There was a time when the family business was the cornerstone of America’s small business community. Having a business that could be passed from generation to generation was considered a gift, a way to lock prosperity into the family tree.
That was in the 18th and 19th centuries, when everything was much simpler, and the skills that made a family business successful were needed and not yet duplicated by machinery.
There are still family businesses today, and while some maintain the level of precession and individual hard work that the storied businesses of days gone by had, some are less traditional. As such, they are sometimes easier to sell than the pass on the next generation in the family.
Our newest study, Serving Business Owners, examines the attitudes and concerns of today’s owners of businesses both large and small, considering how they operate, what types of financial advisors and providers they use, how today’s medical insurance and social media worlds affect them, and what they plan for the future of their business.
“Owning a business has been one of the greatest sources of wealth creation in the United States throughout the 20th and the 21st centuries,’’ said Spectrem President George H. Walper Jr. “Business owners face a variety of economic challenges ranging from maintaining corporate profitability in a changing economy to increasing regulatory pressures. Eventually, business owners consider retirement, and one of their most important decisions is what is going to happen to the business once they no longer wish to own it themselves.”
In the study, Business Owners were asked what their plans for the business are once they are ready to retire. Only 25 percent said they planned to pass the business on to their family, with 43 percent saying the plan was to sell the business, perhaps to spread the wealth among family members for their personal business plans.
Only 4 percent plan to close down the business upon retirement. Almost one quarter of all business owners say they don’t plan to retire.
It is interesting to note that 41 percent of female business owners claim they do not plan to retire. Nineteen percent of male business owners have no such plan as well. Male business owners are far more likely to sell their business (47 percent of males to just 30 percent for females).
Perhaps age has something to do with the concept of generational business ownership. While 32 percent of business owners 61 and older plan to pass the business on to someone from the family, only 21 percent of those 46-60 plan to do so and 25 percent of business owners between the ages of 21 and 45 see the business moving on to family members when they retire.
Our study shows that the highest percentage (24 percent) of business owners are professionals, such as lawyers, doctors or dentists. The next generation has to have the education and training necessary to be able to maintain the business upon the retirement of today’s owner, and that requirement is not always met by the next generation.
Only 9 percent of business owners are in the skilled service industry, the type of job that was indeed passed on generations ago.