A new Raymond James survey of more than 500 owners of privately held businesses asked how they’re approaching their livelihoods, their futures and the places where the two intersect. The resulting data reveals the coming need for a comprehensive wealth plan for many as 88% plan to financially exit their business, either partially or fully, within the next decade.
“Divesting a business is more than a transaction, it’s a transformation,” Bill Seugling, senior vice president, head of Raymond James Global Wealth Solutions, said. “With so much of their lives tied to an enterprise, business owners need strategies that dig deep. Regardless of whether the goal is retirement, reinvestment or legacy, owners can turn a business transition into an opportunity to secure their future and preserve what matters most.”
Key Findings
- Owners who are already envisioning an exit don’t see it as an ending. Even after transitioning some or all of their financial stake, one-third will continue working at their current business while 30% intend to invest in or acquire a new one.
- 20% plan to retire.
- A majority of respondents won’t look far for a successor, as 35% of owners will transition their business to a family member, while another 23% will tap a nonfamily internal stakeholder.
The survey further explores how business owners are preparing for the future of their companies and personal wealth, uncovering the unique challenges of converting what is likely their largest asset into realized personal wealth.
Asset Concentration
Business owners often have significant personal wealth tied up in their companies. This concentration underscores the importance of long-term personal wealth planning and diversification.
Nearly half of respondents (44%) said their business accounts for more than half their wealth, while nine in 10 said it represents at least a quarter.
Transition Timeline
More than half (56%) plan to fully or partially transition their financial stake within the next five years and a vast majority (88%) plan to do so within 10 years. Notably, 85% of respondents report having a transition plan in place, highlighting the significance of managing challenges and preparing for a smooth handoff.
“The time to plan is now, especially for those business owners whose transition timeline is within the next five years,” Bonnie Harper, vice president, private wealth consulting at Raymond James, said. “It’s important to have a personal wealth plan that ensures the effort you’ve invested in your business becomes the foundation for the life you envision.”
Growth Capital Needs
Eighty-five percent of owners anticipate needing additional capital to power future business growth. When asked to identify all sources they would consider for growth capital, respondents selected:
- Private equity (52%)
- Traditional/bank loan (50%)
- Personal funds (43%)
- Securities based line of credit (43%)
- Personal loan (40%)
To choose the best source, owners must weigh the trade-offs for their business and desired outcome, including whether they’re willing to share control with outside investors or wish to transition the business to a family member or key employees.
Future Plans
Looking ahead, 35% of owners intend to transition their business to a family member. Among owners of businesses valued at more than $15 million, that figure rises to 44%.
Thoughtful and timely planning holds extra importance in this type of transition given familial dynamics and nonfamily internal stakeholders. These leadership changes could not only redefine ownership structures but may also trigger a large intergenerational wealth transfer.
Future Business Success
When asked what would impact the future success of their business:
- 22% of business owners identified expansion into new markets as a critical factor.
- Economic environment ranked second at 17%.
- 15% of owners said demand for service/product.
- People-centric factors, including hiring/retaining people (12%) and readiness of next generation leadership (11%) ranked at the bottom of the list.
While respondents see external forces like market expansion and economic conditions as critical to future success, people-centric priorities, such as talent retention and leadership development, ranked lower, signaling a potential gap between strategic growth ambitions and the human capital needed to sustain them.
