The ‘Silver Tsunami’ Is Reshaping Small Business: Why Exit Planning Can’t Wait

Key Summary

• A looming "Silver Tsunami" of retiring baby boomer business owners threatens to leave millions of U.S. small businesses without formal succession plans, jeopardizing their sale prospects and potentially leading to widespread closures that would impact jobs and local economies.
• The primary obstacles to successful business transitions include a lack of documented processes, owner dependency, complex family dynamics, insufficient buyer-readiness, and overlooked legal and financial complexities, all of which can transform a planned exit into a reactive crisis.
• While the impending wave of business sales creates a buyer's market with attractive opportunities for entrepreneurs, proactive exit planning, including objective valuation and operational streamlining, is vital for owners to maximize sale value and ensure their legacy, supported by but not solely reliant on fragmented government assistance.

As a new year begins, exit planning should be a priority for any small business owner approaching retirement. America’s small business landscape is on the brink of a demographic earthquake. In a phenomenon dubbed the ‘Silver Tsunami’, approximately 2.3 to 3 million baby boomer-owned SMBs in the U.S. are expected to transition ownership over the next decade due to retirements. A significant portion is expected to occur in the coming five years.

This cohort of SMB owners alone owns businesses that employ some 32 million people and generate nearly $6.5 trillion in annual revenue, making them a critical engine of local economies. But only half of retiring owners have formal succession plans in place, and that jeopardizes their prospects of a successful sale.

The impact of failing to find buyers will extend far beyond the owners’ retirement plans. Closures would mean job losses, weaker household incomes, and tighter local labor markets, while the disappearance of family-run shops and service providers would push spending toward national chains or online retailers, leaving many communities economically and culturally poorer.

Exit Planning: An Operational Project

By far the biggest barrier to a successful sale is planning, specifically, the absence of a formal succession strategy, as Carolyn Rodz, cofounder of Hello Alice, a tech platform and community for small businesses, explains. She says: “Most SMBs are deeply tied to their owner, and without documented processes or a clear transition plan, the business becomes harder to sell or hand down. In family-owned companies, that challenge is amplified by emotional dynamics, legacy pressure, internal conflict, or simply the next generation not wanting to take the reins.

“When you combine owner dependency with a lack of buyer-ready structure, you end up with stalled transitions or, in too many cases, the business closing when the owner exits. The companies that succeed are the ones that treat succession like an operational project, not a personal milestone.”

Being Prepared

With only around half of owners having a formal written succession plan in place, a significant majority rely on informal or verbal arrangements, have no plan at all, or remain uncertain about the process.

“Common gaps that contribute to this low level of preparedness include a lack of professional business valuation, leading to unrealistic price expectations that can deter buyers, difficulty identifying capable successors, preserving company culture, and ensuring effective knowledge transfer,” says Rodz.

Many owners also overlook critical legal and financial elements such as estate taxes, buy-sell agreements, funding mechanisms such as life insurance, or structured transfer options, which can trigger higher costs, family disputes, or even forced liquidation.

Next Generation Leaders

For family businesses, handing over to second-generation leaders might seem the obvious solution, but they inherit not just a business, but its history, relationships, and expectations. “Unlike founders, they must balance respect for an established vision and culture with the need to modernize, introduce new strategies and adopt technology, often facing resistance from family members or long-serving employees,” says Rodz.

Family dynamics can further complicate decision-making, from sibling rivalries to generational tensions, while successors work to establish credibility in the founder’s shadow and professionalize informal ways of working. Clear communication, external advice, and structured succession planning can help navigate these challenges and secure long-term continuity.

Avoiding a Reactive Exit

Research from the Exit Planning Institute has identified that nearly 50% of business owners exit involuntarily, not by choice, but due to the five D’s: divorce, disability, disagreement with a partner, economic duress and death. These events rarely lead to optimal outcomes because the exit is reactive, rather than planned.

Linda Jensen, founder and CEO of Heart Financial Group, says: “I’ve experienced the consequences of an involuntary exit personally. My father owned a jewelry store and died in a tragic drowning accident, falling squarely into the ‘death’ category of the five D’s. He had no exit plan, no valuation framework, and no succession strategy. Our family was forced to sell his inventory for pennies on the dollar, not because the business lacked value, but because there was no preparation, and that experience profoundly shaped my belief that exit planning is not optional, it’s a responsibility.”

A Buyer’s Market

The flood of supply that outnumbers buyer demand, triggered by the Silver Tsunami, presents many opportunities for entrepreneurs, creating a true buyer's market with attractive valuations, easier financing, and greater negotiating leverage.

Boomer sellers often prioritize legacy preservation over maximizing cash upfront; after all, these businesses are their life's work. This opens the door for creative deal structures like seller financing, take-back loans, earnouts, and equity rollovers, which significantly reduce the buyer's initial capital requirements.

At the same time, younger entrepreneurs can bring fresh advantages: injecting modern technology, AI, digital marketing, and operational efficiencies to unlock growth in these often traditional, cash-flow-positive businesses. This generational shift represents one of the largest transfers of business ownership in history, providing ambitious buyers with a rare opportunity to acquire proven companies at favorable terms and scale them significantly.

Government Support for Exit Planning

There is government support available for those looking to sell their business, with effective elements including SBA loan flexibility for successions and ESOP tax benefits, alongside rising investor interest in SMB opportunities. However, shortfalls remain, as Cameron Kolb, founder of ExitPros, explains. “Banks often favor larger deals, limiting support for smaller firms; ESOPs are costly and complex; and the government prioritizes startups over succession-specific incentives, with little regulatory streamlining or tax relief,” he says. “Greater education, accessible advising, and targeted policies are needed to prevent widespread closures and job losses.”

He adds that available support is also fragmented. For example, at the federal level, organizations such as SBA offer education, individual counseling, and transitioning assistance via a series of Small Business Development Centers (SBDCs) and SCORE, but most of this help is focused on launching or sustaining a business, not preparing for an exit.

At the state level, it varies widely. Some states have tax incentives for succession planning, employee ownership programs or technical assistance grants; others have next to none. He says: “There could be more uniform national policies around succession planning education, tax incentives for early exit preparation, and support for ownership transitions, including ESOPs, that make a difference.”

Exit Planning is Vital

Kolb advice to small business owners nearing retirement is to start with an objective valuation to identify value-suppressing factors. He emphasizes reducing owner dependence, strengthening leadership, streamlining financials and operations, standardizing costs, and mitigating operational risks. Preparing well in advance, often two years before exit, helps maximize sale value, as waiting until retirement can force owners to sell at a discount or risk closure.

According to Linda Jensen, the fundamental exit planning questions SMB owners need to ask include ‘What am I retiring to? And how will I stay engaged, challenged, and fulfilled?’ “The most important question I ask every owner is this: if you couldn’t work in your business tomorrow, would it still take care of you, and everyone who depends on it?” she says. “And if you sold it, would your life still feel meaningful? If either answer isn’t a confident yes, the work needs to begin now.”

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This article was written by Alison Coleman from Forbes and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.