WASHINGTON, D.C. — Data from the U.S. Census Bureau show that just over half (52.3%) of U.S. employer-businesses are owned by people who are at or near retirement age, those 55 and older. These firms represent 3 million of the nearly 6 million private-sector employer firms operating in the United States, and the owners have higher levels of income, wealth and wellbeing than other adults, according to previous Gallup research, which compared employers to owners who do not have employees and individuals who are not business owners.
New Gallup research shows that as employer-business owners think about retirement, most, 74%, have plans to sell or transfer the ownership of their business. These transactions have the potential to enhance their wealth or the wealth of family members. This contrasts sharply with business owners who have no employees, yet account for approximately 30 million businesses. Only 35% of these owners plan to transfer ownership through a sale or gift. Approximately 27% plan to close the business, and 40% say they are uncertain of their plans.
These results are based on Year 2 of the Gallup Pathways to Wealth Survey, which was conducted with support from JPMorganChase and the Ewing Marion Kauffman Foundation. The study was designed to foster a better understanding of how entrepreneurship can lead to wealth generation. The new findings feature data from 1,264 U.S. adults who spend most of their work hours on a business they own and were asked about short- and long-term plans for their business (results that include part-time owners are provided in the supplemental information at the end of the story).
Even among people who are focused on their own business, the results confirm that there are often important differences between business owners who do versus those who don’t employ workers. Creating personal and intergenerational wealth generation are each far more likely to occur when owners reach the scale of hiring workers and sustaining employment.
The Next Five Years
The Gallup survey, conducted in the fall of 2024, asked anyone who owned a business what they have planned for it in the next five years. Among all owners who primarily work for their business, 44% say they would try to grow or expand their business. Another 30% say they would try to maintain its current size and scale; whereas 14% say they would sell, go public, or transfer ownership; 8% say they would close it; and 12% do not have a plan.
Owners at or approaching typical retirement age (defined here as 55 or older) were more likely than younger owners, 17% vs. 10%, to report having plans for selling the business or otherwise transferring ownership through a gift or, in rare cases, a public offering of stock (because owners could select more than one option, the numbers in the graph should not be added together). Older owners were also more likely to report plans for closing the business (13% vs. 4%) and much less likely to plan expansion (24% vs. 57%).
Yet across ownership age groups, there were large differences in the five-year outlook for their ownership plans, according to whether the business has employees. Among all employer-business owners, 22% reported they plan to sell or transfer ownership, compared with just 9% of nonemployers. Employers were also less likely to say they plan to close the business (5% vs. 9%) or that they don’t have a plan (5% vs. 15%).
Long-Term Plans
When asked about long-term plans for their business after they step away, a third of all business owners say they have no plan or are unsure about their future. Another large group (22%) say they plan on closing the business. Thus, the owners of roughly half of U.S. businesses surveyed either plan on closing their business or do not have a plan. Only 26% plan to give it away to a family member or someone else, and 23% plan to sell, with an additional 2% hoping to take the business public. The age of owners bears little relation to owners’ plans for handling their business in the future, except that uncertainty is higher among younger owners.
Yet, as with more immediate plans, these long-terms plans show a distinct pattern between employer and nonemployer owners. Among employers, 74% plan to either sell/take public or give away their business, with some reporting both plans. For nonemployer-businesses, just 35% foresee taking one of these actions. Only 15% indicate plans to sell, 2% to take public and only 21% plan to give away the business to a family member or someone else. Uncertainty about the future of the business is also more common among nonemployers than employers (40% vs. 16%). Finally, nonemployers are more likely than employers to anticipate closing their business (27% vs. 11%), and the gap is even wider for those at or near retirement age (34% vs. 14%).
Why Owners Do Not Have Plans
When asked why they do not have a plan, the plurality of nonemployer owners (35%) stated that there was no specific reason after being presented with various options. In open-ended responses, some owners who did not endorse a specific reason offered referred to their age or retirement plans as the reason. Others mentioned that the business was based on their personal labor, an artist for example, and so could not be continued when they retire. The next-most-common reason given for why they had no plan was that "the business is too small" (31%), followed by the owner being too busy to think about the future (18%). Less common options were that the business is too young (7%), or the owner needed advice (7%) or more information (5%).
Regardless of whether they have employees, business owners with a long-term plan for their firm operate larger firms by profit (or revenue, not shown) than those with no long-term plan. As displayed in the table below, the median nonemployer with no long-term plan brought in just $6,000 in profits in 2023, compared with $11,000 for nonemployers with a plan. The median profit gap is also large between employers without a long-term plan and those with one ($60,000 vs. $90,000, respectively).
For employers, business success is clearly linked to plans that would lead to wealth generation. Employer firms who plan to sell or give away their business earn median profits of $100,000 and $85,000 per year, respectively, compared with just $20,000 for those who plan to close the business.
The situation is different for nonemployers. Those who plan to close their business tend to do relatively well. This implies that even successful nonemployer-businesses face challenges when it comes to scaling and selling, such as their reliance on the individual human capital of the owner.
Conclusion
As U.S. business owners think about the future of their enterprise, many are uncertain and many imagine closing the business as they retire from it. This comes at a time when a large portion of owners are nearing retirement. This is largely the case, however, for nonemployer-businesses, which tend be smaller by revenue and, by definition, do not directly employ workers. From a personal and familial wealth perspective, just over one-third are positioned to boost net worth or intergenerational assets for owners at the time of retirement.
Yet, the situation is very different for owners who employ others. The median employer’s business generated $80,000 in profits in 2023, according to the Gallup data, suggesting a median valuation of somewhere around $400,000 if sold (using a simple and conventional valuation formula). In cases in which owners achieve a successful ownership transition, this value may be sold or transferred to a family member, if plans are realized. The preservation of most employer-businesses, through sales and transfers, would help provide macroeconomic stability as older American entrepreneurs retire, because most Americans work for employer-businesses.
For nonemployers, creating and sustaining a business that reaches operational independence from the owner and sufficient scale to warrant a sale or transfer would be a challenge for many, but a substantial fraction plan to do so. Future research in this series will look at why more U.S. adults do not become owners in the first place.
Acknowledgments
This report was funded with the support of JPMorganChase and the Ewing Marion Kauffman Foundation. The views expressed are those of the authors and should not be attributed to JPMorganChase or Ewing Marion Kauffman Foundation.
