The 2021 Business Owner Benchmark: Fortifying for the Future
Grow and transition resilient businesses with insights from The Northern Trust Institute.
Faced with unprecedented challenges and a shifting business landscape, business owners have adopted a range of new strategies to weather the storm over the past year and continue to move their businesses forward.
In The Northern Trust Institute’s inaugural Business Owner Benchmark, we surveyed a wide range of business owners to understand the challenges and opportunities they are facing — and how they are adapting to this new environment as we emerge from a tumultuous year.
Business Owners’ Top Concerns:
In the resulting report, we explore five themes and provide insight for addressing common challenges — all based on empirical observations and data from working with thousands of business owners across the country.
Theme 1: Planning for Changing Tax Policies
Not surprisingly, given the current landscape of significant, proposed policy changes and record-high government debt, taxes are top of mind for business owners. In fact, concerns about higher taxes are significant enough to cause nearly half of respondents to evaluate relocating their primary residence and/or business to a different state.
While much uncertainty exists around the ultimate form of tax policy changes, there are a number of personal and business planning strategies to consider in light of the proposed changes.
Theme 2: Addressing Transition Uncertainty
With an eye to the future, most business owners recognize the value of having a succession plan in place, and 70% of our survey respondents indicated that they already have some form of succession plan in place. However, half of the business owners who have a plan are nonetheless worried about the ability of their chosen successor(s) to maintain and grow the business over the long term.
Business succession planning is a complex and interconnected process with unique considerations specific to each business. There are, however, several best practices business owners can adopt to increase the odds of a successful transition.
Theme 3: Building Your Board
A majority of business owners we surveyed indicated they have a board of directors in place and reap multiple benefits from their board. However, while a minority, the percentage of business owners without a board of directors or advisory board is sizeable at 32%, highlighting the significant opportunity that exists within this cohort to establish boards to potentially realize some of the same benefits that the other two-thirds of respondents enjoy.
Building an effective board of directors with the right people, skills and engagement can significantly improve your company’s performance over the long term.
Theme 4: Engaging the Rising Generation
A common concern we hear from business owners is that the next generation is either not interested in leading or prepared to lead the business. By building a systematic process, however, it is possible to both inspire the rising generation to get involved in the business and prepare them to contribute to its success.
One way to engage the rising generation is to create ongoing opportunities to learn about the family business. Touring facilities, shadowing executives, mentorship programs, summer jobs and internship opportunities are all learning experiences that can help determine which members of the next generation are most interested in the business and may choose to one day join the company.
This also can help create a pipeline of future leaders — even for those family members who ultimately decide not to enter the business — and facilitate a greater appreciation of the benefits and responsibilities that come with being a business-owning family.
Balancing business objectives with family harmony can be rife with complexity, but there are several strategies that have proven helpful.
Theme 5: Building and Retaining Your Workforce
Most business owners demonstrate a strong commitment to supporting and developing both family and non-family employees who work in the business.
Yet, only half of businesses who employ family members have formal policies in place that clarify family employment expectations and create objective criteria for how family members are hired, promoted and compensated. Adopting formal family employment policies helps to mitigate some of the intense emotions surrounding situations where family members might have unrealistic assessments of their progeny’s competence. It also ensures that all employees will be treated fairly and have the opportunity for career progression.
Fortifying for the Future
Gain insight on the most pressing challenges and opportunities facing business owners with new research from the Northern Trust Institute.
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This information is not intended to be and should not be treated as legal, investment, accounting or tax advice and is for informational purposes only. Readers, including professionals, should under no circumstances rely upon this information as a substitute for their own research or for obtaining specific legal, accounting or tax advice from their own counsel. All information discussed herein is current only as of the date appearing in this material and is subject to change at any time without notice.