This is the sixth article in our series, where we cut through the hype and focus on what really matters.
Beyond the hype: Four surprising business truths for 2025
The headlines are always telling us the same two stories: persistent economic uncertainty and the unstoppable rise of AI. While these are certainly important, they don't tell the whole story for Small and Medium Enterprises (SMEs) in Australia and New Zealand.
The real narrative is far more complex. It's about a series of surprising truths that are shaping the future of our businesses right now. This article reveals four of those trends, from a bizarre technology gap in New Zealand to a hidden mergers and acquisitions (M&A) boom. These are the hidden risks and opportunities that will define SME success in the next few years.
1. NZ SMEs are AI leaders... and tech laggards
The first truth is a stark paradox. New Zealand SMEs have become world leaders in AI adoption, with an incredible 82% experimenting with or actively using AI. The results are clear: 95% of those businesses report increased earnings, proving a tangible return on investment.
Yet, this enthusiasm for cutting-edge tools masks a foundational weakness. The wider NZ SME sector lags significantly behind in basic technology use. Only 34% of Kiwi businesses generate more than 10% of their sales online, compared to the regional average of 62%. This reveals a digital divide where businesses are leaping to advanced tools without mastering the basics of e-commerce and digital operations.
The takeaway for Kiwi business owners is powerful: mastering foundational digital commerce isn't just a prerequisite for growth, it's the only way to ensure your significant investments in AI actually translate from impressive experiments into sustainable profit.
2. A 'flood' of businesses is for sale, but half are unprepared
A massive generational transition is underway. As Baby Boomer owners look to retire, a "flood" of businesses is set to hit the market. For many, the sale of their business is their retirement nest egg.
Here lies the shocking reality: despite the high stakes, there is a profound lack of preparation. Roughly half of these businesses are unprepared for a sale, and in Australia, only 24% of SMEs have a formal succession plan. This failure to prepare carries a devastating financial risk, with a loss of up to 30% of their value.
For the next generation, with 75% of Gen Z considering starting their own business, this creates a monumental opportunity to acquire established companies. This wave of unprepared businesses is creating a turbulent and buyer-friendly market, one where the real action is happening far from the billion-dollar headline deals.
3. The mergers and acquisitions (M&A) market is slower, but booming for small business
If you only follow the major financial headlines, you would believe the Mergers & Acquisitions (M&A) market is in a slump. Overall deal volume did decline in 2023.
However, this top-level view obscures the most active part of the market. The SME sector is the primary engine of M&A deals in Australia. In 2023, a staggering 80% of all completed deals were in the $0-100 million range, proving the market for small and mid-sized businesses is alive and well.
Furthermore, there is immense capital waiting on the side lines. Private equity firms in Australia alone have approximately $30 billion ready to deploy, with a strong appetite for well-run, mid-sized businesses. This is a clear signal that the window of opportunity to attract waiting capital is open now, but only for the meticulously prepared.
4. Everyone is using AI, but almost no one is managing the risk
The rush to adopt AI is undeniable, but it has a critical and dangerous flaw: a massive governance and risk management gap.
Business leaders are aware of the risks, citing concerns like reliability (87%), security (85%), and privacy (85%). Despite this, less than 10% of organisations have mature AI governance frameworks in place. This is a crucial mistake.
Fixing this isn't just about mitigating risk; it’s a powerful driver of growth. Businesses with mature AI governance report a 28% increase in staff adoption and see almost 5% higher revenue growth. The frantic rush to adopt AI without proper governance isn't just reckless; it’s leaving significant revenue and productivity gains on the table.
Are you ready for 2025?
The ANZ landscape is defined by a powerful collision of trends. A generational handover of businesses is feeding a hot M&A market flush with capital, yet many of these same businesses are unprepared, lagging in foundational tech even as they rush to adopt AI without managing its immense risks. It's a world of contradictions where businesses can be both leaders and laggards, and where the greatest opportunities are often accompanied by overlooked risks.
Understanding these underlying truths is essential for any business leader aiming to navigate the coming years successfully.
What is the one truth here that surprised you the most, and how are you going to act on it in your business?
Original ideas from Paula Riano, research done with NotebookLM, writing optimised by Gemini.