21 July 2026
Australia is approaching a succession cliff. According to a recent report in the Australian
Financial Review, some 467,000 Australian small businesses face succession challenges, and
a PwC survey found that 1.4 million business owners will retire by 2036 — one third of them
with no succession plan at all. Perhaps most telling, 30% of family businesses report that the
next generation simply isn’t interested in taking over.
For a generation of owners who assumed the business would pass to their children, the
alternative is stark: find a buyer, or wind down. And in a market where hundreds of
thousands of businesses may come up for sale within a decade, the businesses that transact
— and transact well — will be those that can demonstrate transferable value. Increasingly,
that value is intangible.
The value has moved off the balance sheet
Over the past four decades, the composition of business value has inverted. Intangible assets
— brands, know-how, software, data, customer relationships, patents, designs and trade
secrets — now represent the overwhelming majority of enterprise value in most developed
markets, a near-complete reversal of the position in the 1970s, when value sat in plant,
equipment and property.
Small and family businesses are no exception. The regional food producer’s value lies in its
recipes, brand reputation and supply relationships. The engineering firm’s value lies in its
proprietary processes and drawings. The services business’s value lies in its methodologies,
client data and the goodwill attached to its name. Yet in most small businesses, none of this
appears on the balance sheet, little of it is documented, and much of it exists only in the
heads of the founder and a handful of long-serving staff.
That is precisely the problem a prospective buyer sees. A business whose value walks out the
door when the owner retires is not an acquisition — it’s a risk. Conversely, a business that
has identified, documented, registered and protected its intellectual property presents a
buyer with something they can actually own, defend and grow.
What buyers look for — and what kills deals
Anyone who has sat through a due diligence process knows the pattern. The buyer’s advisers
issue a request list, and the IP section asks the same questions every time: What trade marks
do you own, and are they registered? Who owns the copyright in your software, website and
marketing materials? Are your trade secrets protected by confidentiality agreements? Do
your employment and contractor agreements assign IP to the company? Are your domain names, social media accounts and licences held by the business entity — or by the founder
personally?
In an unprepared business, the answers are often uncomfortable. Common deal-damaging
discoveries include:
• Unregistered brands. The business has traded under its name for twenty years but
never registered the trade mark. The buyer discovers a competitor — or worse, an
unrelated party — holds a registration for a similar mark, or that the name is
descriptive and difficult to protect. Goodwill the vendor priced into the deal suddenly
looks fragile.
• IP owned by the wrong entity. The founder registered the trade mark, domain
names and key contracts in their own name, or in a dormant company, rather than in
the trading entity being sold. Untangling this mid-transaction creates delay, cost and
sometimes adverse tax consequences.
• Contractor-created assets. Under Australian law, an independent contractor
generally owns the copyright in what they create unless it is assigned in writing. The
website, the logo, the custom software the business depends on — all may legally belong
to a designer or developer paid a decade ago and never heard from since.
• Undocumented know-how. The processes, formulations, pricing models and
customer knowledge that make the business profitable exist nowhere except in the
owner’s memory. A buyer cannot value what cannot be transferred.
Each of these issues is fixable — but fixing them during a sale process, under time pressure,
with a buyer’s lawyers watching, erodes both price and negotiating position. Fixed two or
three years in advance, they cost comparatively little and add materially to value.
An IP audit: the practical starting point
For owners contemplating an exit — even one five or ten years away — the single most useful
step is a structured IP audit. In essence, this means working through the business
systematically to answer three questions: What intangible assets do we have? Who actually
owns them? And how well are they protected?
A typical audit covers:
1. Brands and reputation — business names, product names, logos, taglines and get-
up, checked against the trade marks register and secured by registration in the relevant
classes and markets (including export markets, where registration is territorial and
cannot be assumed).
2. Inventions, designs and improvements — products, processes or product
appearances that may be patentable or registrable as designs, bearing in mind that
public disclosure before filing can be fatal to registrability.
3. Copyright works — software, websites, manuals, training materials, photography and
marketing content, with a chain of title tracing ownership back through employees and
contractors.
4. Confidential information and trade secrets — recipes, formulations, methods,
supplier terms, customer lists and pricing structures, protected through confidentiality
agreements, access controls and documented procedures.
5. Contracts and registrations — licences, distribution and franchise agreements,
domain names, and the consents needed to transfer them on a sale.
6. Documentation of know-how — converting the founder’s tacit knowledge into
operating manuals, process documents and training systems, so the business can
demonstrably run without them.
The output is an IP asset register: a living document that lists each asset, its owner, its
registration status, its renewal dates and the agreements that support it. For a buyer, that
register transforms the conversation. Instead of hoping the goodwill survives the founder’s
departure, they can see a portfolio of defined, transferable, defensible assets.
The valuation dividend
Identifying and protecting IP doesn’t just remove deal risk — it actively builds price.
Registered trade marks and patents are property: they can be independently valued,
licensed, used as security and sold. A protected brand supports premium pricing and justifies
a higher goodwill multiple. Documented systems and know-how support the argument that
earnings are sustainable post-completion, which is ultimately what every buyer is paying for.
There is also a structural dimension. In Australia, the way IP assets are held can interact with
the small business capital gains tax concessions and the structure of the sale itself (assets
versus shares). Getting ownership into the right entity well before a transaction — rather
than scrambling to assign assets on the eve of completion — preserves flexibility and can
materially affect the after-tax outcome. This is an area where IP advisers, accountants and
tax advisers need to work together, and where lead time is everything.
Start before you need to
The succession statistics point to a buyer’s market ahead. When 1.4 million owners head for
the exit over the next decade, buyers will have choices, and they will pay for businesses that
are genuinely transferable — and discount, or walk away from, those that are not.
The owners who fare best will be those who treat their intellectual property as what it is:
usually the most valuable asset class in the business. Identify it, document it, register it, own
it in the right entity, and protect it. Done early, this is one of the cheapest and highest-
leverage forms of succession planning available — and it may be the difference between a
business that sells well and one that quietly closes its doors.
This article provides general information only and does not constitute legal advice. Business owners should seek advice tailored to their circumstances from a qualified intellectual property professional.
