A $3 trillion opportunity for Black business owners is on the horizon
There is a $3 trillion opportunity for Black and other minority entrepreneurs to become business owners as part of the “Great Business Transfer.” According to a new report from McKinsey.
“This is the largest ownership transition in modern U.S. history,” said report co-author Shelley Stewart, senior partner and president of the McKinsey Institute for Economic Mobility. “This is a huge opportunity, but there is also a challenge; the problem is that many viable businesses may not be able to successfully transfer because the market to connect buyers, sellers and capital has not been built at scale.”
Researchers estimate that 6 million small and medium-sized businesses, or SMEs, could be acquired by 2035. If black, Latino and female entrepreneurs can increase ownership in these transitioning businesses, it has the potential to unlock $3 trillion in new household wealth, the report found.
The contrast between opportunity and risk is particularly pronounced for the black community, McKinsey said.
Only 3% of U.S. business owners are Black, compared to 13% of the population. If current trends continue, black entrepreneurs are expected to gain $87 billion in transferred enterprise value. However, if they increase their participation in the Great Business Transfer, this figure could rise to over $369 billion. On the contrary, without greater participation, wealth inequalities would only increase, according to the report.
Stewart added that the ripple effect of the transfer goes well beyond underrepresented communities.
“What will make this successful is having the broadest pool of entrepreneurs to buy these businesses, which means you have to be inclusive,” Stewart said. “This is in the interest of all Americans. This has impacts on employment, it has impacts on local economic spending, it has impacts on wealth creation.”
Financing and finding business
According to McKinsey, the biggest challenges for potential buyers in Black and other minority communities will be financing, accessing deal flow and managing the advisory process in an acquisition.
“We have more Black check writers at venture capital firms and buyout firms than ever before,” said Jacob Walthour of Blueprint Capital Advisors. “We also work inside other traditional financial institutions like banks, so the capital is there.”
But Walthour added that it is imperative for members of Black and minority communities to understand the dynamics of owning a business versus starting a new one.
“You can get people to put capital into a business that already exists, one of the hardest things to do is raise capital to start that business,” Walthour said. “The fundamental principles of capitalism should always be present, and that includes return on investment. That’s how professional investors think about capital allocation.”
John Hope Bryant, founder and CEO of Operation Hope, also emphasized that black entrepreneurs should look for opportunities in core industries rather than personal interests.
“You don’t have to fall in love with this job,” Bryant said. “Business is impersonal. When that change happens and you connect the hustle, the untapped ambition that we have… that’s how you become a millionaire. We’ve never tried that boring traditional approach.”
planning process
The McKinsey report highlights five stages of a successful ownership transition: aspiration and preparation, search and sourcing, deal structuring and financing, ownership and value creation, succession and exit.
Sheena Gray, CEO of the Association of African American Advisors, said this transfer highlights the need for Certified Financial Planners, as potential buyers will be entering unfamiliar financial territory in many cases.
“The right planning infrastructure can make sense for expanding minority business ownership,” Gray said. “Certified Financial Planners are better positioned to strategically structure tax strategies to assist someone looking to transition into ownership. This is an important component that most business owners don’t think about when talking about pursuing a new opportunity.”
Brandon Jones, founder of Gravy Wealth, works with the National Black MBA Association to help professionals become business owners; he calls this transition from “winner” to “owner.”
“It is now more urgent than ever to stay in control and capture the value you create,” Jones said. “The world is moving towards a place where workers, especially knowledge workers, are now optional.”
artificial intelligence impact
McKinsey’s Stewart said the potential for disruption from AI only amplifies the upside of business acquisition.
“What’s in those 6 million businesses? You’ve got retail, you’ve got restaurants, you’ve got construction, you’ve got healthcare. You’ve got small manufacturing. Those will certainly be impacted by AI, but those are labor-intensive businesses that will continue to need labor,” Stewart said. “AI will play a role in helping entrepreneurs get smart across different industries, it’s unlikely AI will eliminate the need for those businesses.”
“It’s going to be a matter of whether we can create the market mechanism that connects businesses with entrepreneurs and capital. If we can actually put together the infrastructure to prepare people to buy those businesses, I think we can see an acceleration in the next decade.”
Jones also said AI could also be an important tool for narrowing wealth and ownership gaps: “If someone is advanced in AI, not only can they potentially buy that business, but they can also run the AI playbook to drive much greater efficiency and value.”
