Succession crisis: How poor planning is hollowing out NZ mid-market firms
This article was originally published in the NZ Herald on 2 January 2026.
THE FACTS
New Zealand’s economy relies on over 600,000 privately-owned businesses, facing a succession crisis.
Talented managers see limited pathways to ownership, leading to a brain drain and consolidation.
Addressing this requires early succession planning and creating genuine equity pathways for emerging leaders.
New Zealand’s economic engine runs on businesses most people never hear about.
While the New Zealand Stock Exchange captures headlines with roughly 150 listed companies, the real story lies in the more than 600,000 privately-owned enterprises that employ the majority of our workforce and drive local innovation.
Within this landscape, a structural problem is unfolding, one that threatens to hollow out the mid-market and accelerate a brain drain New Zealand can least afford.
The issue is succession. Or more precisely, the absence of credible pathways for the next generation to step into ownership and leadership of the businesses that underpin the economy.
The invisible ceiling
I work with founders and owners of medium-sized companies across Australasia, and one pattern appears repeatedly: talented senior managers in their late 30s and 40s hitting an invisible ceiling.
These are proven operators who understand the business, have built client relationships and are trusted internally.
Yet when they look ahead, they see limited equity, no credible pathway to ownership or influence and vague timeframes – “maybe in five years” or “maybe never”.
The outcome is predictable. High-quality people leave. They move into large corporates for stability, exit into consulting or contracting, or take their skills offshore.
This drains precisely the cohort needed to renew and lead New Zealand’s mid-market businesses.
In most cases this is not a failure of intent, but a failure of structure and timing.
This exodus is occurring against a broader backdrop. While population growth remains strong through migration, New Zealand continues to see a net outflow of its own citizens, including experienced, working-age professionals.
The absence of attractive, credible ownership pathways is one factor driving disengagement at home or decisions to leave altogether.
The consolidation default
When internal transitions are not viable, options narrow quickly. Businesses are increasingly sold to larger domestic players or absorbed into offshore corporates, roll-ups or private equity platforms.
Often, this is not because it is strategically ideal, but because it is the only executable option left.
At scale, the consequences matter. Decision-making moves further from New Zealand communities. Incentives tilt toward efficiency and extraction rather than long-term capability building and innovation.
The next generation of leaders become managers rather than owners – optimising for quarterly targets rather than building generational value.
This is not an anti-capital argument. Large firms and private equity play a legitimate, important and highly visible role.
But when consolidation becomes the default outcome rather than one option among many, it signals a system imbalance and a narrowing of future ownership pathways.
The founder’s dilemma
One of the most common mistakes I see is owners seeking advice only once they have decided to exit. Many mid-sized businesses remain heavily founder-dependent or lack a clear successor, which makes them less attractive and significantly narrows the available options.
“Succession is usually a once-in-a-lifetime decision, and most owners only get one real chance to get it right.”
The most successful transitions begin two to three years earlier, while owners still have the time and energy to shape the outcome.
Given this is often the only transition an owner will undertake, the quality and experience of advice at this stage can materially influence both the outcome and the optionality available.
The challenge is compounded by the structure of New Zealand’s business landscape.
Enterprises with fewer than 50 employees account for around 99% of all businesses and employ roughly two-fifths of the workforce. Structural failures in this segment, therefore, have economy-wide implications.
When succession planning fails at this level, it represents not isolated outcomes but a systemic erosion of locally owned enterprise.
Breaking the pattern
One of the most common mistakes I see is owners seeking advice only once they have decided to exit. Many mid-sized businesses remain heavily founder-dependent or lack a clear successor, which makes them less attractive and significantly narrows the available options.
“Succession is usually a once-in-a-lifetime decision, and most owners only get one real chance to get it right.”
The most successful transitions begin two to three years earlier, while owners still have the time and energy to shape the outcome.
Given this is often the only transition an owner will undertake, the quality and experience of advice at this stage can materially influence both the outcome and the optionality available.
The challenge is compounded by the structure of New Zealand’s business landscape.
Enterprises with fewer than 50 employees account for around 99% of all businesses and employ roughly two-fifths of the workforce. Structural failures in this segment, therefore, have economy-wide implications.
When succession planning fails at this level, it represents not isolated outcomes but a systemic erosion of locally owned enterprise.