Inside Singapore’s quiet succession crisis
Across Singapore, small and medium sized enterprises are facing a critical test. Many were built over decades by founders who put in long hours and earned the trust of customers, suppliers, and bankers. Yet a large share of these firms do not have a formal plan for leadership transition. The result is a growing succession crunch that threatens business continuity, jobs, and the value embedded in long standing relationships.
SMEs account for 99 percent of businesses in Singapore and employ more than 70 percent of the workforce. By several estimates, fewer than one in four have a formal succession plan. Surveys also show a striking gap between intention and action. Most founders say they want the business to stay in the family, but about half have no concrete plan in place. As owners age and contemplate retirement, the lack of a clear successor increases the risk of distress sales or outright closures.
Industry groups warn that the fallout is not just about revenue and profit. When a founder exits without a plan, much of the firm’s intangible capital can evaporate. Trust with key customers, tacit know-how inside operations, and personal relationships that smooth procurement and financing often sit inside one person’s head. That is why sectors where value rests on craft, supplier ties, and service reliability, such as food and beverage, traditional trades, construction, logistics, and manufacturing, face heightened exposure.
Many owners postpone decisions until a health scare or market shock forces a rethink. Others keep delaying retirement, which can hold back investments in new systems and leaders. At the same time, younger family members often prefer careers with clearer progression and stability in larger companies, leaving owner managed firms with a smaller pool of potential successors.
What is fueling the SME succession gap
Several forces are converging. Demographics are shifting as Singapore ages. By mid-century, about one third of the population will be over 65, and many SME owners are already past traditional retirement age. Cultural discomfort around discussing mortality and wealth transfer can also delay honest conversations. That hesitation is reflected in data across Asia, where many family businesses value legacy but still have not formalized leadership handovers.
Survey results point to consistent patterns. A clear majority of entrepreneurs want to keep their businesses in the family, yet around half have not drawn up a plan to do so. In parts of Greater China, about two thirds of respondents have not planned for continuity. In Singapore, a sizable minority of owners also express interest in selling the business as an exit route. All this is happening as Asia prepares for a very large transfer of family wealth by the end of the decade, which raises the stakes for getting succession right.
The numbers behind the gap
Key statistics capture the pressure points. SMEs make up 99 percent of Singapore companies and provide over 70 percent of jobs. Fewer than one in four have a formal succession plan. In Singapore, roughly 8 in 10 founders want the business to remain in the family, yet different surveys put the share without a plan between 48 percent and 55 percent. In several Asian markets, about two thirds of business owners say they have not prepared a continuity plan. In Singapore, about 22 percent of entrepreneurs indicate they would consider a sale. The tension between legacy, liquidity, and family choice is real, and it is intensifying as the expected intergenerational transfer of wealth accelerates.
Why founders delay passing the baton
For many owners, the business is not just a source of income. It is a life’s work and a core part of identity. Handing control to someone else can feel like losing purpose. That emotional weight often collides with the need to professionalize processes, write down tacit knowledge, and empower others to make decisions. Some founders fear changes that could unsettle loyal staff or long term customers. Others worry that a successor will not protect the firm’s reputation or values.
Emotion, identity, and control
Owners who built a company from scratch often equate control with quality and resilience. Letting go of operational decisions can be hard. In family firms, it is common for roles to be informal and decisions to be centralized. These patterns make governance changes, such as creating a real board or clarifying job scopes, feel like a loss of autonomy rather than a path to continuity.
Daily firefighting and thin margins
SME leaders also face daily operational pressures. They negotiate credit terms, chase receivables, manage staff turnover, and respond to customer demands. Writing a succession plan competes with urgent tasks that keep the lights on. Tight margins can make it difficult to add layers of management or invest in leadership development. That short term focus can leave the bench thin and the business overly dependent on one person’s judgment.
Sectors most exposed to knowledge loss
Not every industry faces the same level of risk. In areas where craftsmanship, service relationships, and operational know-how drive value, the cost of failed transitions is high. That includes food and beverage, where recipes, supplier trust, and kitchen workflow are often passed down informally. It includes traditional trades, where quality and reliability are learned on the job and the customer base is loyal to a person more than a brand.
Food and beverage and traditional trades
A signature sauce, a sixth sense for supplier quality, or a regular’s favorite order are rarely captured in manuals. Many family eateries and specialty shops still keep processes in the heads of long serving staff. Without deliberate knowledge transfer, a new leader can struggle to maintain standards and customer relationships. Replicating that cultural glue is not easy for a buyer who lacks the founder’s history with patrons and suppliers.
Construction, logistics, and manufacturing
Construction and logistics firms depend on project leadership, safety practices, and networked problem solving. Manufacturing companies rely on line supervisors’ tacit skills and long term relationships with tool makers and component suppliers. In all three segments, continuity relies on trust and timing. If a founder leaves abruptly, the ripple effects can hit subcontractors, lenders, and clients. Handovers that protect those relationships need months or years, not weeks.
Family dynamics and the next generation
Even where a family wants to keep ownership, the next generation may not want to run the company. Many younger Singaporeans prefer roles with global exposure, structured training, and defined career ladders. Surveys show a majority of successors feel supported by older generations, yet a significant share do not find it easy to ask for help. Lifestyle expectations and concerns about burnout also shape choices. In 2024, Singapore ranked near the top globally for burnout related search interest, a signal of resistance to high stress careers.
When children choose different paths
Families are increasingly open to letting children pursue independent careers, while preserving the business or diversifying wealth. One visible trend is the rapid growth of single family offices in Singapore, which allow families to professionalize wealth management without requiring the next generation to operate the core business. This dual approach, where the current generation runs the enterprise and the next explores new ventures or manages investments, can reduce pressure on reluctant heirs while keeping options open.
Governance gaps in family firms
Many family companies operate with implicit rules. That works until conflicts appear. Written governance can help. A family charter that sets principles, a shareholders agreement that defines transfer rules, and a functioning board with independent voices can reduce friction. Clear job scopes for family and non family executives also help build trust among employees who may worry about favoritism or sudden changes.
The talent bottleneck for professional managers
When families look outside for leadership, they face a competitive talent market. Capable managers weigh SME roles against opportunities in multinational companies with higher brand recognition and structured development. They ask about authority, equity, and the freedom to make changes. They also look for stability in ownership and clarity in goals.
Large listed companies in Singapore tend to promote from within. Recent analysis of firms on the Straits Times Index shows about 80 percent of chief executives are long serving insiders, and only about 17 percent are external hires. That pipeline is harder to build in SMEs, where there may be only one or two senior deputies under a founder. Without a bench, the search for a successor starts from scratch and takes longer.
It is not just a shortage of candidates. The match must be right. Successor candidates want a mandate, fair compensation, and a path to ownership or profit sharing. Owners want cultural continuity and prudence. The best transitions create shared incentives. For example, a plan may combine a salary with a performance based payout and a gradual acquisition of shares tied to milestones. That blend aligns interests and allows the founder to mentor a successor over time.
New solutions and market responses
Market players are building platforms to close the gap. Permanent holding companies that focus on buying and operating essential businesses for the long term are emerging in Singapore. One such firm raised 50 million dollars this year to acquire profitable business to business SMEs and to train operator leaders through a structured CEO in training program that takes two to three years. The model emphasizes stewardship, steady improvement, and respect for founder legacies rather than quick flips.
Digital tools are also arriving. A Singapore startup recently raised several million dollars to develop an online platform that helps SME owners assess readiness, create transition roadmaps, and connect with advisors. Templates for governance, communication plans, and valuation, combined with access to legal and financial professionals, can make the process less daunting. Owners who are unsure where to start get a step by step path and a team to call.
Banks and trustees in the region are weaving succession and estate planning into daily operations. In Malaysia, a trustee unit partnered with a human resources software platform to embed succession and legacy tools alongside payroll and employee management. The idea is to make planning routine, not episodic, and to reach SMEs at the point where decisions are made.
Nor Fazlina Mohd Ghouse, chief executive of Maybank Trustees Berhad, described the intent of that collaboration in a recent statement.
