New research released this week indicates business and income protection have moved up in importance for many small-business owners in the uncertain economy.
The study, which surveyed 511 business owners with 2-500 employees about their priorities, was conducted by Harris Interactive for the Principal Financial Group. The research considers both business issues and personal finance needs of small- to medium-sized business owners.
When business owners were asked their most important business priorities, “business protection” was named No. 1, eclipsing “health insurance” as their top priority, while “income protection” moved from fifth last year to third in priority.
“It is clear that the effects of the recession have brought protection of one’s business and income to the forefront of the business owner’s planning,” says Steve Parrish, national advanced solutions consultant for The Principal. “Benefits, for both owners and their employees, are crucial, but in their planning, owners are cognizant of the need to make sure these benefits cover contingencies like death and disability.”
Business owners learn lessons but still have not taken action
Over a quarter (26%) of business owners said the most important lesson to learn from the recession is the need to be more diversified with assets. In addition, 25% of owners also learned they need to have a plan for how they will exit their business. Despite this sentiment, research shows two-thirds (68%) of owners still do not have a plan in place to exit their business. Also, less than half of these owners (47%) have wills and 30% don’t have wealth transfer plans.
“We are seeing a lack of realism among business owners who in spite of their good intentions, are not following up with actions,” Parrish says. “Despite this, we are seeing a trend towards the realization that they need to act. With so many baby boomer business owners contemplating the financial future of both their businesses and themselves, it is essential that they act now as the economy makes its slow climb out of the recession.”
Balancing Business and Personal Priorities
This is the fourth study related to business owners’ priorities released by The Principal. According to Parrish, the findings are compelling because it shows the dilemma business owners have in balancing their own personal financial well-being and the needs of their businesses.
“This study goes deeper than just ranking stated priorities,” he says. “It gives us a hint as to what kind of things are keeping business owners awake at night.”
An in-depth analysis of the research is available at: http://www.principal.com/about/news/documents/businesspriorities_whitepaper.pdf.