More Comprehensive Planning Key to Securing Business Owners’ Biggest Asset, Their People, Finds U.S. Trust Survey of Business Owners and Entrepreneurs

June 26, 2018 at 9:00 AM Eastern

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. 


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.


Bank of America

Bank of America is one of the world’s leading financial institutions, serving individual consumers, small and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 47 million consumer and small business relationships with approximately 4,400 retail financial centers, approximately 16,000 ATMs, and award-winning digital banking with approximately 36 million active users, including 25 million mobile users. Bank of America is a global leader in wealth management, corporate and investment banking and trading across a broad 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 owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations across the 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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