Small business retirement wave could unlock a major planning opportunity

A tidal wave of retiring business owners, stronger government-backed lending and growing interest from acquisition-minded entrepreneurs are setting the stage for one of the largest ownership transitions in US small business history, according to a new report.

Austin-based investment and advisory firm Contrarian Thinking’s State of Main Street 2026, its third annual benchmark study on small business ownership in America, combines proprietary survey data from the firm’s network of business buyers with public data from the US Small Business Administration, US Census Bureau and Google Trends to examine the forces reshaping the lower middle market.

The report estimates there are 36.2 million small businesses in the United States, representing 96% of all companies and accounting for a substantial share of private-sector employment. Nearly half are concentrated in five states: California, Texas, Florida, New York and Georgia.

For wealth managers and financial planners, the most consequential trend may be demographic.

Contrarian Thinking projects that by 2040, 78.3 million Americans will be at or above retirement age, equal to 22% of the population. The report also notes that 52% of small business owners are 45 or older, and 23% are over age 65.

That aging ownership base is expected to drive a surge in succession planning and sale activity. Citing survey data from Live Oak Bank, the report says 70% of small business owners lack a formal succession plan, while nearly one-third expect to transition ownership within five years.

Business optimism

A separate survey from Principal Asset Management suggests that many business owners are approaching this period of transition with a growing sense of caution.

In the firm’s latest Principal Financial Well-Being Index, small business optimism fell to 5.59 out of 10, down from 7.51 in 2024, as owners cited inflation, elevated interest rates, tariffs and supply-chain disruptions as major concerns. Just 17% of employers said they believe the US economy is growing, while recession worries have increased sharply.

Even so, Principal found that many small and midsize businesses remain financially resilient, with strong balance sheets, healthy cash flow and manageable debt levels helping to cushion against economic uncertainty.

For advisors, that combination of owner anxiety and operational stability may create an opening to engage clients on succession planning, liquidity needs and strategies to preserve business value ahead of a potential sale.

Financing conditions

Through May of fiscal 2025, the SBA approved 78,078 loans totaling $37.3 billion, an 11% increase from the same period a year earlier, according to the report. SBA 7(a) lending reached $18.7 billion across 69,089 approvals, while 504 loans totaled $6.7 billion through 5,093 approvals.

Contrarian Thinking said change-of-ownership loans are among the fastest-growing categories, a sign that more entrepreneurs are using SBA-backed financing to acquire established businesses rather than launch startups from scratch.

The report also examines shifting online search activity around terms such as “buy a business,” “business broker,” and “SBA 7(a) loan,” which the firm says signals growing interest in small business acquisitions.

AI impact

Artificial intelligence is another emerging factor, particularly in industries such as home services, logistics and local consumer businesses, where operators are beginning to automate back-office tasks and improve efficiency.

For buyers evaluating acquisition targets, that shift could have meaningful implications for valuation and post-deal planning. Businesses that adopt AI effectively may be able to boost profitability, reduce labor pressures and create more predictable cash flow, all of which can enhance enterprise value.

“This report examines those shifts from our unique vantage points not as observers, but as active participants,” Codie Sanchez, founder of Contrarian Thinking, wrote in the report. “Through Contrarian Thinking Capital, we invest in software and hardware serving Main Street businesses. Through our Contrarian Academy, we deliver advisory services to thousands of business buyers navigating the acquisition process.”