The Great Ownership Transfer

For the past decade, community leaders have been rightly focused on addressing the “silver tsunami,” i.e., the ongoing retirement of the large Baby Boomer population which may have negative effects on public budgets, workforce quality, and a community’s business base.  That last topic is the focus of a new McKinsey report on “The Great Ownership Transfer.”

While baby boomers are retiring at rapid rates, they continue to own more than half of US businesses.  But, as they continue aging, these businesses, and their assets, will be transferred to future generations.  And this shift will be a big one—hence the name “The Great Ownership Transfer.”  

McKinsey researchers estimate that ownership of roughly 6 million US small businesses (with more than $5 billion in asset value) will be transferred by 2035.  Doing this right will help maintain local assets, help new generations build wealth and enjoy their own entrepreneurial journeys.  But, warning signs are appearing.   Business transitions will be more common (and impactful) in rural areas, and many potential entrepreneurs, especially women and minority business owners, may not have adequate opportunities to benefit from these trends.

The researchers note that getting the ownership transition right matters.  They estimate that effective transition policies could save up to 12 million jobs and around $250 million in local buying power.  Doing it right will require an “all hands on deck” approach.  Among the many smart recommendations are the following:

• Banks and other financial institutions should update underwriting stranders to account for small business transitions
• Local ecosystem and supply chain partners should be on the lookout for at-risk firms or owners ready to retire.  Early interventions can help smooth ownership transitions.
• Economic developers and other community leaders should prioritize ownership transitions and help support these efforts within their service areas.