Over the next decade, the United States will experience one of the largest ownership transitions in modern history.
According to McKinsey, approximately six million small and medium-sized businesses are expected to face ownership transitions as baby boomer owners retire.
Behind those numbers are companies that employ millions of Americans:
- HVAC companies
- Construction firms
- Restaurants
- Auto repair shops
- Healthcare practices
- Landscaping businesses
- Manufacturers
- Local service providers
These businesses are more than financial assets. They are employers, community anchors, and economic engines.
The Risk of Business Closures
Many small business owners spend decades building successful companies, but a large percentage of businesses still close when the owner retires.
McKinsey estimates that in 2022, 92% of small business exits occurred through closure rather than sale or succession.
In many cases, the issue is not that the business lacks value. The challenge is that:
- The owner did not prepare the business for transfer
- A successor was never identified
- Buyers and sellers were never connected
- Financial or operational records were not organized for a sale
When viable businesses close, communities can lose:
- Local jobs
- Skilled workers
- Customer relationships
- Tax revenue
- Essential services
This impact is especially significant in rural communities, where small businesses often account for more than half of local employment.
Business Owners as Stewards
Retiring business owners play an important role in preserving economic continuity.
A successful ownership transfer allows a business to continue operating under new leadership while preserving the relationships, jobs, and expertise built over many years.
Preparing a business for transition can include:
- Organizing financial records
- Reducing owner dependence
- Documenting systems and processes
- Building a management team
- Creating succession or exit plans early
Businesses that are transferable are often easier for buyers, lenders, employees, and investors to support.
The Rise of Entrepreneurship Through Acquisition (ETA)
At the same time that millions of owners are retiring, a growing number of buyers are pursuing Entrepreneurship Through Acquisition (ETA) — the process of buying and operating an existing business instead of starting one from scratch.
ETA buyers often seek businesses with:
- Stable cash flow
- Loyal customers
- Established employees
- Long operating histories
- Opportunities for modernization and growth
For many buyers, acquiring an existing business represents an opportunity to become an owner while preserving an already productive company.
A Generational Opportunity
The coming ownership transition represents both a challenge and an opportunity for the US economy.
Successful transfers can:
- Preserve jobs
- Keep local businesses operating
- Support community stability
- Create opportunities for new entrepreneurs
- Maintain economic activity across regions
As millions of owners approach retirement, business transferability and succession planning are becoming increasingly important topics for owners, buyers, lenders, advisors, and communities alike.
