The $10 Trillion Small-Business Exit Crisis Is Hiding in Plain Sight

Nearly $10 trillion in private business assets across the United States is held by aging founders, creating what financial analysts view as the largest intergenerational wealth transfer in modern American economic history. Yet roughly 92% of small and midsize companies that exit the market simply liquidate their assets and shut down instead of being sold or transferred to new ownership.

McKinsey & Company estimates that baby boomers, born between 1946 and 1964, own approximately 41% of all U.S. small businesses. That represents roughly 2.3 million operating companies employing more than 25 million workers. McKinsey projects that approximately six million small business transitions will occur by 2035, involving as much as $5 trillion in enterprise value.

Among the approximately 510,000 small and midsize businesses that exited the market in 2022, data from the McKinsey Institute for Economic Mobility shows that 92% simply closed down. Only 5% were sold to third-party buyers, while 3% were transferred internally to family members or existing employees.

Corporate readiness remains low. McKinsey research found that fewer than one in three small business owners has established an exit plan, and fewer than one in 10 can estimate their company’s enterprise value within 10% of its actual market worth.

The small business market has historically depended on fragmented networks of local business brokers, private listing portals such as BizBuySell, and word-of-mouth transactions. Unlike residential real estate, where standardized Multiple Listing Services (MLS) and public property deeds provide pricing transparency, private companies lack a unified database for financial performance and standardized valuation metrics. As a result, most founders remain disconnected from formal exit channels.

Technology platform Baton is attempting to create a public pricing layer for that unlisted commercial market through an initiative called Business Profiles. The company has publicly released automated valuation estimates and local competitive rankings for two million small businesses nationwide, providing free baseline estimates intended to encourage owners to view their companies as transferable assets.

Baton co-founder and Chief Executive Officer Chat Joglekar previously served as an executive at Zillow. His company’s approach draws on the consumer engagement model Zillow established in residential real estate when it launched its automated “Zestimate” tool in 2006. Zillow used public tax assessor records and recent home sales to publish property valuations, attract consumer traffic, and generate lead pipelines for real estate agents.

Joglekar said the main challenge in small business transactions is not competition from traditional business brokerages, but owner inertia and a lack of market awareness. “Our biggest competitor isn’t someone else trying to sell small businesses,” Joglekar said. “It’s the small business owner who hasn’t considered selling and thinks the only option is to shut their business down.”

The data behind Baton’s public figures begins with secondary sources rather than private accounting files. One major source is the federal government’s COVID-19 relief initiatives, particularly the Small Business Administration’s (SBA) Paycheck Protection Program (PPP). Between 2020 and 2021, the PPP issued nearly 11.8 million loans totaling roughly $800 billion, producing public records containing company names, employee counts, address records, and estimated payroll figures.

Baton combines those public SBA disclosures with estimated revenue metrics, local workforce sizes, online customer feedback scores, and tens of thousands of historical transactional comparables. The result is a public enterprise valuation and competitive stack rank for each business.

The free valuation also serves as a client acquisition mechanism. Owners who find their companies can claim their profiles, upload verified internal financial documents such as tax filings and profit-and-loss statements, and refine the preliminary valuation. If an owner decides to sell, Baton oversees the transaction and earns revenue through monthly retainers and success fees upon deal completion.

The initial figures are benchmarks rather than formal appraisals because they are produced before an owner provides verified financial statements. Private firms can differ sharply in revenue consistency, inventory value, management dependency, and financial reporting accuracy, creating technical and financial challenges for automated valuation models (AVMs) applied to commercial enterprises.

Residential real estate algorithms have faced similar accuracy differences. Zillow reports a median error rate of approximately 2% for homes actively listed on the market. For unlisted properties, the median error rate rises to roughly 7%, although Zillow’s technical disclosures state that 99% of its automated estimates fall within 20% of actual sale prices.

Baton has operated for nearly five years and now reports approximately seven closed sales per week. That pace is up from an earlier milestone at which the firm reported generating roughly 2,000 preliminary valuations and completing 100 total sales.

Joglekar told Fortune that addressing the information deficit is central to Baton’s expansion strategy. “Awareness is our biggest competition, not other competitors,” he said. “It’s almost frustrating that millions of small business owners still aren’t aware of us. That’s why we’re so excited about Business Profiles.”

Baton maintains that approximate initial figures can still give disengaged owners an immediate reason to consider their exit options before closing down. “Over the past five years, we’ve built the most sophisticated database of small business valuations in America,” Joglekar said, stating that public transparency aims to reframe how founders evaluate their corporate holdings.

“If every small business in America understood their valuation, I believe the U.S. would be a better place,” Joglekar told Fortune. “It’s such a key bit of information that’s locked away and almost hidden from small business owners, even as they grow … most of the supply is ill-equipped for that discussion. We’re just trying to equip them.”