- 73% of wealthy investors find business ownership enticing given recent regulatory and tax reform
- 58% of wealthy investors are considering starting a business now or in the near future
- 77% of Millennials are reluctant to jump in saying that it’s too risky, and four-in-five current owners say children would rather inherit money than the business itself
- 52% of business owners who plan to exit in the next five years will sell, although they have neglected the preparation required to sell at a profit: 58% have never had their business formally appraised, and 48% have no formal exit strategy in place
February 13, 2018 - NEW YORK—Most wealthy investors believe the economic climate is ripe for owning a business, and many (58%) would consider starting one now or in the near future. At the same time, others see an opportunity to exit their business and make a profit, yet 48% have no formal exit strategy in place and it’s unclear who will step into their shoes. Seventy-seven percent of Millennials feel that starting a business is too risky and four-out-of-five business owners say their children would rather inherit the money from the sale of the business than the business itself. This is according to UBS Wealth Management USA’s latest UBS Investor Watch report, “Who’s the boss?”, released today, which delves into investors’ sentiment on business ownership. The quarterly survey, in its 22nd edition, polled over 2,000 affluent and high net worth investors, including 1,085 business owners.
Prestige in being an entrepreneur
The report indicates that the era of the entrepreneur is here to stay, with 73% of respondents agreeing that recent tax reform makes business ownership more attractive and 72% saying they are highly optimistic about the state of the current economy, the highest level since the financial crisis. Almost half (49%) of wealthy investors believe that being an entrepreneur is now one of the most prestigious career paths, second only to being a doctor.
Many current business owners are looking to exit
The economic environment is also driving current business owners to consider their exit. Forty-one percent of business owners expect to leave their business in the next five years. Over half of these owners (52%) plan to sell, not only because many are approaching retirement age but because timing may boost their chances of securing a favorable sale price. On the other hand, only 20% plan to leave the business to their family.
"Small businesses are experiencing an important shift," said Paula Polito, Client Strategy Officer of UBS Global Wealth Management. "Most owners are choosing to sell instead of passing businesses to the next generation to fill their shoes."
Most are unprepared
Though a majority of exiting business owners are planning to sell, many are woefully unprepared. Fifty-eight percent have never had their business formally appraised, and 48% have no formal exit strategy in place. This indicates a knowledge gap for the 75% of owners who believe they can sell their business in a year or less.
"Selling a business successfully requires a great deal of planning, which owners often underestimate," said Stewart Kesmodel, Head of Global Family Office, Americas for UBS Global Wealth Management. "Before pursuing a sale, it is important for business owners to not only have a view on the value of their business to potential buyers, but also an understanding of how that price applies to their personal needs post-transaction."