Most business owners are unconcerned about any changes to the Trump administration’s tax reductions should there be a change in leadership in 2020, according to a recent survey conducted by Wilmington Trust, a unit of M&T Bank.
Some 70% of business owners said they thought the reductions and pass-through benefits would remain in place even after the election, while 67% said that they expect to see lower corporate taxes beyond the election, while a whopping 85% were optimistic about the outlook for their business.
Wilmington Trust economist Rhea Thomas indicated that this high level of confidence may be misplaced. “A change in power next year in Washington could have major implications for policy in areas such as taxes and business regulation," said Thomas in a press statement. "Trade conditions and the outcome of trade negotiations could further weigh on business investment and spill over to reduced hiring by businesses. All of these external factors have the potential to impact businesses, their values and the pool of available buyers and investors."
Yet business owners are not showing much preparedness for changes in the economic outlook. Of those surveyed, only 55% admitted to having developed succession plans, only 49% had performed business valuations and only 48% were training or preparing for successor(s) to take over.
Stuart A. Smith III, managing director of strategic family business advisory services, emerald advisory services division at Wilmington Trust, called this lack of preparedness “troubling,” noting that “owners who do not begin planning years in advance of a transition risk suffering 'the unplanned discount' of lower proceeds from a liquidity event.” A positive business transition, he said, “requires ample time and foundational work. This survey shows that for too many business owners that foundational work is not taking place."
Indeed, the quarterly survey, entitled Wilmington Trust Business Owners Outlook: Is Now the Time to Sell?, which was undertaken in collaboration with M&T, found that in spite of the expected “silver tsunami” of business sales by baby boomers—boomers own nearly half of the millions of privately held U.S. firms—69% of owners aren’t ready to unload. 51% cited market conditions as the reason for their willingness to stand pat, while 61% said it was because they still enjoy running their companies.
Rob White, managing director and group head of mergers & acquisitions/corporate finance at M&T Bank Investment Banking Group, said in the press statement that while most business owners can’t imagine not going to work, this “suggests they don't know all their options, many of which include still operating their business after a transaction.” In addition, he said, “they may not realize most buyers and investors will want them to continue working after a transaction, which makes planning ahead and working with the right experts even more important."
The survey, which was conducted online in September and October 2019, tracked the responses of 1,007 owners of privately held businesses with at least $5 million in revenue throughout the U.S. and across industries.
