Research Shows Many Businesses Might Be Left Unprotected Should Unforeseen Events Occur
SPRINGFIELD, Mass., Aug. 31, 2015 —While business owners work to sustain their operations, few report making the necessary arrangements to protect their businesses for the long-term, according to a new study by Massachusetts Mutual Life Insurance Company (MassMutual). Only 44 percent have a buy-sell agreement in place, leaving many businesses unprotected, should unforeseen and unfortunate events occur. The 2015 MassMutual Business Owner Perspectives Study reveals business owners’ underlying values and attitudes toward business planning and illustrates the need for financial guidance and preparation.
The study, which MassMutual conducted to better understand how to help prepare U. S. businesses to not only sustain future generations but the American economy as a whole, found that many business owners think they are good decision makers but are either not ready or too busy to address all of the essential long-term business planning needed to sustain their businesses. At the same time, business owners feel they need to protect their businesses and families but aren’t confident in taking the first steps on their own and don’t always know where to turn for help.
“We found that business owners are spending the majority of their time working in their businesses instead of on their businesses,” said Tara Reynolds, corporate vice president, Life Company Marketing, MassMutual. “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.”
Among the business planning essentials, business owners answered that the most top-of-mind are:
How the business would be affected by the death or disability of an owner or key employee
- Protecting the business from disability and death of an owner or key employee had the second and third highest level of importance (44 percent versus 42 percent, respectively). However, these two pillars were not very top of mind, with 55 percent saying they rarely or never think about the effect of disability and 59 percent saying they rarely or never think about the effect of death.
- Of those with a buy-sell agreement in place, just over half say it is funded with life insurance, but only 5 percent say it is funded with disability buy-out insurance. The rest were either funded with cash flow from the business or not funded at all.
Keeping key employees loyal to business
- Eighty-one percent of respondents said keeping key employees loyal is important and nearly two-thirds say they think frequently about the issue.
- Ninety percent of survey respondents report offering some kind of benefits to their employees, with the top three most common cited as health care (60 percent), generous salaries (55 percent), and flexible work benefits (51 percent).
Planning for life after the business
- Nearly 40 percent of business owners don’t have a retirement income strategy outside of their businesses and will rely on proceeds from the sale of the business or income from the business post-retirement.
- Most business owners surveyed say they have chosen their successor – frequently it’s a family member. However, 1 in 4 don’t know they’ve been chosen as the successor.
- Just over half of the business owners surveyed said they have had their businesses valued in the last three years, and the resources they are most likely to turn to for guidance are CPAs and financial professionals.
Additional insights from the 2015 MassMutual Business Owner Perspectives Study can be found at MassMutual.com/bizstudy.
At MassMutual, we recognize the challenges business owners face, and we are here to help get the important conversations started. To learn more about planning for your business, visit massmutual.com/businesses or locate an office near you at massmutual.com/secure/locateanoffice.
The 2015 MassMutual Business Owner Perspectives Study was conducted by Hawk Partners for Massachusetts Mutual Life Insurance Company (MassMutual) via a 20-minute online survey of 801 general population business owners from January 23 – March 9, 2015. The sampling margin of error for this study is +/− 2.9% percentage points when looking at the results for the total general population. These are at the 90% confidence level.
Founded in 1851, MassMutual is a leading mutual life insurance company that is run for the benefit of its members and participating policyowners. 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 policyowners consistently 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.