Survey: Most business owners lack succession plans
A new survey commissioned by the Massachusetts Mutual Life Insurance Company found a lack of succession planning among businesses with less than half of those surveyed having a buy-sell agreement in place.
The Springfield-based company funded a nation-wide survey that found only 44 percent of businesses have a standing buy-sell agreement. The 2015 MassMutual Business Owner Perspectives Study, an online survey of 801 businesses, found that most business owners were either not ready to address the issue or said they were too busy.
"We found that business owners are spending the majority of their time working in their businesses instead of on their businesses," Tara Reynolds, corporate vice president of life company marketing at MassMutual, said in a statement. "It's never easy to think about death or disability, but in order to raise awareness about these longer-term issues, business owners need to be confronted directly with the potential risk and damage of unexpected events."
Of those that had a buy-sell agreement in place, over half reported it was funded through life insurance, but only five percent of the agreements were funded through disability buy-out insurance. The rest were either funded with cash flow from the business or not funded at all.
In addition to planning for a sudden turn of events, nearly 40 percent of business owners surveyed did not have a retirement income strategy, saying they would need to rely on the sale or buyout of the business. And while most business owners surveyed said they had chosen their successor, with it frequently being a family member, approximately 25 percent had not informed their successor, according to the survey.
The study was conducted by Hawk Partners, a market research firm.
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