The next owner of a small American business may first hear about it from an accountant, a supplier or a commercial banker. By the time the company appears on a broker’s website, other prospective buyers may have spent months studying its accounts and talking to lenders.
That matters because the United States is approaching an unusually large transfer of business ownership. The McKinsey Institute for Economic Mobility estimates that roughly six million businesses with fewer than 500 employees will reach an ownership exit by 2035. Just over one million of them may be suitable for a sale or an employee takeover. Together, McKinsey says, those transferable companies could be worth as much as $5 trillion.
The distinction between businesses reaching an exit and businesses finding a buyer is important. A shop can be profitable and still prove difficult to sell. Its owner may keep unreliable accounts, handle every important customer personally or have no manager able to run the operation after retirement. Children may not want to inherit it. Employees may want to buy it but lack the money. In many cases, closure will be simpler than succession.
For Black entrepreneurs, viable companies create an opening that starting from zero does not. They also expose an old constraint: people cannot buy businesses merely because those businesses have become available.
Buying What Already Works
The Census Bureau counted 4.4 million Black-owned businesses without paid employees in 2023. It recorded approximately 201,000 Black-owned employer firms, or 3.4 percent of all US businesses with employees. Those employer firms generated $249 billion in receipts, according to the Census Bureau.
The imbalance is not evidence of a shortage of Black entrepreneurship. Millions of people have created work for themselves. Far fewer own the kind of company that provides work for others, and the move from one category to the other is hard. A founder has to find customers, hire staff, develop supplier relationships and survive long enough for the operation to become dependable.
An acquisition begins further along. Customers, employees, equipment and trading history come with the company. So do its debts, neglected maintenance, weak contracts and habits that may never have been written down. The appeal is not that acquisition removes risk. It allows a buyer to examine a business that has already been tested, although the quality of that test varies widely.
McKinsey estimates that Black buyers would capture about $87 billion of the enterprise value changing hands if current ownership patterns hold. At a level proportionate to the Black share of the population, that amount would be approximately $369 billion. Neither figure predicts what buyers will actually acquire. The gap describes what existing disparities in ownership, household wealth and financing could carry into the next generation of American business.
The Sale Is Already a Competition
In September, Reuters reported that KKR had agreed to pay roughly $2 billion for A1 Garage Door Service. A1 started in Arizona in 2007 and now operates in about 20 states. KKR and Cortec Group, A1’s private-equity investor, declined to comment on the reported transaction.
Garage-door repair does not look like a glamorous route to a multibillion-dollar deal. That is part of the attraction. Doors need repairing in strong economies and weak ones. The work requires technicians near the customer, and thousands of small local operators leave room for a larger company to keep buying.
Four months before the reported A1 deal, Apollo Global Management invested about $2 billion in Apex Service Partners, Reuters reported. The investment valued Apex at roughly $10 billion including debt. Since 2019, the company has assembled heating, cooling, plumbing and electrical businesses and grown to more than 7,800 tradespeople.
These transactions sit far above most companies whose owners are nearing retirement. McKinsey expects nearly 80 percent of the relevant exits to involve businesses valued below $2 million, while institutional investors generally pursue deals between approximately $25 million and $1 billion.
Yet the markets are not entirely separate. A private-equity firm can buy a sizeable regional operator and use it as a platform for smaller acquisitions. A plumbing contractor or electrical business that is too small to interest a fund directly may suit one of the fund’s portfolio companies. The platform gains a new territory, customer base or group of technicians; the seller gets an exit without ever negotiating with the private-equity firm behind it.
Federal regulators have paid attention to the accumulation of these small deals. In 2024, the Federal Trade Commission and Justice Department requested information on serial acquisitions, noting that individual purchases may fall below federal reporting thresholds even when the series changes competition in a market. Lina Khan, then the FTC chair, said the strategy could be used to “roll up markets, consolidate power, and undermine fair competition.”
A retiring owner may prefer a platform buyer that can complete the purchase without asking the family to remain involved. What follows is harder to generalise. New software and investment may arrive with tighter targets, centralised decisions and debt. The same offer must be weighed against bids from competitors, relatives, employees, search funds and individual entrepreneurs, assuming those bids are ready when the owner wants to leave.
What the Purchase Price Leaves Out
The Small Business Administration’s 7(a) programme can finance full or partial changes in ownership, with loans of up to $5 million. The guarantee reduces some of the participating lender’s exposure; it does not turn the maximum loan amount into cash available to every applicant. The lender still examines the buyer, the company and the proposed terms.
A typical purchase may draw on the buyer’s equity, a 7(a) loan and financing from the seller. The company’s future earnings must cover the debt. Before that calculation can be trusted, accountants and lawyers have to test the earnings, contracts, leases, tax position and liabilities. Their fees are part of the cost. Working capital after the sale is another part.
Consider a company marketed with $300,000 in seller’s discretionary earnings. The calculation may add back the owner’s salary and personal or one-off expenses, suggesting that the buyer will inherit $300,000 of annual income. But suppose the departing owner also supervises staff, wins new customers and answers emergency calls. A replacement manager costing $120,000 changes what is available for loan payments before taxes, equipment purchases or an unexpected customer loss enter the picture.
The problem is not unusual, and no amount of diligence changes the price already agreed with the seller. Diligence tells the buyer what has been purchased and which assumptions are unlikely to survive. If nearly all available cash went into closing the deal, a broken vehicle or delayed customer payment can become a financing problem immediately.
This is one place where the racial wealth gap enters a transaction without appearing as a line on the purchase agreement. A prospective buyer needs money before the lender releases acquisition funds and after the seller has been paid. Someone with less personal wealth may depend on outside equity, a larger seller note or a lender willing to accept a more complicated structure. All three can take time to arrange.
The racial wealth gap enters a transaction without appearing as a line on the purchase agreement.
Sellers notice that uncertainty. They want an acceptable price, but they also want the transaction to close. A bidder who has already engaged an adviser and secured lender interest can appear safer than one still assembling the equity contribution, even when the second bidder knows the company or its industry better.
The Deals That Never Reach the Open Market
Business succession rarely begins with a public listing. Accountants hear that an owner is tired. Suppliers know when a founder’s children have chosen other careers. Bankers, lawyers and insurance advisers encounter plans that remain tentative for years.
Buyers connected to those networks receive time: time to learn why the owner wants to leave, look at the company’s records and decide whether financing is realistic. Black operators without those introductions may enter only after the sale becomes formal and the competition is visible.
The most obvious successor may already work inside the business. A manager who knows which customers pay late and which machines fail most often carries knowledge an outside buyer must purchase through diligence and experience. Knowledge alone does not provide an equity contribution. Management buyouts can require seller financing, outside investors or both. Employee ownership offers another route for suitable companies, with its own legal costs and demands on cash flow.
Much of a company’s saleability is decided before its owner meets a buyer. The lender needs accounts it can trust, while the person taking over needs to know how work gets done after the founder leaves. Where that knowledge has never moved beyond the owner’s head and there is no management layer underneath, even a business with loyal customers can disappear at retirement.
For an aspiring Black buyer, the decisive moment may come well before a listing appears: someone in that local circle has to know that the buyer is looking.
One owner will mention retirement to an accountant and eventually sell to a competitor. Another will spend a year helping a manager assemble the financing. A third will close the doors. Most of the six million exits will pass without national attention. For an aspiring Black buyer, the decisive moment may come well before a listing appears: someone in that local circle has to know that the buyer is looking.
Frequently Asked Questions
Are six million businesses going up for sale?
No. McKinsey estimates that about six million small and midsize businesses will reach an ownership exit by 2035. It considers slightly more than one million suitable for a sale or transfer to employees. Others may remain in the family, close with the founder or lack accounts, profits and systems that another owner can take over. The estimate of up to $5 trillion refers to the smaller, transferable group.
Why does private equity matter if most of the businesses are worth less than $2 million?
Large funds generally operate well above that price. Their portfolio companies can still buy smaller operators as additions to regional or national platforms. That makes private equity one category of competitor in selected industries, not the likely buyer of every retiring owner’s company.
Can an SBA loan pay for the acquisition?
The 7(a) programme permits financing for eligible ownership changes and has a $5 million lending limit. Approval depends on the lender’s assessment of the borrower, the business and its ability to service debt. Buyers may also need their own equity, professional fees and cash to operate the company after closing.
Which companies present the best opportunities for Black buyers?
No national dataset can identify a universally attractive sector or rank targets according to the buyer’s race. A useful company is one whose earnings remain credible after the founder leaves and whose risks the buyer understands. McKinsey identifies a broad space for individual acquisition entrepreneurs among businesses valued from roughly $500,000 to $25 million, with less buyer demand below $5 million. Industry experience, access to financing and early knowledge of a possible sale will narrow that field considerably.
