Advisory Boards and The Great Ownership Transition

By Sarah Morrison

Sarah Morrison is an entrepreneur, chemical engineer and former strategy executive with over 10 years experience in banking, insurance, management consulting, oil and gas, and capital intensive industries. She is an experienced leader known for building high-performing teams and driving growth and innovation.

Big changes are coming for small businesses. Over the next 5 to 10 years, a staggering number of small business owners, especially baby boomers, are expected to sell or close their businesses as they retire. This phenomenon, often called the "Great Ownership Transition" represents one of the largest transfers of wealth and business control in modern economic history.

The Scale of the Transition

Globally, small and medium-sized enterprises (SMEs) form the foundation of most developed economies. For example, in the United States alone, baby boomers own approximately 2.3 million businesses, employing over 25 million people and generating nearly $5 trillion in annual revenue. In Europe, SMEs make up 99% of all businesses, supporting over 100 million jobs and contributing nearly €4 trillion annually. Similarly, in Canada, SMEs account for 98% of businesses and employ 70% of the workforce.

Recent U.S. data reveals the scale and urgency of this anticipated transition:

• Aging Business Owners: According to the 2021 U.S. Census, nearly 52% of business owners are aged 55 and above, with 23% aged 65 or older.
• Rising Business Sales: A BizBuySell survey found that 37% of business owners plan to sell within the next two years, with retirement being the primary reason for 55% of them.
• Lack of Succession Planning: Despite the wave of expected transitions, nearly two-thirds of family businesses lack a formal, documented succession plan, according to PwC’s 2023 U.S. Family Business Survey.
• Economic Impact: The Minority Business Review estimates that 10 million small businesses—representing 65-75% of all small firms—will change hands in the next decade, with an estimated $14 trillion in business value set to transfer in just the next five years.
• Risk of Business Closures: Without proper succession planning, many of these businesses may not survive. Currently, only 30% of small businesses successfully sell, leaving 70% without a clear transition plan or buyer.

These statistics underscore the critical importance of proactive succession planning. Without proper succession strategies, millions of jobs, supply chains and local economies could face potential disruptions. 

The Strategic Role of Advisory Boards

Advisory boards have a pivotal role in guiding businesses through this transition. There are five key roles they can play:

1. Succession Planning: Advisory boards can help business owners prepare for leadership transitions by designing and implementing strategies to identify, develop, and onboard future leaders, ensuring continuity and preserving business value. This applies equally to succession from generation to generation as well as recruiting non-family successors. Advisory boards in particular can play a critical role helping the shareholders identify, interview, hire and onboard a new CEO and support them through their transition.
2. Supporting the Exit Strategy: When business owners are ready to exit, advisory boards provide critical expertise to craft the right exit strategy – external sale, IPO merger, operate as a going concern, or employee buyout. Their insights can ensure owners maximize value, minimize risks and ensure continuity. A key element of this process is board design—ensuring the advisory board itself has the right mix of expertise including experience in negotiations, valuations, structuring deals, and implementing exit strategies to maximize value while minimizing risk for the business owner.
3. Scaling Opportunities: Advisory boards can assist owners in implementing organic growth strategies, leveraging acquisition opportunities, providing guidance on suitable target companies, raising necessary capital, and planning seamless integrations to drive growth.
4. Transitioning to a Holding Company Model: For businesses managing multiple subsidiaries or aiming to optimize resources, advisory boards can help evaluate and implement a holding company structure or family office, creating flexibility for future growth. Experience on the advisory board can accelerate success and minimize risk.
5. Operational Excellence: As founders exit operations, advisory boards can guide businesses in streamlining operations, improving profitability, and positioning themselves as attractive opportunities for buyers or partners.

The Transition Has Already Begun

The transition of SME ownership is well underway, revealing distinct trends so far. Healthcare, technology, logistics, and financial services are experiencing the highest activity in ownership transitions, as these sectors attract significant interest due to their resilience and growth potential. Large corporations are increasingly acquiring SMEs to expand market share, diversify product offerings, and access new customer bases. With large corporations buying SME’s there are potential impacts to communities and the quality of products and services. 

Boards Have a Big Role to Play

The Great Transition is expected to represent a pivotal moment in economic history, offering both risk and reward that will affect many companies and communities. Boards need to be ready. By driving succession planning, identifying strategic acquisitions, and supporting SMEs, boards can turn challenges into opportunities. 

As millions of small businesses change hands, the boards that act decisively will not only safeguard their organizations but also contribute to stronger, more resilient economies and communities.

Now is the time for boards to act boldly, provide insightful leadership, and help businesses shape their futures.