How AI Will Unlock Small Business Growth

Artificial Intelligence

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If AI is going to matter at all in our economy, it has to matter for small businesses first.

As a search fund entrepreneur, I’ve met and worked with more than 300 CEOs and founders in cities across the U.S. from New York to Las Vegas, Sunnyvale to Maryland. In every conversation, the same concern surfaces: the AI models in our smartphones are more advanced than the technology stacks running our businesses. While the devices in our pockets update monthly, most business systems remain unchanged for years. And nowhere is this more evident than in small businesses.

This matters because small businesses employ more than 61 million people, nearly half the private workforce. Yet just a fraction of 1% are building the kinds of technology ventures that attract institutional capital.

So this means that the overwhelming majority of small businesses are self-funded and family-run. They’re bootstrapped by owners who pour their own savings into businesses that anchor the communities they care about. These are the businesses still running payroll on technology built a decade ago.

Family Businesses Meet AI Startups

The other day, I joined a lunch meeting with 80 small business owners who lead multi-generational family firms. This gathering was a masterclass in human networks. However, not once was technology mentioned in the entire meeting.

Every three weeks, all 80 members gather at a private club on Park Avenue for a three-course meal. The purpose was to share business priorities and make referrals and introductions for each member. There were green pens and notepads on the tables embossed with the motto: “Trusted relationships build businesses.” Over lunch, if each of the 80 members received just five new customer introductions, that’s over 400 new channels opened before dessert.

Four hours later, I was downtown at the city’s newest restaurant for a startup forum. Here, every conversation was about AI and technology, from AI-powered roll-ups and cybersecurity to founders turning New York’s vacant warehouses into sushi pop-ups.

Two Worlds In One City

Across every city I’ve traveled to, these two business communities live side by side but rarely meet. One is led by families built through trusted introductions and intellectual property developed over decades. The other is driven by startups fueled by the race to deploy the newest technology at scale.

What happens when these two worlds connect? Imagine today’s most advanced technology powering small family-owned businesses.

For the past 40 years, one model of entrepreneurship has created more than $10 billion in value by doing exactly this: investing in established small businesses and building them with new technology and leadership. The Search fund model, first launched at Stanford in 1984, was designed to bring innovation into established firms. One of the earliest search funds invested in a 50-person roadside assistance company and built it into Asurion, now a global tech-care enterprise with 23,000 employees and 300 million customers. Another transformed a compliance services firm into RIA-in-a-Box, a leading SaaS platform used by over 2,600 firms nationwide.

What once took years and significant capital investment can now be done in months. Today, enterprise-grade tools once reserved for Fortune 500 corporations are within reach of nearly every business. The playbooks that small businesses have relied on for decades to build multi-generational, value-based businesses can, when paired with AI, scale impact in weeks instead of years.

Across core functions, generative AI is cutting work times by more than 60%. If you can sketch an idea on a napkin, it can be built in hours, not weeks. Supply chains, compliance, document processing and technical workflows are already showing double-digit productivity improvements. In some cases, technical tasks have been reduced by as much as 70%.

Search funds are one proven path to bringing technology into legacy businesses. Others are emerging as well, including AI consulting firms, AI studios and AI-powered roll-up strategies, each with their own strategies to rebuild established firms with the most advanced technology available today.

The tools are here, the cost has never been lower, and the door is wide open—for now.

If AI is going to matter at all, it has to matter for small businesses first. Once it’s put to work, it will power growth across Main Street and fuel an economy that directly supports half the workforce.