The Great Handoff: Why So Many Business Owners Are Facing a Succession Decision Right Now

What’s in this article?

• The Great Ownership Transfer
• Only Some Exits are Sales
• The Time to Plan is Now
• Exit Strategies to Consider
• Coldstream Capital Partners Can Help

Think back to the day you signed the papers, took over the lease, or hung out your first shingle. It probably felt like the biggest decision of your life: were you ready, was the timing right, could you actually make this work? You figured out the rest as you went.

Chances are that somewhere in the middle of building the business, “eventually I’ll deal with retirement” felt like a problem for a much later version of you. If “later” doesn’t feel quite so far off anymore, you’re in good company. A lot of owners are having that same realization at the same time.

The Great Ownership Transfer

A recent McKinsey study puts a number on how large this moment has become. By 2035, roughly 6 million small and mid-sized U.S. businesses are expected to change hands as their baby boomer owners retire, with more than 1 million of them viable candidates for an outright sale, representing as much as $5 trillion in enterprise value. This isn’t a distant, abstract trend: it’s a wave of owners, most around the same age, who built their businesses in the same era, approaching the same decision within the same handful of years.

Only Some Exits are Sales

Here is the part of the study that should get more attention than the $5 trillion headline: the default outcome for many of these owners isn’t a sale. Of the roughly 510,000 businesses that exited in a recent year, the vast majority—92 percent—simply closed their doors. Only 5 percent were sold to a third party. Just 3 percent transferred successfully to family. Ask yourself: if you had to hand your business off tomorrow, with no time to prepare, which of those three outcomes would be most likely?

The Time to Plan is Now

That gap between “eventually I’ll deal with this” and an actual plan is where value is won or lost. It has nothing to do with whether you intend to sell next year or in ten years. It has to do with whether the business could be transitioned well if the time came sooner than expected—whether through illness, a partner’s exit, an unsolicited offer, or simply a change of heart about how you want to spend the next chapter.

A plan doesn’t mean picking a buyer today. But it does mean thinking about different types of exits and considering which of a few broad paths fits your goals and your business, so the eventual decision is a choice rather than a scramble.

Exit Strategies to Consider

What are the paths that you might take when you are ready to exit? Here are some strategic paths to explore:

• A third-party sale, to a strategic acquirer or a private equity buyer, usually delivers the highest price and the cleanest break, in exchange for a structured process and a period of due diligence.
• A sale to employees, often through an Employee Stock Ownership Plan, preserves the culture and independence of the company and can carry meaningful tax advantages, though it takes longer to set up and typically pays out over time.
• A transfer to family keeps the business in the family, but raises its own governance and fairness questions that are worth working through well before anyone expects an answer.
• Staying the course, remaining an owner for years to come, is a completely legitimate choice, as long as it’s a deliberate one rather than a default born of not having looked at the alternatives.

None of these paths requires a decision today. What they do reward is an early, honest look at where the business stands and where you’d like to land. The owners who end up with real choices when the time comes are, almost without exception, the ones who started looking a few years before they needed to.

Coldstream Capital Partners Can Help

This is exactly the kind of question Coldstream Capital Partners works through with business owners, advising from that first conversation about options all the way through a closed transaction. If you’re wondering where your own business would land on this timeline, that’s worth a conversation with our team.

This article is for informational and educational purposes only and does not constitute legal, tax, or financial advice. Readers should consult with qualified professionals regarding their specific circumstances.

Coldstream Securities, Inc., a registered broker-dealer, and member of FINRA and SIPC, is an affiliate of Coldstream Capital Partners. All securities transactions are conducted through Coldstream Securities, Inc.