Most high-net-worth business owners have no idea what their businesses are worth. That could have terrible implications for their families' financial futures — and even the U.S. economy. But it spells opportunity for financial advisors.

According to the sixth annual Wealth Survey, conducted by Hartford, Conn.-based The Phoenix Companies, 68 percent of the high-net-worth business owners surveyed never had their companies professionally valued.

In addition, 63 percent of respondents to the survey have no formal business succession plan, and 50 percent don't have a business transfer or continuation plan.
— Thrupthi Reddy


The Small Business Administration says it is experiencing record demand for commercial credit from small business owners — a sign that the pool of potential financial advisory clients could be expanding in the coming years.

Through the first three quarters of the fiscal year 2005, the SBA has extended loans to 71,131 business owners — up 21 percent from the year prior and 49 percent from 2003. In total, the loans amount to $11.1 billion this year, or 19.5 percent more than in the same period last year.

The SBA has come under some fire in recent months over the fees it charges to offset loan default costs. There is also controversy surrounding the federal government's efforts to revise upward the size of a business that qualifies for government contracts set aside for small businesses.

SBA administrator Hector Barreto says the increased loan demand “tells us that the critics are wrong, that small businesses are confident enough to invest in the future of the American economy.”

He added that the increased fees assessed to small businesses have helped to stabilize the SBA's loan program, which has in turn encouraged more small business lending from banks.


Women head up a quarter of the nation's business-owner high-net-worth households, and they bring unique characteristics to the small business niche, according to a recent survey by The Phoenix Cos.

For starters, women tend to own more nascent businesses than men. Thirty-three percent of female respondents said they were still in the process of establishing a small business, as opposed to 22 percent of men. Women are also more likely to be sole proprietors and to be heading up a family business.

There are attitudinal differences as well. Female small business owners tend to be more savers than investors. They also are more concerned about “outliving money in retirement.”

These findings demonstrate that women business owners are likely looking for an advisory sales approach that is more education-oriented, giving them the opportunity to really understand why a particular product or investment approach might help their business.

A good first step in this process is to perform an intake analysis that explores decisions the business owner wants to make in each crucial scenario: retirement, disability and death. This may be the first opportunity your client has had to think these scenarios through, and the answers to these questions help cement the client/advisor relationship.

Small businesses produce 13 to 14 more patents per employee than larger firms. Royalties from patent licensing agreements typically range from 2 percent to 10 percent of sales of the product in which the patent is used (or much higher for some products, including software.) Are patent holders an underexploited client niche?

Thirty percent of all high-net-worth households are headed by a business owner, and the U.S. is home to some 2.5 million closely held and family businesses, according to The Phoenix Cos.