NEW YORK--(BUSINESS WIRE)--Business success typically is measured in financial terms, but more business owners lie awake at night worrying about people-related issues than about money, according to a new nationwide survey of business owners by U.S. Trust, Bank of America Private Wealth Management. The ability to attract top talent, the complexities of family member involvement in a business, and sense of personal responsibility for the livelihood of other people are top concerns occupying the minds of entrepreneurs; however, few have a comprehensive plan to secure the well-being of their company’s greatest asset – its employees – when they leave.
U.S. Trust surveyed high net worth business owners of companies ranging from $1 million to more than $100 million in annual revenue, and found:
- Fifty-one percent of business owners plan to give up ownership interest or control of their business within the next five years. Of those, 37 percent intend to retire and quit working, while the rest have other goals, including buying or investing in another company.
- Only 33 percent have a robust, formal transition plan that’s been communicated to the people it affects.
“Entrepreneurs are the driving force of business creation and leadership, however, their success is often only as good as the company they keep – the people they surround themselves with, from partners, investors and advisers to the employees who ultimately help deliver the company to the marketplace,” said Karen Reynolds Sharkey, national business owner strategy executive at U.S. Trust. “Through the combined resources of Bank of America and U.S. Trust, we can help business owners manage through business lifecycle transitions including creating, building and planning an exit strategy, while balancing their personal needs with the best interests of the company.”
U.S. Trust assists business owners with business transition planning and intra-family transfer and succession planning, and connects them with Bank of America Merrill Lynch partners for M&A advisory and capital-raising. Its capabilities are enhanced by an understanding of the needs of business owners derived through its annual survey. Among the insights gleaned from this year’s survey:
People are a top priority and challenge
Business owners are
motivated by creating opportunities for others, but attracting and
maintaining top talent is a challenge.
- Business owners are investing in their employees by increasing wages (59 percent), health care funding (46 percent) and retirement plan contributions (41 percent).
- Attracting top talent and retaining key employees are the No. 1 and No. 2 most frequently cited challenges affecting business expansion.
- Taking responsibility for the livelihood of other people is cited as the top concern business owners had when deciding to start or own a business.
- People-related issues – management conflicts, poor leadership, lack of diverse or objective advice – are considered the top reasons most startup businesses fail.
- Family involvement in the business creates mixed feelings among business owners: 71 percent agree it provides a competitive advantage, while 69 percent say that it also complicates decision-making. Additionally, seven in 10 say it is difficult to separate family needs and dynamics from business needs and goals.
Balancing personal needs and responsibility for other people
complicates planning a business exit strategy
When considering
retirement or starting another venture, business owners evaluate a
variety of important factors and goals they want to achieve in their
business exit strategy:
- Seventy-nine percent say it is important to get the best price or maximum value for the company.
- An equal share (79 percent) worry about protecting jobs for key employees, while 56 percent want to protect jobs for family members and 54 percent want to protect the best interests of the community.
- Six in 10 owners think key employees (33 percent) or a member of their family (26 percent) would most likely buy their company, if they were to sell it now.
Employee priorities are not reflected in planning
About half
of business owners plan to give up control of their current business
within the next five years (47 percent of businesses with $1 million-$10
million in annual revenue and 54 percent of business with more than $10
million in annual revenue). Their plans vary from taking the company
public and selling it to outside investors to selling it to employees or
transferring ownership to other family members.
- While 63 percent say they have a succession plan, only 33 percent overall and 44 percent of companies with more than $10 million in revenue have a robust, documented plan that has been communicated to those whom it affects.
- Twenty-one percent of owners who say they have a succession plan only have something informal such as a verbal understanding (11 percent), a simple memo (6 percent) or a general idea in mind (5 percent). Another 9 percent have put their plans into their will or estate plan.
- In the event of an unexpected death or debilitating illness or event, nearly one in three business owners say family would need to liquidate their business interests in order to gain access to its assets.
U.S. Trust’s survey of business owners is part of its 2018 U.S. Trust Insights on Wealth and Worth® series, a broader study of nearly 1,000 high net worth individuals that examines the motivation, behaviors and goals for creating and using wealth. Detailed findings from the U.S. Trust survey of business owners can be found here.
Survey Methodology
The 2018 U.S. Trust Insights on Wealth and
Worth® survey is based on a nationwide survey of nearly 1,000 high net
worth and ultra high net worth adults with at least $3 million in
investable assets, not including the value of their primary residence.
Respondents were equally divided among those who have between $3 million
and $5 million, $5 million and $10 million, and $10 million or more in
investable assets. The sample included 203 high net worth business
owners, including 155 current owners and 48 retired owners. All
respondents own or owned businesses with annual revenues of $1 million
to greater than $100 million. The survey was conducted online by the
independent research firm Phoenix Marketing International and completed
in February 2018. Asset information was self-reported by the respondent.
Verification for respondent qualification occurred at the panel company,
using algorithms in place to ensure consistency of information provided,
and was confirmed with questions from the survey itself. All data have
been tested for statistical significance at the 95 percent confidence
level.
U.S. Trust
U.S. Trust, Bank of America Private Wealth Management is
a leading private wealth management organization providing vast
resources and customized solutions to help meet clients’ wealth
structuring, investment management, banking and credit needs. Clients
are served by teams of experienced advisors offering a range of
financial services, including investment management, financial and
succession planning, philanthropic and specialty asset management,
family office services, custom credit solutions, financial
administration and family trust stewardship.
U.S. Trust is part of the Global Wealth and Investment Management unit of Bank of America, N.A., which is a global leader in wealth management, private banking and retail brokerage. U.S. Trust employs more than 4,000 professionals and maintains 93 offices in 31 states. As part of Bank of America, U.S. Trust can provide access to a broad range of banking solutions for individuals and businesses, and an extensive retail banking platform.
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million mobile users. Bank of America is a global leader in wealth
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range of asset classes, serving corporations, governments, institutions
and individuals around the world. Bank of America offers
industry-leading support to approximately 3 million small business
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United States, its territories and more than 35 countries. Bank of
America Corporation stock (NYSE: BAC) is listed on the New York Stock
Exchange.
U.S. Trust operates through Bank of America, N.A., and other subsidiaries of Bank of America Corporation. Bank of America, N.A., Member FDIC.
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