2018 Insights on Wealth and Worth — Business Owners

For many business owners, the link between family and business goes back to their company’s founding. In fact, the survey showed the majority of all business owners (65%) use personal and family money to fund the start-up and early growth of their business.

Family is also involved in the company in different capacities for two-thirds (66%) of business owners. Most of these family members are involved in either senior (38%) or middle (21%) management (see Figure 1).

Family involvement in the business creates mixed feelings for business owners: 71% agree it provides a competitive advantage, while 69% say that it also complicates decision making. Additionally, 7 in 10 say it’s difficult to manage family dynamics and to separate the needs of family from those of the business.

Family business owners also cite the readiness of the next generation as a key challenge, both in terms of the next generation’s interest in taking over the business and in how to best prepare for leadership.

Business owners are acutely aware of the vital role their businesses play in the lives of employees. Taking on the responsibility for the livelihood of other people was the top concern owners had when contemplating the decision to own a business.

Employees are also a key consideration when it comes to running and growing a business. Attracting talent and retaining key employees are the two biggest challenges that business owners face, ahead of other operational, regulatory and financial issues (see Figure 2). Further, “people and leadership issues” was the number one reason given for why businesses fail.

As a result, investing in people is a priority for most business owners, with 59% planning to increase wages this year. Additionally, 4 in 10 plan to increase contributions to employee retirement plans and 46% expect to increase funding for employee health insurance.

Most business owners are either maintaining or increasing business spending this year. To fund this growth, owners of midsized ($10 million to $100 million in revenue) and large companies (over $100 million in revenue) are more likely to reinvest profits from the business, while owners of smaller businesses ($1 million to $10 million in revenue) are most likely to tap into their personal savings or family resources.

The reduction in tax rates for corporations and pass-through businesses is seen as an opportunity by many business owners. Nearly 6 in 10 (59%) view the reduction positively, fueling their thinking about strategic investments over the next three years.

When asked about future plans, 7 in 10 business owners say they intend to expand products or services (see Figure 3), as well as expand into new territories within the U.S. and abroad—fueling job creation and further investment in employees.

More than half (51%) of all business owners (and two-thirds among large corporate owners) plan to leave their business within the next five years. Yet selling or transferring ownership to family is the exit plan for just 28% of business owners.

While ensuring that their family is taken care of financially is the primary concern of business owners considering an exit strategy, the impact on their key employees is also a very important consideration reported by 43% of owners.

And yet that sense of responsibility for others is not reflected in many succession plans. While about two-thirds (63%) of all business owners, including those already retired, say they have or had a business succession plan upon leaving it, only one-third have a robust, documented plan that’s been communicated to those it affects (see Figure 4).