Succession planning statistics in 2024: preserving a legacy

With nearly 50% of America’s workforce employed by small businesses, the success of these long-standing fixtures is paramount to local and national economies. Unfortunately, today’s small businesses face a succession problem that threatens their future in their respective communities.

Finding a successor when an owner retires is vital to the future of any small business. Yet nearly two-thirds of family-owned businesses don’t have a documented or communicated succession plan in place. Moreover, of the over 200,000 small businesses that are listed for sale each year, only 30% ever find a buyer.

If a small business doesn’t find a buyer, they are often forced to close their doors, leaving a hole in the local economy and community. At Teamshares, we’re helping change that.

Our vision is to help a network of 10,000 small businesses become employee-owned and create $10 billion of stock wealth for hard-working Americans while supporting a generation of business owners through confident retirement. Learn more about small business succession planning statistics and the importance of having a succession plan.

Importance of succession planning

With over 33 million small businesses in the United States, they are the backbone of the U.S. economy.

But what happens to these small businesses when an owner retires? What happens if someone in the owner’s family doesn’t want to take over? What happens if a small business can’t find a buyer? Or what happens when a successor isn’t capable of leading the business? In these cases, small businesses—even long-standing, successful ones—are often forced to shut their doors.

To better understand the impact small businesses have on the economy—and the greater impact of those businesses failing—it’s important to look at succession planning statistics through the lens of how many people small businesses employ.

• According to the Small Business Administration, there are 33.2 million small businesses in the U.S. (SBA, 2022).
• The Small Business Administration also estimates that there are 61.7 million small business employees in the U.S. (SBA, 2022).
• Small businesses employ roughly 46% of the U.S. population and represent 43% of gross domestic product (SBA, 2022).
• U.S. small businesses represent 97% of all exporters and 33% of known export value, which is estimated to be $413.3 billion (SBA, 2022).
• Small businesses account for 70% of global employment (SBA, 2022).
• Nearly two-thirds of family businesses don’t have a documented and communicated succession plan (PwC’s US Family Business Survey, 2023).

In addition to not having a clear plan for what happens next, small businesses that haven’t begun planning for succession are at risk for devastating losses in unexpected circumstances like the sudden death of an owner or a fractured family relationship.

• Over 90% of U.S. small businesses are either family-owned or have the chance of becoming a family business over time (Sage Journals).
• According to the SBA, only 30% of family-owned businesses in the U.S. survive into the second generation, 12% into the third, and 3% into the fourth and beyond (SBA).
• It’s estimated that only 30% of small businesses successfully sell, leaving 70% of small businesses without a buyer or successful plan for what happens next (Exit Planning Institute).

Small businesses looking to sell face a sizable hurdle, as high acquisition costs are a major barrier to entry for most buyers.

• 42% of buyers say the high cost of capital has delayed their purchase timeline (BizBuySell Insight Report).

Acquisition costs are just one of the many hurdles small businesses face when looking for a buyer. Teamshares has committed capital in place and doesn’t use outside investors to fund individual purchases. We have no financing contingencies and can move independently, quickly, and efficiently.