Q&A talks about the state of business ownership with Matthew D. Maclean, senior vice president at U.S. Trust in Hartford.
Q: U.S. Trust recently released its 2013 Insights on Wealth & Worth study. What are some of the highlights from the report with regards to business owner findings?
A: According to the survey findings, business ownership at all ages is thriving as a new generation of young entrepreneurs inherits family wealth. Additionally, business owners believe that by owning a business, they are more likely than people who work for someone else to be fulfilled in their work, create significant wealth, provide financial security for their family and create opportunities for others. Younger business owners are notably more likely than those who are older to feel that business ownership empowers them to make a positive impact on society. The study found generational differences in the motivation for owning a business but widespread agreement on the biggest challenge to future growth being the impact of taxes.
Q: Younger business owners (79 percent of Gen Y and 54 percent of Gen X) are notably more likely than those who are older (35 percent) to feel that business ownership empowers them to make a positive impact on society. What do they define as a positive impact on society? Is it creating jobs?
A: Business owners are generally very community oriented and believe that, as a community leader, it is their responsibility to do what they can to make the lives of those around them better. This includes jobs but goes beyond jobs to philanthropy and community service.
Q: There appears to be a universal concern, regardless of age, about taxes. What are these entrepreneurs doing about their business tax situations?
A: The biggest challenge business owners cited in being able to grow their business is the impact of taxes. In response to the cumulative impact of increased federal, state and local taxes, business owners have taken a variety of actions including: reducing or limiting staff; moving the business to a state with lower personal income tax rates or state with lower costs; and eliminating or reducing the provision of healthcare benefits. However, some business owners overall have already or intend to sell the business because of increased taxes.
Q: According to the study, 95 percent of Baby Boomers are the first generation to own their business, compared to three-quarters of younger business owners. One-quarter (25 percent) of owners under the age of 49 represent the second- or third-generation owners of a family business. What’s happening to the family business model? Are fewer businesses being passed down?
A: More than one-half of business owners currently do not have a business succession plan in place. The reasons cited are that they have no intention of retiring any time soon, they are not aware of the succession planning process, or important decisions regarding management of their businesses going forward have yet to be made. However, the majority of business owners plan to sell or close their business rather than passing it on to the next generation.
Q: The study also seems to indicate business financing is improving with this statement: “Among business owners surveyed, 84 percent said that getting a bank loan and 88 percent said access to investment capital has not held them back from growing their business.” Is that accurate? Or are these business owners reinvesting profits and not relying on outside sources of capital and loans?
A: I believe that it is accurate. Owners of growing businesses believe that their highest returns on capital will come from reinvestment in their businesses. With that perspective, it isn’t surprising that access to debt capital isn’t viewed as critical to business growth.
Q: Business owners believe that they are more likely than people who work for someone else to be fulfilled in their work. Could that be because business owners start their own companies out of perceived frustrations with their employers?
A: It could be but I think that it goes deeper than frustration with former employers. Entrepreneurs are highly self-motivated and want control over their personal and business lives. I think business owners’ entrepreneurial spirit tends to be innate and independent of past employment experiences.
