Small and medium-size businesses (SMBs), a cornerstone of the US economy, face an imminent ownership transition as millions of baby boomers retire, note McKinsey’s Ken Yearwood, Shelley Stewart III, and coauthors. The share of Americans aged 65 and older is expected to reach 22 percent by 2040, a demographic shift that puts jobs, local economies, and pathways to mobility at risk. As a result, roughly six million SMB transitions are expected by 2035, including more than one million firms viable for sale, representing up to $5 trillion in enterprise value. How the United States builds pathways for ownership transfer will determine whether this moment leads to widespread loss or a new era of economic renewal, inclusive ownership, and institutional strength across the US economy.
Image description:
Three population pyramids show the age structure of the US population across 2005, 2025, and 2040, illustrating the wave of baby boomer retirements. Each pyramid displays age groups on the vertical axis (0-85+ years) and population in millions on the horizontal axis, distinguishing between those within 10 years of retirement and those beyond median retirement age. In 2005, baby boomers aged 41-59 form a prominent bulge in the middle of the pyramid, with most approaching retirement but not yet there. By 2025, this cohort has aged to 61-79 years, with the majority now beyond retirement age. By 2040, baby boomers aged 76-94 will concentrate heavily in the upper section, representing a fully retired generation. Key statistics below each pyramid show that the population over retirement age grows from 35.3 million (12% of total population) in 2005, to 63.3 million (19%) in 2025, and to 78.3 million (22%) in 2040, while the population within 10 years of retirement is 30.2 million in 2005, 41.1 million in 2025, and 40.4 million in 2040. The exhibit demonstrates that the share of Americans at or beyond retirement age nearly doubles from 2005 to 2040, reflecting the unprecedented scale of baby boomer retirements—a demographic shift with major implications for small business ownership transitions, as over half of all small-business owners are now over age 55 and millions of businesses will need to change hands as their owners retire.
Note: This image description was completed with the assistance of Writer, a gen AI tool.
Source: US Census Bureau; baby boomers were born between 1946 and 1964.
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