McKinsey's Institute for Economic Mobility just published "The Great Ownership Transfer: A New Era of Business Stewardship." It's 36 pages of rigorous research on what's reshaping small business in America. For us, it also reads a bit like a blueprint for why Fireroad exists.
We invest in founders with domain expertise who are building technology for small businesses in industries that require human skill and local presence. Construction, hospitality, home services, manufacturing, the trades, professional services, etc. Exactly the kinds of businesses at the center of what McKinsey calls the Great Ownership Transfer. Here's what the data says, and why we think the window for building into this moment has never been more open.
The Scale of What's Coming
Baby boomers own an enormous share of American small business. More than half of all small-business owners in the United States are over the age of 55, up from roughly 30 percent in 2002. One in four is 65 or older. And they are retiring.
McKinsey estimates that by 2035, approximately six million SMBs will face ownership transitions. More than one million of those firms are viable candidates for sale, representing up to $5 trillion in enterprise value. Annual business exits could rise 42 percent above 2011 levels, reaching as many as 665,000 per year by the mid-2030s.
These aren't failing businesses. Many are profitable, cash-flowing, community-anchored firms whose owners simply haven't figured out what comes next. The crisis isn't in the businesses themselves. It's in the system that's supposed to help transfer them.
92 percent of SMB exits in 2022 ended in closure, not transfer.
— McKinsey Institute for Economic Mobility, "The Great Ownership Transfer," February 2026
Not because the businesses weren't worth buying. Because the infrastructure to connect buyers, sellers, and capital simply doesn't exist at scale. McKinsey found that 6 to 13 percent of all business closures during this period could have been avoided, stemming from predictable life events like retirement combined with a lack of succession planning.
One of our portfolio companies is directly attacking that gap. SMB.co, backed by Fireroad in 2024, is building the modern marketplace for small business ownership transitions. Think Zillow, reimagined for buying, selling, and growing small businesses. SMB.co gives owners data-driven valuations and growth tools before they're ready to sell, connects them with vetted buyers, and makes the entire process transparent for everyone involved.
The "Missing Middle" and Why PE Isn't the Answer
One of the most important concepts in this report is what McKinsey calls the "missing middle": businesses valued between $500,000 and $2 million. HVAC companies. Construction trades. Small medical and dental practices. Neighborhood service businesses. They're too large for informal family handshakes, but too small to attract institutional capital.
Private equity operates at a different altitude. McKinsey is direct: institutional buyers "typically target firms with enterprise values between roughly $25 million and $1 billion," and the vast majority of firms coming to market fall well below that threshold.
"Emerging middle-market firms sit in the 'missing middle' of the acquisition market — too large to be informal, yet too small to attract private equity or corporate buyers. As a result, many viable companies remain invisible to the market and are more likely to close than transfer."
— McKinsey Institute for Economic Mobility, "The Great Ownership Transfer," February 2026
This is exactly why we've built Fireroad around the independent ownership thesis. PE roll-ups are real. 85 percent of PE investments target small business, and PE's share of corporate equity has grown from 4 percent to 20 percent since 2000. Main Street is being consolidated in plain sight. But the businesses that employ most of America's small-business workforce sit well below the PE waterline. They need something different: purpose-built software that makes them more operationally legible, more transferable, and ultimately more valuable on their own terms.
Good Software Makes a Business Worth Buying
Here's something we think about a lot at Fireroad. A business with clean systems, documented processes, and clear financials is a business someone can actually buy. A business that runs entirely in the owner's head is not.
Most small businesses in the sectors McKinsey identifies are closer to the second description. Owners don't know what their business is worth. Buyers can't figure out what they're actually acquiring. Lenders won't touch what they can't underwrite. The business might be genuinely valuable — profitable, loyal customers, good reputation — and still die when the owner retires because nobody can see it clearly enough to buy it.
The right software changes that. When a platform built for independent restoration contractors automates insurance claim negotiations, creates clean revenue reporting, and standardizes how jobs get documented, as our portfolio company Longview Restoration does, it's doing two things at once. It's making the owner's daily operation easier. And it's building the kind of record that makes the business sellable.
The same idea runs across the portfolio. Fenceline turns the tribal knowledge of an experienced fencing contractor into instant, professional project proposals. Ando gives hospitality operators real-time visibility into their labor costs versus actual demand. Murray Mentor captures the hard-won expertise of experienced workers before they walk out the door for good. In each case, the software isn't just making the business run better today. It's making it something a next-generation owner could actually step into.
Local Ownership Is the Point
McKinsey is clear on something that often gets lost in the transaction-focused framing of this conversation: local ownership isn't just about preserving jobs. It's about preserving wealth, economic mobility, and community stability in ways that absentee ownership simply cannot replicate.
The report documents the impact directly. Effective ownership transitions could keep up to 12 million jobs in place and protect roughly $250 billion in annual local spending power. And under current participation patterns, only about 28 percent of the $5 trillion in transferring enterprise value would accrue to women and Black and Latino individuals combined. McKinsey estimates that closing those participation gaps could unlock up to $3 trillion in new household wealth, making ownership transfer one of the most powerful near-term levers for expanding prosperity at the community level.
"Failed ownership transitions don't simply result in closures; they erode jobs, dismantle wage ladders for frontline and skilled workers, and eliminate locally rooted wealth-building opportunities."
— McKinsey Institute for Economic Mobility, "The Great Ownership Transfer," February 2026
The geographic dimension makes this even more urgent. In rural states, small businesses account for more than half of total employment. There is no Fortune 500 headquarters absorbing the shock when a business closes. There's no diversified economy to catch people. The HVAC company, the construction firm, the family restaurant — these aren't just employers. They are the economy.
When those businesses close instead of transfer, the damage goes well beyond a single owner's retirement account. Jobs disappear. Supply chains break. Tax bases shrink. And the kind of community fabric that took decades to build can come apart in a single generation.
That's not hyperbole. McKinsey calls it a "mobility trap," particularly where alternative employment is scarce. Fireroad was built on the belief that local ownership, sustained and strengthened by the right technology, is one of the most powerful forces for long-term community health in America.
We Built the System for Starting. We Never Built One for Transferring.
Here's something McKinsey points out that should stop every entrepreneur and policymaker in their tracks: in America today, buying a business is harder than starting one. Not because buying is inherently more complex, but because we've built almost no infrastructure to support it.
We have incubators, accelerators, pitch competitions, SBDC resources, and angel networks, all optimized for net-new creation. There is no equivalent ecosystem for helping someone find, evaluate, finance, and close on an existing business. Buyers can't easily source deals. Sellers don't know how to prepare. Intermediary quality varies wildly. Financing is slow, bespoke, and often inaccessible to anyone without significant personal wealth or an elite network.
This is a solvable problem. And there are real advantages to buying a great business versus starting from scratch, especially in the industries Fireroad focuses on. You get an established customer base, proven workflows, a trained team, and real cash flow from day one. The challenge has been finding and accessing those businesses, not the businesses themselves. McKinsey puts it plainly: the market for ownership transfer is "opaque, costly, and underdeveloped," and most of the infrastructure that exists serves only the upper end of the deal-size range.
That's the market we're building into. SMBs already account for $1 trillion in annual IT and software spend in the U.S., and only 3 percent of venture capital flows to SMB-focused startups. The gap between what these businesses need and what gets built for them is the opportunity.
Our Fund II thesis formalizes this with what we call Building for Legacy: investing in solutions that help owners finance growth, plan and execute business succession, and preserve the value they've built. SMB.co is the most direct expression of that in our current portfolio. But it threads through the whole fund. When GlassHouse helps a home service contractor build a systematic, neighborhood-level sales engine, they're building a customer base that any successor can inherit and scale. When DifferentKind gives dental practices evidence-based patient experience data, they're creating the kind of clean performance record that makes a practice sellable instead of just closeable.
Our Read on All of This
The Great Ownership Transfer is not a future event. It's happening right now. And the pace of it will only accelerate.
The businesses at the center of this transition aren't abstract market statistics. They're the roofing company that's been in a family for thirty years. The dental practice that serves a rural county with no other options nearby. The HVAC contractor whose entire company lives in the owner's head. The restaurant that's been the town gathering place for two generations. These businesses represent real wealth, real jobs, and real community fabric. The system that should help them transfer is not built for them.
At Fireroad, we're backing founders who already lived inside these industries before they decided to build for them. They understand the customer, the workflow, the economics, and the exit dynamics in ways that no outside observer can replicate. That's not just a good founder filter. It's a structural advantage in a market where most of the capital chases the same handful of sectors and ignores the businesses that make American communities actually work.
The software to make the Great Ownership Transfer a story of renewal rather than loss needs to be built by people who understand what's at stake. We're proud to be backing them.
Source: McKinsey Institute for Economic Mobility, "The Great Ownership Transfer: A New Era of Business Stewardship," February 26, 2026. Authors: Ken Yearwood, Shelley Stewart III, Nathan Marks, Nick Noel. Read the full report →