Six million businesses are about to change hands

In February, the McKinsey Institute for Economic Mobility put a number on something people in small business have felt coming for years. By 2035, roughly six million small and midsize American businesses are expected to change ownership as the generation that built them retires. More than a million of those are healthy, sellable companies. The total value in motion could reach five trillion dollars. The report calls it the Great Ownership Transfer. I think of it as the largest handoff of real, working businesses this country will see in our lifetimes.

Here is the part that should stop you. The companies are mostly fine. These are profitable businesses with customers, employees, and decades of operating history. The risk is not that they are failing. The risk is that no one is standing by to take the baton. Surveys this year found that only about a third of owners have any succession plan at all, and a separate one found three in five have none. A good business with no next owner does not get a soft landing. It closes.

McKinsey's authors make a point I wish more investors would sit with. The systems we built to support entrepreneurship in this country are built for founding companies, not for transferring them. There is a whole industry set up to fund the start. There is almost nothing set up to fund the handoff of a sound business from a retiring owner to the next one. The money, the attention, and the glamour all sit at the beginning of the story. The end of the story, where a working company either finds a steward or shuts the doors, gets almost no capital at all.

A good business with no next owner does not get a soft landing. It closes.

The businesses caught in this are not abstractions. Roughly a third of them are in labor-intensive trades: retail, construction, food service. They are the shop that has been on the corner for thirty years, the contractor every builder in town trusts, the family restaurant that sponsors the team. When one of them closes for lack of a buyer, the owner loses their retirement, the employees lose their jobs, and the neighborhood loses something it will not get back. Multiply that by six million and you are describing a slow, quiet erosion of exactly the companies that hold communities together.

I have said from the day we started SwellPoint that talent is everywhere and backing is not. The ownership transfer is the same sentence pointed at a different moment. Good businesses are everywhere. Patient owners ready to take them over are not. We back small companies across every sector, and increasingly that means being the kind of investor who can step in at the handoff, not just at the founding. A thirty-year-old business with real cash flow and a retiring owner is not a worse opportunity than a startup. By our math it is often a better one, because the hard part, building something customers actually pay for, is already done.

Buying and running an existing business is not easy money, and I would not pretend otherwise. I operate real estate and care businesses myself, and I know the value lives in what happens after the purchase, in the hundred unglamorous decisions nobody sees. Taking over a company from a founder who ran it on instinct for three decades is its own kind of hard. You have to learn the business, keep the people, and earn the trust of customers who were loyal to a person, not a logo. But that work is exactly the work we think investors should be doing, and almost nobody is.

So when I read that six million businesses are about to change hands and most owners have no plan, I do not read a crisis. I read a generation of good companies looking for someone to take the baton, and an industry that has pointed its capital almost entirely at the other end of the race. We would rather be at the handoff. If you own a small business you have spent your life building, and you are starting to think about what comes next, that is a conversation we want to have.