MassMutual: Business Owners Lack Preparation

SPRINGFIELD, Mass., Dec. 13, 2011 /PRNewswire/ -- More than three quarters (77 percent) of business owners say they started their companies to provide financially for their families, yet despite these good intentions, less than half feel confident with their current personal financial situation. More than a quarter (28 percent) say that it is all they can do to keep up with everyday business expenses, let alone think too much about their future.

This disparity is among the key findings of Massachusetts Mutual Life Insurance Company's (MassMutual) new study, Business Owner Perspectives: 2011 Insights in an Uncertain Economy*, a survey of over 1,600 business owners in the United States. The study breaks new ground by looking for the first time on record at business owners' thoughts about both their personal and business finances and includes multicultural and women business owners, two fast-growing groups in the U.S.

"Entrepreneurial businesses are vital to our economic recovery, so it is concerning that so many business owners seem to be sacrificing their own and their family's financial future," says Tara Reynolds, corporate vice president of consumer and product marketing at MassMutual. "With help, business owners can look past the seemingly overwhelming day-to-day demands of running their businesses and establish and meet their long-term financial goals."

A review of the research suggests four considerations for business owners who want to start to get their financial houses — or shops — in order: 

Know Your Worth

Only four in ten business owners realize it is very important to know what their business is worth right now, and 43 percent of business owners have not had their businesses valued in the past three years.

"Knowing and carefully tracking the value of their business is the key to keeping business owners in control of their own futures," says Reynolds. "Those aware of their company's value can take steps to protect it from unexpected events — such as the death or illness of a partner – using it as the foundation for sound business, succession and estate plans. Working with a professional who is qualified to value businesses is a key first step to any long-term planning."

Lock in Key Employees

The top business concern of owners who participated in the study was keeping key employees loyal, with about half (53 percent) expressing this concern. However, less than a third (30 percent) has special benefits in place to help ensure employees who are integral to the business' survival remain loyal and with the company.

In addition to special incentive benefits, business owners can take steps to protect their businesses against the loss of an essential employee — perhaps their most valuable asset — and the lost sales, productivity or even some good customers that may result. The first step may be estimating the financial impact on the business, if a key employee is unable to work or leaves the company.

Plan for Life after Ownership

Almost 40 percent of business owners who participated in the study say they plan to retire at age 66 or older, yet, only a third have formal retirement income strategies in place that map out how to manage their income during retirement, and less than half are confident they are doing a good job of preparing financially for their retirement.

Many plans and programs exist to help entrepreneurs not only save for retirement but also create a retirement income strategy, and working with a trusted financial services professional can help business owners be confident about their financial future. Plan for the Next Generation of Your Business

What happens to the business once an owner retires? A second top business concern cited by business owners was how to transition ownership when the owner is ready to retire. Fifty-four percent say they plan to pass their businesses on to a family member, yet only 26 percent have a formal business succession plan in place. Even worse, 16 percent say that the person selected as the successor doesn't even know it.

Lacking a plan, especially in a family-run business, can cause stress for family members and even cost employees their jobs. For instance, 38 percent of those surveyed would leave the business to a child, yet a child may be unwilling or unable to properly manage the business, forcing a sale at an unfavorable time or even forcing the business to close. A financial services professional who specializes in family businesses can help business owners sort through these issues, and put a plan in place that helps maximize the value of the business while addressing the needs of the owner, the owner's family and employees. 

For more information about Business Owner Perspectives: 2011 Insights in an Uncertain Economy, including how the findings break down by gender and culture, visit massmutual.com/bizownerperspectives. Helpful business planning tools and resources for business owners are available at massmutual.com/smallbusiness. To locate a MassMutual professional to help with the planning process, visit massmutual.com/secure/locateanoffice.

Methodology*

The research was conducted by GfK Custom Research North America for Massachusetts Mutual Life Insurance Company (MassMutual) via telephone interviews administered to 916 general population business owners and 150 interviews each, with business owners of these types: African American, Asian Indian, Chinese, Hispanics, and Korean.  Interviewing took place from March 28 – May 20, 2011.  The interviews were conducted in the language of preference to the business owner for Chinese, Hispanic and Korean businesses.

Businesses were required to meet the following criteria: have 500 or fewer employees, have 2010 total sales or revenue of $50,000 or more, and have been in business at least 1 year. The sampling margin of error for this study is +/- 3.3 percentage points when looking at the results for Total General Population.  It is +/- 8 percentage points when looking at the total results of any one of the five ethnic groups.  These are at the 95% confidence level.

About MassMutual

Founded in 1851, MassMutual is a leading mutual life insurance company that is run for the benefit of its members and participating policyholders. The company has a long history of financial strength and strong performance, and although dividends are not guaranteed, MassMutual has paid dividends to eligible participating policyholders every year since the 1860s. With whole life insurance as its foundation, MassMutual provides products to help meet the financial needs of clients, such as life insurance, disability income insurance, long term care insurance, retirement/401(k) plan services, and annuities. In addition, the company's strong and growing network of financial professionals helps clients make good financial decisions for the long-term.

MassMutual Financial Group is a marketing name for Massachusetts Mutual Life Insurance Company (MassMutual) and its affiliated companies and sales representatives. MassMutual is headquartered in Springfield, Massachusetts and its major affiliates include: Babson Capital Management LLC; Baring Asset Management Limited; Cornerstone Real Estate Advisers LLC; The First Mercantile Trust Company; MassMutual International LLC; MML Investors Services, LLC, Member FINRA and SIPC; OppenheimerFunds, Inc.; and The MassMutual Trust Company, FSB.

For more information, visit www.massmutual.com, 'Like' MassMutual on Facebook, or follow MassMutual on Twitter.

Contact:Karen Lavariere-Sanchez
413-744-7660
[email protected]

SOURCE MassMutual