Recent research from the Principal Financial Group unveils insights into business owners’ priorities and practices. In particular, the study shows us that where a business is in its life cycle can affect an owner’s attitude. Understanding these insights can help you better address business owners’ financial needs and planning concerns.
We found that, of the over 500 owners surveyed, more than half consider their businesses to be “established,” while nearly an additional quarter indicated they are “growing.” The remaining owners said their firms are new, in transition or retrenching.
Understanding the characteristics that factor into the life cycle of a business can help guide your sales conversation. As you might expect, some of the life cycle determination is due to tenure of the business. Most established businesses (83 percent) have been in business over 10 years compared to growing businesses (56 percent) that have typically been in existence for less than 10 years.
Another characteristic, in this research, appeared to be employee population size. We found that the established businesses were largely made up of sole proprietorships with less than 10 employees. Growing businesses, on the other hand, tended to have more employees; in fact, 43 percent indicated they have 50 or more employees.
In our research, a large portion of sole owners of the established businesses were over the age of 60. In these situations, transition planning is critical, as the succession options may not be obvious nor quickly attainable. Yet, almost six in 10 of these owners do not have written business continuation plans in place. This is an opportunity for you to help guide them through the planning process and show them how to effectively structure these plans. Without this guidance, business owners will likely run into challenges when they’re ready to transition out of the business — especially if an unexpected disability or death occurs.