I’ve previously written about how macroeconomic trends affect valuations, but one trend will have the greatest impact: baby boomers own roughly 51% of privately held U.S. firms, representing a colossal $10 trillion asset pool poised to transition.
The good news for IT firms, especially those that have developed strong recurring revenue models: best-in-class companies will still command best-in-class valuations, as investor appetite for secure revenue streams is unlikely to diminish. I suggest this applies to the top 20-25% of companies, with profit levels above 20%, recurring revenue greater than 50%, revenues above $5m at a minimum, and strong client diversity. Company owners should consider these thresholds when identifying the optimal time to sell, as multiples will decline over time as supply increases. For a more nuanced analysis, keep reading and check out my bibliography below.
How Big is the Wave?
A February 2026 study by the McKinsey Institute for Economic Mobility reveals that 6 million small and medium-sized businesses will face ownership transitions by 2035. This wave involves roughly $5 trillion in enterprise value for viable sales candidates. Broader industry estimates that bundle non-employer sole proprietorships push that number as high as 10 to 12 million businesses.
Historically, the structural bottleneck is severe: an alarming 92% of small-business exits occur through liquidation or closure, while only 5% successfully close as a third-party sale. Because Exit Planning Institute data shows that 70% of companies put on the market fail to find a buyer, an unmitigated surge in supply will create a heavy buyer's market. This will deflate standard valuation multiples for commoditized, owner-dependent companies.
We are clearly entering a decade‑plus period in which boomer succession—not just organic exits—becomes the dominant driver of small business supply. For owners, that means their personal retirement timeline is now tied to a macro demographic wave that they do not control but must strategically anticipate. Let’s look at some of the factors that affect this wave.
Valuation Multiples & Market Oversupply
Why it matters: Standard valuation multiples (like EBITDA or SDE) depend heavily on supply and demand dynamics. When a flood of similar service firms hits the market simultaneously, buyers gain extreme leverage. Industry and media analyses note that boomers own about half of privately held businesses and are beginning to “offload” them at an accelerated rate, with some marketplaces already reporting post‑pandemic transaction volumes back to or above pre‑2020 levels.
Evidence: Empirical analysis by Valutico underscores that micro-to-mid-market companies face a stark valuation divide. While prepared businesses capture premium multiples, unorganized firms see steep discounts. Furthermore, historical transactional data shows that only 20% of standard listed businesses actually close a sale, leaving a massive backlog of supply.
Implication: Buyers will become increasingly selective. Over time the consistent addition of new sellers tends to normalize and then pressure multiples, especially in crowded, lower‑growth segments. Owners who wait until “everyone else” in their cohort is ready to exit may discover that the market has quietly shifted from a seller’s market to a buyer’s market. Standard companies operating with baseline margins will see compressed multiples (dropping from historical averages of 4x–5x down to 3x or lower) as buyers cherry-pick only top-tier firms.
The Structural "Valuation Killer"
Why it matters: The single greatest structural "valuation killer" during a high-supply market is key-man risk. If an MSP's or IT firm’s revenue is tied directly to the founder's personal relationships, the asset is much more difficult to sell.
Evidence: Professional advisory data analyzed by Wholesale Investor establishes that high owner-dependency triggers an immediate 30% to 40% valuation discount during due diligence. Additionally, independent market studies emphasize that buyers pay for transferable cash flow and decentralized infrastructure, not historical founder-driven revenue.
Implication: To protect or maximize an exit multiple against the incoming supply wave, owners must build institutional infrastructure. Relinquishing daily operations and moving to a management-led structure 24–36 months before an exit is no longer optional—it is a baseline requirement to secure a premium valuation.
Valuation Pressure & “No‑Buyer” Risk
Why it matters: The biggest valuation risk in a Silver Tsunami environment isn't a small discount to an ideal multiple—it is failing to find a buyer at all and being forced into a distressed liquidation. As more boomer owners hit retirement age without a plan, this risk grows. However, this risk is much lower among tech startups and MSPs. The IT sector, specifically MSP and SaaS companies, experiences a vastly higher successful third-party closing rate of about 68%, according to a Yury Zabella report.
Evidence: Project Equity reports that fewer than 15% of small businesses are passed on to family, and roughly one-third of business owners over fifty struggle to find a buyer—many ultimately "quietly close down" rather than sell. This is compounded by a lack of planning; a 2026 analysis emphasizes that fewer than one in four owners have a formal succession plan, meaning a large pool of under-prepared sellers are likely to accept weaker terms or face closure.
· Implication: In valuation terms, markets discount uncertainty. The combination of owner age, lack of planning, and buyer scarcity acts like a slow leak in pricing power. Owners who "wait for top dollar" without improving transferability will likely face a smaller buyer pool, longer time on market, and ultimately lower multiples than were available a few years earlier.
Industry Mix: IT, MSPs, and Other “Boomer‑Heavy” Sectors
Why it matters: Some industries—IT services, MSPs, professional services, manufacturing, construction, and local services—are disproportionately owned by aging boomers. For sectors like MSPs, where many founders started in the 1990s and early 2000s, the age curve is especially steep.
Evidence: Demographic breakdowns show that more than half of U.S. small-business owners are age fifty or older, with baby boomers owning a large share of professional and technical service firms. Research on the "Baby Boomer Effect" notes that older owners are over-represented in sectors with long customer relationships and technical expertise but are often under-prepared for formal succession planning.
Implication: For IT and MSP owners, this suggests two parallel forces: a growing pool of similar businesses coming to market, and a sharper premium placed on those that have already professionalized operations and reduced owner dependence. In practice, "good enough" businesses are likely to see flat or softening multiples over time, while truly transferable MSPs can still command strong valuations even in a crowded market.
Timing, Positioning, and Valuation Strategy
Why it matters: In a market shaped by demographic supply rather than just cyclical demand, valuation becomes less about where the economy is this quarter and more about when an owner exits relative to the broader cohort. Owners who treat succession as a multi‑year project rather than a last‑minute event are far better positioned to defend their multiples.
Timing matters! Research summarized in mid‑2026 suggests that 2.3–3 million boomer‑owned small and medium businesses will need new owners in this decade, implying that a significant portion of the broader 6‑million‑by‑2035 transition is front‑loaded into the 2026–2035 period.Evidence:
Analysts projecting six million ownership transitions by 2035 emphasize that only about one million of those firms are “high‑potential” sale candidates as‑is; the rest may require restructuring, employee ownership models, or may face closure—an implicit signal that the market will be discerning and reward only the most prepared sellers.
Studies of boomer‑owned businesses show that lack of planning correlates with lower sale prices and a higher incidence of closures, while firms that invest in clean financials, documented processes, and diversified customer bases are far more likely to sell at healthy multiples.
The rapid growth of worker‑ownership and succession funds—investment in such funds grew roughly 73% in 2025 to about 865 million dollars—signals that capital is flowing to structured, scalable transition models, rather than ad‑hoc last‑minute exits.
Implication: Time and preparation are now part of the multiple. Selling into the early or middle phase of the Silver Tsunami, with a de-risked, transferable business, is likely to yield stronger outcomes than waiting to exit alongside a crowded wave of under-prepared peers.
Bottom Line for Owners
The Baby Boomer retirement wave is not simply a retirement story—it's a market dynamic. As more businesses compete for a finite pool of buyers, timing and preparation may become increasingly important factors in maximizing business value. Owners who wait until retirement is imminent could find themselves entering a much more competitive market than those who begin planning several years in advance.
Macroeconomic conditions do influence valuations, but your business fundamentals remain the biggest driver of value: recurring revenue, customer stickiness, operating efficiency, and strategic positioning.
If you’re weighing retirement or exit timing, consider:
Selling during a low-rate, high-liquidity environment often yields stronger valuations.
Waiting too long in hopes of a “perfect” market can backfire if broader conditions tighten or if more sellers flood the market.
For many owners, the most profitable course of action comes from preparing the business for sale well before you actually plan to exit—so you’re ready to move when market conditions align.
What You Can Do Now to Be Ready
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Warm regards,
Jeff.Greenspan@FinancialModelingService.com
Bibliography (APA 7th Edition)
American Impact & Old National Bank. (2026, June 19). Why millions of boomer retirements leave small businesses stranded without buyers.
Cleanfax Staff. (2026, March 18). 6M small business owners to reach retirement by 2035. Cleanfax. https://cleanfax.com/6m-small-business-owners-to-reach-retirement-by-2035/.
Exit Planning Institute. (2025). The state of owner readiness report. Corporate Transitions Acquisitions. https://ctacquisitions.com/guides/boomer-business-succession-wave-report-2024-2030/.
Falcon Capital Partners. (2025, October 6). The MSP exit playbook: 2026 merger & acquisition value. Falcon Capital Partners Insights. https://www.falconllc.com/insights/msp-exit-playbook-2026-merger-acquisition-value/.
Horizon Business Advisors. (2026). Baby boomer exit strategy 2026: Sell your business for maximum value. https://horizonmaa.com/the-silver-tsunami-is-here-why-2026-is-the-year-every-baby-boomer-business-owner-must-start-their-exit-strategy/.
InCorp Services. (2026, January 28). What happens when boomer business owners sell. https://www.incorp.com/resources/knowledge-base/boomer-business-owners-selling.
Lichtenberg, N. (2026, February 26). The great (small business) wealth transfer: McKinsey sees $5 trillion of baby boomer companies coming up for sale over the next decade. Fortune. https://fortune.com/2026/02/26/great-small-business-wealth-transfer-mckinsey-5-trillion-baby-boomer-businesses-sale/.
McKinsey Institute for Economic Mobility. (2026, February 26). Navigating the great small business ownership transition. McKinsey & Company. https://www.mckinsey.com/institute-for-economic-mobility/our-insights/the-great-ownership-transfer-a-new-era-of-business-stewardship.
Mergers and Acquisitions Network. (2025, August 27). IT service, MSP & IT consulting M&A trends & analysis report. Mergers and Acquisitions Insights. https://mergersandacquisitions.net/insights/it-services-msp-ma-trends-analysis-report.
TechMarketView. (2026, January 27). Tech integration chaos and legacy systems drag down MSP M&A performance. IT Europa. https://iteuropa.com/news/tech-integration-chaos-and-legacy-systems-drag-down-msp-ma-performance
Valutico. (2026, April 13). Business exit valuation: Methods, multiples & how to maximize. https://valutico.com/business-exit-valuation/.
Wholesale Investor. (2026, January 27). Business succession planning: The $3.5 trillion crisis. https://www.wholesaleinvestor.com/the-3-5-trillion-succession-wave-why-48-of-australian-business-owners-are-about-to-destroy-value/.
WifiTalents. (2026, February 12). Startup exit statistics | 2026 market report. WifiTalents. https://wifitalents.com/startup-exit-statistics/.
Zabella, Y. (2026, May 8). Startup exit statistics: 2026 report. Yury Zabella Blog. https://www.zabella.net/blog/startup-exit-statistics.