A looming generational shift in small business ownership threatens to reshape the American economy in ways few policymakers have fully reckoned with.
Baby boomer owners of roughly six million American small and medium-sized companies will retire between now and 2035, according to research from McKinsey.
McKinsey has described the coming wave as “a once-in-a-generation wave of ownership transitions,” underscoring the scale and urgency of what lies ahead.
Data from the U.S. Census Bureau show that just over 52.3% of U.S. employer-businesses are owned by people aged 55 and older, at or near traditional retirement age.
Those firms account for three million of the nearly six million private-sector employer businesses currently operating across the United States.
Small businesses employ more than 62 million Americans and contribute roughly 43% of U.S. GDP, according to the U.S. Small Business Administration.
Research from the McKinsey Institute for Economic Mobility estimates that one million of those retiring owners hold businesses viable for sale, representing up to $5 trillion in combined enterprise value.
Yet if current trends continue, as many as 92% of these small businesses will close rather than successfully transition to new ownership.
McKinsey research further finds that effective ownership transitions over the next decade could preserve up to 12 million jobs nationwide.
Without a succession plan, companies may be acquired by out-of-state or foreign buyers who relocate operations, absorbed by private equity firms that strip assets, or simply shuttered permanently.
Less than a third of small business owners currently have any succession plan in place, while only 20% to 30% of businesses that go to market actually sell, according to the Exit Planning Institute.
One Harvard researcher warned directly about the consequences of inaction, stating: “There are places in this country that will be wiped out if we don’t think about having a strategy for the silver tsunami.”
The same researcher added: “Worker ownership isn’t the only solution but it leads to better companies, better performance for workers and better performance for communities.”
Employee ownership has emerged as one promising alternative, with up to 600 U.S. firms now being sold to their workers each year, according to a 2025 study on the subject.
Investment funds available to finance such worker-ownership deals rose 78% to $865 million last year, signaling growing financial market interest in the model.
Research consistently shows that employee-owned companies tend to be more productive, less likely to lay off workers, and more likely to offer higher wages than conventionally owned firms.
Through an Employee Stock Ownership Plan, or ESOP, shares are held in trust for workers who accumulate equity over time without having to invest their own capital upfront.
In 2023, there were 6,609 companies operating under such ownership structures, employing 10.9 million people and holding combined assets of more than $2 trillion.
The federal government has begun taking steps to encourage employee ownership, with the Department of Labour launching a new Employee Ownership Initiative to promote the practice and provide guidance.
Advocates argue that without a coordinated national strategy, the so-called silver tsunami could hollow out communities and permanently eliminate the jobs and wealth that small businesses have long generated.
