More Business Owners Plan to Retire Early: Survey

Business owners' confidence has plummeted by about 30% since the onset of the pandemic and the number who plan to retire earlier than expected has nearly doubled, according to the latest Business Owners Outlook from Wilmington Trust, developed in collaboration with its parent company, M&T Bank.

The study was conducted Jan. 25 through Feb. 10 among 1,007 business owners, including 228 who identified as people of color, with annual revenue of $1 million or more.

Pandemic Wreaks Havoc

The survey found that the number of owners who are pessimistic about the future of the U.S. economy has almost doubled since March 2020.

Roughly half said they expect lower or flat revenue in 2021 versus pre-pandemic figures.

Owners' confidence in achieving their business's long-term financial goals dropped from 57% to 34%.

Owners have also been pushed to ramp up digital investments to respond to changing consumer behavior: 1 in 3 entrepreneurs said they have increased their investments in technology during the pandemic.

Their top priorities include e-commerce, overall tech equipment/infrastructure, social media and digital advertising.

The increased focus on technology and the investments required, however, may be giving older owners second thoughts about how long to remain at the helm.

Since August, the number of owners of larger businesses who plan to retire sooner than expected shot up by 110%, while the number doubled among owners of smaller companies, according to the survey.

Not only that, their confidence in passing their business along to a successor is eroding. Whereas in March 2020, half or owners expressed high confidence that their personal and business assets would be well-managed if they were to die or become unable to manage them, only 34% in the latest survey said the same.

"We highly recommend owners take this time to revisit their long-term business and personal planning," Stuart Smith, national director of business value strategies for Wilmington Trust and M&T Bank Emerald Advisory Services, said in a statement.

"To upgrade their technology, they may need to seek outside investment in the most cost-effective way possible, which will impact their valuation. But if they really are experiencing burnout and want to retire or sell sooner, they will need a well-planned transition. Beware of the quick-and-dirty exit plan, because it's usually both."

Diversity Among Business Owners

The survey also found that significant divides remain between entrepreneurs of color and non-minority business owners.

When engaging with the Paycheck Protection Program, entrepreneurs of color are 43% more likely to experience problems when applying than their non-minority counterparts.

Forty-six percent of business owners said their main issue was generating documents for loan applications and forgiveness, 45% cited accessing the application online and 43% said it was difficulty understanding the requirements for loan forgiveness.

Ninety-two percent of entrepreneurs of color cited diversity as either very or somewhat important, but only 70% of non-minority owners said the same. In addition, 91% of the former but only 70% of the latter stressed the importance of working with external partners that take action on diversity.

About one-third of non-minority owners said addressing diversity is not very or not at all important.

"We know that entrepreneurs of color continue to experience challenges securing capital for their businesses, with the pandemic exacerbating these conditions," Detra Miller, head of minority and women-owned business banking at M&T Bank, said in the statement.

"It's important that they work with an experienced banker that they can trust to help introduce them to new networks, identify solutions to optimize cash flow, establish new and extended lines of credit, and set up payment deferrals or explore alternative funding options if needed."