Millions of Small Businesses Will Need New Owners — Why ETA Model Matters in the Coming Ownership Transition

A February 2026 report by the McKinsey Institute for Economic Mobility paints a striking picture. By 2035, roughly six million small and medium-sized businesses will need new owners as baby boomers retire, and over a million of those firms, worth a combined five trillion dollars, are viable candidates for sale. Most have no succession plan and no clear buyer in sight. The risk is obvious: if these companies close, millions of jobs disappear with them. But the same data also means that trillions in enterprise value are up for grabs, and the pool of people qualified to take it over is remarkably thin.

While the headlines focus on startups and venture capital, a quieter model of entrepreneurship offers a direct response to this mismatch. Entrepreneurship Through Acquisition (commonly shortened to ETA) allows ambitious operators to raise capital, find a profitable company, buy it, and step in as CEO. For most people outside the MBA world, however, ETA remains unfamiliar. Ilia Lotov is the founder of Kaizen X Capital, a search fund focused on acquiring a U.S. B2B services business. He previously worked as an analyst in Goldman Sachs’ Investment Banking Division and later as an investor at Mubadala, and holds an MBA from MIT Sloan. Here, he explains how he thinks about evaluating and acquiring a business responsibly.

Why buying beats building; the logic behind ETA

Startup culture dominates the popular imagination of entrepreneurship: garage founders, pitch decks, billion-dollar valuations. Yet statistically, nearly half of new businesses close within five years. Ilia has watched this play out firsthand. As a member of the start-up selection committee at Investopia 2025 in Abu Dhabi, he evaluated early-stage ventures alongside seasoned investors. A pattern kept repeating: sharp founders with solid products who could not get funded because they lacked a flashy narrative or simply ran out of runway before the unit economics turned positive.

“What kept standing out to me was that many of these founders were capable operators. The startup phase itself is structurally hard. ETA gives you a very different starting point: an existing customer base, real cash flow, and a business that has already shown it can work.”

Stanford's Graduate School of Business has tracked this model since 1984, and its latest research shows median acquisition multiples around 7x EBITDA with company margins near 27%. Millions of profitable firms in B2B services and manufacturing have founders who are aging out, yet neither venture capitalists nor large PE funds pay attention to deals this small. For operators like Lotov, that neglected middle market is exactly where the math works best.

What separates a good acquisition from a bad one

Not every business for sale is worth buying. From the outside, ETA looks simple: raise money, find a company, close a deal. In practice, a searcher must evaluate financial statements that small businesses rarely keep clean. That is why the hardest part is not finding a target. It is turning down one that almost fits.

“A lot of buyers focus on headline revenue and EBITDA, but that is only the starting point. In smaller companies, add-backs can be aggressive, customer concentration can be understated, and reported margins do not always reflect the real economics. The diligence has to be just as rigorous on a $10 million deal as it would be on a much larger one.”

That approach was forged across a career that moved from Penn State through Goldman Sachs's Investment Banking Division, where he built financial models for M&A transactions, to Mubadala Investment Company, the Abu Dhabi-based sovereign wealth fund managing over $300 billion in assets. There, rising from intern to Senior Associate in three years, he closed six major deals in software and tech-enabled services, learning to spot where a company's reported earnings mask its real economics. The experience taught him something most small-business buyers in the ETA market learn the hard way: knowing how to evaluate a deal is only useful if you know which deals to look at in the first place. For Lotov, the first question is not about the numbers — it is about what holds the business together once the person who built it is gone. 

We are focused on U.S. B2B services businesses that are important to their customers, generate consistent cash flow, and are not overly dependent on a single customer or on the founder’s personal relationships. In practice, that usually means businesses with more than $2 million of EBITDA. But even a good business can be damaged by a poor transition, so the handoff matters just as much as the deal.

The fundraising confirmed that the thesis holds up. Lotov pitched over a hundred firms and individuals; fourteen, including s16, Gestalt Capital, Legate Partners, and Riviera Capital, committed more than $500,000 to Kaizen X Capital to fund the search phase. Those same investors have committed to deploy an additional six to ten million dollars once the right acquisition target is identified, with the remaining purchase price typically covered by debt financing. In the search-fund world, investors are underwriting the operator as much as the thesis. For a first-time searcher, that early backing suggests the search criteria and approach resonated with experienced backers.

Beyond the deal; why ETA needs more than capital

Finding the right company is only half the challenge. Running it well requires understanding how businesses grow, where they break, and what makes teams stick around after a founder leaves. Lotov has spent years building that kind of judgment. At MIT Sloan, he worked as a graduate teaching assistant for  a course on public versus private capital markets led by Professor Piero Novelli, former head of UBS Investment Banking and current chairman of Euronext, Europe's largest stock exchange operator. Before that, at Moscow State University's School of Finance, he taught students and judged an investment research competition. That background helped refine how he thinks about valuation, business quality, and long-term ownership transition.

“We are still in the early stages of this ownership transfer. Some businesses will find good successors, but many will struggle to. When that happens, the effects show up across employees, customers, and suppliers. ETA is not the full answer, but it is one practical way to preserve good businesses that might otherwise disappear.”

Funds like Kaizen X Capital are part of a broader wave: a growing ecosystem of operators, investors, and MBA programs working to ensure ETA absorbs at least some of the coming ownership transfer. The INSEAD ETA Conference, which now draws searchers and investors from across Europe and beyond, is one sign of how fast that community is maturing. Whether the model scales fast enough remains open. What the market needs is more serious long-term buyers who are prepared not only to acquire a business, but to operate it responsibly through a change in ownership with a forward thinking mindset to navigate through generational changes.