FRESH TAKES ON BIG IDEAS

Over the next decade, there will be more retirements per year in the United States than ever before. A huge number of retirees are owners of small and medium-size businesses. Most do not have clear succession plans. 

The ramifications ripple far beyond individuals. Business ownership has long been a powerful path for communities to build wealth. If a massive generation retires without transition strategies, six million businesses could shut down. Twelve million jobs could be lost. Tax revenue could disappear. Small businesses are the lifeblood of communities, and rural or rapidly aging areas—where businesses like print shops, barber shops, or small construction companies can make up half of total employment—are particularly at risk. 

Communities facing the Great Ownership Transfer fall into four buckets: 

Different areas can take different approaches based on the pace of aging and concentration of business value. But the underlying imperative is the same: Don’t wait until it’s too late.

While the risks of inaction are significant, it’s also important to consider the incredible opportunities this transition could open. More prospective business buyers are needed to meet the scale of the ownership transfer. One potential lever is to increase participation of Black, Latino, female, and/or rural buyers. Our research suggests that these groups could capture roughly 28 percent of this economic mobility opportunity. This raises an ambitious question: What would it take to turn that into more than 50 percent?

“Business ownership has long been a powerful path to wealth. This transition will determine who gets access to that opportunity next.”

The answer lies in fostering access to capital, raising awareness that business acquisition (not just starting a business) is a compelling path to entrepreneurship, and building support systems that can help new owners succeed. Done right, the wealth-building implications of this transition for individuals, families, and communities are mind-boggling.

People can take different actions depending on their roles in the ecosystem. If you’re a business owner, start thinking about your exit plan well before you think you need to. Succession isn’t something to figure out a year before retirement. It requires preparation. Do you want to pass your business to a family member? Sell it to an individual owner–operator? Your employees? Private equity? In the meantime, get your financials in order. Too many owners underestimate how long and complex that process can be. 

If you’re a financial player—whether in private equity, banking, or another form of capital allocation—the challenge is different. Many institutions target deal sizes far larger than the $2-million-and-under businesses that make up the “missing middle.” Yet roughly 80 percent of the businesses nearing transition fall below that threshold. Investors can rethink how to make transactions more seamless and consider more flexible deal structures.

If you’re a policymaker or community leader, this issue can find a place on your agenda. Businesses closing without successors can be deeply damaging in communities where small businesses are the backbone of the local economy. The government’s role can be to elevate the issue and develop ecosystems that connect buyers and sellers.

What’s striking is the breadth of the conversations the Great Ownership Transfer has sparked. Senior public officials are asking for granular, county-level insights into how this will affect their constituencies. Investors and operators are asking practical questions: How do we structure roll-ups (where a few businesses that do similar things join together as one business under one umbrella) in fragmented industries? How do we finance smaller deals? How do we identify serious buyers and sellers in a crowded, imperfect marketplace?

In many ways, those questions converge on a single theme: reducing friction. Today, buying and selling a small business is often harder than it should be. Buyers might sift through thousands of opportunities with limited transparency, while sellers might field interest from hundreds of potential buyers without a way to assess credibility or fit. Platforms exist, but the gap between supply and demand, and between intention and execution, is where innovation could yield real benefits.

Despite the scale of the challenge, I’m optimistic. The forces driving this trend—demographics and retirement patterns—are inevitable. But how we respond isn’t predetermined. This is a structural shift, and momentum is building across the ecosystem: investors experimenting with new models, policymakers leaning in, and individuals reimagining ownership.

There’s also a broader mindset shift underway. For generations, homeownership has been viewed as the primary pathway to wealth. Business ownership may represent an equally— if not more—powerful path for the next generation. 

—Edited by Christine Y. Chen, senior editor, Denver

ABOUT THIS AUTHOR

Ken Yearwood is a partner in McKinsey’s Chicago office.