Succession planning statistics in 2024: preserving a legacy

Small businesses are a vital part of domestic and global economies. However, succession planning statistics show that the vast majority of U.S. small businesses, even long-standing, successful ones, are facing a critical juncture. Over two-thirds of small business owners plan to retire in the next two years. Without a solid succession plan in place, many of these small businesses, which have been integral to their communities for decades, will vanish.
Panel of Teamshares leadership discussion succession planning statistics

Key Takeaways:

  • Nearly two-thirds of family businesses don’t have a documented and communicated succession plan.
  • 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.
  • The median close rate was 6.46% for businesses listed on the largest business-for-sale marketplace, BizBuySell between 2018 and 2022.
  • Teamshares has a 90% close rate on signed LOIs.
  • The median purchase price of businesses listed on BizBuySell in 2022 was $315,000.
  • Teamshares has acquired over 82 small businesses across 29 states and 40 industries for a median purchase price of $2,000,000.

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.

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.

Small business succession planning trends

Succession planning statistics reveal that many small business owners are reaching retirement age and planning to sell. However, selling a small business is far from simple and, even with a succession plan in place, many small business owners face an uphill battle to sell their business.

  • More than a third (37%) of business owners say they plan to sell within two years (BizBuySell).
  • Over half (55%) of small business owners recently surveyed cite retirement as their motivation for selling (BizBuySell).

With the close rate on sales incredibly low, many small businesses are in a dire situation when the owner decides to retire.

We analyzed Q1 through Q4 active and closed business listings from BizBuySell’s Insight Report to calculate the median and average close rates for small businesses from the years 2018 to 2022. The data revealed the following succession planning statistics: 

  • From 2018-2022, small businesses saw a median close rate of 6.46% and an average close rate of 6.3% (BizBuySell).
  • The highest small business close rate in the past 4 years was 7.06% in 2021 (BizBuySell).
  • 2020 had the lowest close rate in the past 4 years at 5.56% (BizBuySell).
  • The median sale price of closed businesses in 2022 was $315,000 (BizBuySell).

Succession planning statistics show that small businesses, while a vital part of U.S. and global economies, are facing a critical situation. By transitioning to a model like employee ownership through Teamshares, these businesses can ensure that they survive the next generation and never have to be sold again.

Are you a broker or business owner that needs an exit plan to keep your company and employees in place?

How Teamshares is changing succession statistics

Small business succession planning is more than just selling your business when you retire. It’s about creating an exit strategy that takes into account your community, your employees, and the emotional transition of selling a business you’ve worked so hard to create.

It’s about establishing a legacy. 

As one of the largest buyers of small businesses in America, Teamshares is the buyer of choice for retiring owners who want to leave a legacy and ensure the financial future of their employees. 

Since we were established in 2019, our skilled team has purchased more than 82 small businesses across 29 states and in over 40 industries. Our succession planning statistics speak for themselves.  

  • Teamshares has a 90% close rate on signed LOIs.
  • The average company revenue at close equals $5.25 million.
  • The average company EBITDA at close equals $496,800.
  • The median purchase price is $2.0 million.
  • The average number of employee-owners per company is 32.

Small businesses are indeed the backbone of American communities. At Teamshares, it’s our goal to keep them as fixtures in their local communities and ensure they never have to be sold again. If you’re a broker or a selling owner, find out if Teamshares is the right buyer for your small business.

Teamshares writers follow strict principles for sourcing credible information within articles. Any outside information including direct quotes, paraphrased information, and concepts that are derived from external sources adhere to our standards for accuracy and transparency.

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