At Forward Inheritance, we serve families and help prepare everyone for the inevitable. Outside of the homes and financial accounts and life insurance policies, an often overlooked but critical component of The Great Wealth Transfer will be what to do with Mom and Dad’s business.
According to McKinsey, “as millions of baby boomers retire, the United States is on the brink of an unprecedented wave of small-business ownership transitions—posing challenges for communities but also opening the door to economic renewal.” They back this up with some interesting underlying realities (again, from the article):
- A once-in-a-generation wave of ownership transitions is imminent. By 2035, about six million small and medium-size businesses (SMBs) will face ownership transitions as baby boomers retire.
- SMBs are a cornerstone of the US economy. Ninety-nine percent of all companies in the United States are small businesses. They employ more than 60 million workers—nearly half of the US workforce—and generate 35 percent of business revenue.
- Ownership transition risk is distributed unevenly across geographies. Rural areas are particularly exposed.
- Participation gaps represent both a risk and a major wealth-building opportunity. Under current patterns, only 28 percent of transferring value would accrue to women and Black and Latino individuals combined.
- A better-functioning ownership transition market could preserve jobs and local prosperity at scale. Effective transitions could keep up to 12 million jobs in place and protect about $250 billion in annual local spending power.
Curious, though, which families are planning for this? Are you having Succession Planning conversations with Mom and Dad? Do you want to run their business? Could you run their business? According to the article, “Despite the economic value embedded in many small businesses, closure—not continuity—is the dominant exit path today. In 2022 alone, we estimate that 510,000 SMBs exited the market.”
Failing to plan is planning to fail, as the old quip goes. How can we help Mom and Dad protect their Legacy? How can we ensure we don’t let them trip on a final hurdle? How can we help the blood, sweat, and tears of their careers sustain well beyond their working years? How can we help our families move forward…