luxury thought” as their mindset was rooted in “survival”, not strategy. 

Founded in 1879 by her great-great-grandparents, the business was rebuilt more than once. Both her great-grandmother and grandmother were widowed young and had to grow the company from scratch just to put food on the table, said Ms Lin, who is in her 40s.

By the time the business reached its fifth generation, roles were still informal. 

“There was no CFO (chief financial officer) or CEO, and everyone did everything. Governance was the hardest part. We had to professionalise before we could even think about succession,” said Ms Lin, who took over the family business in the mid-2000s as its chief executive officer.