Maddaisy has spent the past fortnight examining McKinsey through the lens of AI — its 25,000 AI agents, its shift to outcome-based pricing, its OpenAI Frontier Alliance. But the firm’s most consequential publication this month may have nothing to do with artificial intelligence at all.
A new report from McKinsey’s Institute for Economic Mobility identifies what it calls the “Great Ownership Transfer” — roughly six million small and medium-sized American businesses facing ownership transitions by 2035, representing up to $5 trillion in enterprise value. The cause is straightforward demography: baby boomer business owners are retiring, and the systems for handing their companies to the next generation of owners barely exist.
A 92% Closure Rate
The headline statistic is stark. Today, 92% of small-business market exits in the United States result in closure. Just 5% are completed as sales. Another 3% are transferred to new owners through other mechanisms. The remaining businesses simply shut their doors.
This is not a failure of entrepreneurial ambition. Small businesses account for 99% of all US companies and employ nearly half the national workforce. The problem, as the report’s authors put it, is structural: “Buying and selling a small business is often harder than starting one because the systems that support entrepreneurship in the United States are currently built for founding companies, not transferring them.”
Viable firms are closing not because they lack customers or revenue, but because the pathways to succession are limited, opaque, and prohibitively expensive for the buyers who would keep them running.
The Missing Middle
The risk concentrates in what McKinsey terms the “missing middle.” Nearly 80% of projected exits involve micro and emerging middle-market businesses valued at less than $2 million. These firms sit in an awkward no-man’s-land: too small to attract private equity or institutional acquirers, but too large and complex for a typical first-time buyer to finance without significant support.
The consequences are not evenly distributed. Rural communities, where these smaller firms often serve as anchor employers and the primary local tax base, face disproportionate exposure. Labour-intensive industries essential to daily life — retail, construction, food services — account for roughly one-third of the businesses caught in this gap. When a town’s only plumbing contractor or hardware shop closes because there is no viable buyer, the impact extends well beyond the balance sheet.
A Financing System Built for the Wrong Problem
The report is pointed about where the infrastructure fails. The SBA 7(a) loan — the primary federal instrument for small-business acquisition financing — requires high equity contributions and full personal guarantees. For first-time buyers, particularly those without existing assets or family wealth to pledge, the barrier is effectively insurmountable.
The broader ecosystem compounds the problem. Unlike residential property, where standardised appraisals, mortgage products, and regulatory frameworks have created a liquid market, small-business transfers remain bespoke transactions. Each deal requires its own valuation, its own legal structure, its own financing arrangement. There is no MLS for Main Street businesses, no standardised underwriting for a family-owned electrical contractor with $1.5 million in revenue.
McKinsey’s prescription is to treat small-business acquisition as a scalable market rather than a series of one-off transactions. That means modernised underwriting standards, bundled advisory services, and coordinated market infrastructure — the kind of systemic plumbing that already exists for property and public equities but has never been built for SMB ownership transfer.
The Equity Dimension
The demographic profile of current small-business owners — overwhelmingly older, white, and male — means this transfer also carries significant implications for wealth distribution. Under current patterns, women, Black, and Latino individuals combined would capture only about 28% of the transferring $5 trillion in value.
McKinsey’s modelling suggests the gap is not inevitable. If ownership participation reached demographic parity, Black individuals could see their wealth capture increase more than fourfold to approximately $369 billion. Parity for women could unlock roughly $700 billion. These are not aspirational targets plucked from a diversity statement — they are the arithmetic consequence of removing structural barriers to acquisition financing and deal flow.
The growth of employee stock ownership plans (ESOPs) and cooperative conversions offers one partial pathway. ESOP participation has grown by more than one million participants over the past decade, creating models for equitable ownership transfer that do not depend solely on traditional private capital. New platforms — BizBuySell, Acquire.com, Baton — are beginning to chip away at the opacity of the SMB transaction market, though none yet operates at the scale the problem demands.
What This Means for Consulting
For the consulting industry, the report represents both a diagnosis and an opportunity. Advisory firms have spent the past two years racing to build AI practices and secure platform alliances. The $5 trillion ownership transfer is a reminder that some of the largest structural challenges in the economy are not technology problems at all — they are market design problems, financing problems, and coordination failures.
Succession advisory, M&A support for sub-$2 million transactions, ESOP conversion guidance, and community economic development are not glamorous practice areas. They do not generate the headlines that AI partnerships attract. But if McKinsey’s numbers are even roughly correct, the demand for this kind of advisory work is about to grow substantially — and the firms that build credible practices now will find themselves serving a market that barely existed a decade ago.
The question, as the report frames it, is whether the coming decade becomes “a story of tragic business loss” or “the inflection point when business ownership became a broader pathway to mobility.” The answer will depend less on any single technology and more on whether the market infrastructure catches up to the demographic reality already underway.