Retirement on the Horizon: Inside the Great Ownership Transfer

Baby Boomers, the group of people born between 1946 – 1964, currently make up about 20 percent of the population—and a lot of them own small businesses. A new report from the McKinsey Global Institute highlights a massive shift on the horizon for the U.S. small-business economy: a wave of ownership transitions as millions of baby boomer entrepreneurs retire. The report, titledThe Great Ownership Transfer: A New Era of Business Stewardship, suggests that how these transitions unfold could significantly affect jobs, local economies, and opportunities for new entrepreneurs over the next decade. Let’s recap the findings…

A once-in-a-generation business transition

According to the research, the United States is approaching the largest wave of small-business ownership changes in modern history. By 2035, an estimated six million small and midsize businesses will face ownership transitions as their founders retire. More than one million of those businesses could be viable candidates for sale, representing as much as $5 trillion in enterprise value that could continue generating jobs and economic activity if successfully transferred to new owners.

Why does this shift matter? For starters, small businesses play a central role in the U.S. economy. They make up 99 percent of all companies, employ more than 60 million workers, and generate roughly 35 percent of total business revenue nationwide.

For small business owners, the takeaway is pretty clear: succession planning is becoming one of the most important strategic issues of the next decade. Whether businesses are sold, passed to family members, or transitioned to employees could determine whether communities keep thriving companies (or lose them entirely).

The risk of closures instead of transitions

One of the most striking findings in the report is that many businesses don’t successfully change hands when owners exit. In 2022, roughly 510,000 small businesses exited the market, but 92 percent closed entirely rather than being sold or transferred to a new owner. Only about 5 percent were sold and 3 percent transferred ownership, often within families.

This suggests that many viable companies disappear completely simply because the transition process is difficult or poorly supported. Issues such as limited access to financing, lack of succession planning, and complicated transaction processes often prevent potential buyers from acquiring otherwise healthy firms.

For small business owners approaching retirement, this highlights the importance of preparing early. Without a clear exit strategy, businesses with strong customer bases and steady revenue might still shut down rather than continue under new leadership.

Rural communities face the greatest risk

The report notes that the impact of this “Great Ownership Transfer” won’t be evenly distributed. Rural areas are particularly vulnerable because small businesses often represent a larger share of local employment and economic activity.

If a manufacturing shop, construction firm, or service provider closes due to a failed ownership transition, the consequences ripple through the local economy—affecting jobs, supply chains, and tax bases. In many smaller communities, maintaining continuity of local businesses is essential to economic stability. For these communities, helping existing businesses change hands successfully could be one of the most effective ways to protect local jobs.

A major opportunity for new entrepreneurs

While the transition presents risks, the researchers emphasize that it also represents a huge opportunity for new business owners. Instead of starting companies from scratch, aspiring entrepreneurs may be able to acquire existing businesses with established customers, employees, and revenue streams.

However, participation in business ownership today is still uneven. Under current patterns, only about 28 percent of the transferring business value would accrue to women and Black and Latino individuals combined, highlighting a significant gap in ownership opportunities.

Closing those gaps could unlock up to $3 trillion in new household wealth, making ownership transitions one of the most powerful tools for expanding economic mobility in the coming decade.

Employee ownership models, community buyers, and first-time entrepreneurs could all play a role in taking over retiring-owner businesses.

Building a better ownership transfer market

Ultimately, the report argues that the outcome of the Great Ownership Transfer will depend on whether the U.S. develops better systems to connect sellers and buyers. Improving access to financing, increasing advisory support, and creating more transparent marketplaces for small-business acquisitions could help more companies survive generational transitions.

If the transition is managed well, researchers estimate it could preserve up to 12 million jobs and protect roughly $250 billion in annual local spending power. For small business owners, this means succession planning is no longer just a personal retirement decision—it’s part of a broader economic shift that will reshape the small-business landscape in the coming years.

If you’re navigating changes like these, staying informed is essential. Over at the Financial Pantry, we regularly cover important trends affecting entrepreneurs—from economic research and policy changes to financing and growth strategies. Follow along and stay up to date on the latest insights that’ll help you make smarter decisions about managing, growing, and even transitioning your businesses.