This is the 4th part in a series about what women business owners should do to maximize wealth, exit their business, and create a strong retirement plan for a successful future.
Part 1 | Part 2 | Part 3 | Part 4
Check out a summary of the 25 challenges & opportunities: Facts About Women-Owned Businesses
19. Women are More Likely to Become Caregivers
Women are 3 times more likely than men to retire earlier than expected, due to caregiving responsibilities for a family member.
When a woman leaves work to provide caregiving, she will lose an average of $324,000 in total wages and benefits — compared to a loss of $284,000 for a man in the same situation. More male employees (35%) feel that care responsibilities hurt their career more than female employees (23%).
Females tend to have stronger talents in multitasking, creativity, empathy, and interpersonal relationships.
In a survey of over 1,500 employees, 73% of respondents (including 8% who are business owners) said they currently have some type of caregiving responsibility such as childcare, eldercare, adults with disabilities, cognitive disability care, special needs care, or chronic illness care.
(sources: The Financial Challenges Facing Older Women forbes.com, 6 Ways Businesses Can Support Working Caregivers During Covid-19 forbes.com, and The Caring Company hbs.edu)
20. Women Owners Aren’t Sure When They Can Retire
Just 39% of women feel confident they will have enough resources to last 25 years into retirement, compared to 54% of men.
Women in “pre-retirement age” (ages 50-64) accrue an average of $38,200 in future wealth savings, which is two-thirds (2/3) the wealth savings of males of the same age ($60,500).
(source: Gender differences in saving for retirement linked to financial needs – wtwco.com)
No Financial Goal or Written Plan
A significant number of women business owners (84%) are concerned about retirement planning, yet 77% do not have a written retirement plan.
One in 3 female owners do not know how much money they will need for retirement. A similar number (37%) believe their retirement planning needs are “complex.”
(sources: Female Entrepreneurs and Retirement Planning – MoneyWeave Academy moneyweave.org and Financial Goals Concerns and Actions of Women Business Owners – theamericancollege.edu)
Few Create a Written Retirement Plan
Half of female owners want to maximize the value of their business to fund their retirement, yet only 10% have a written plan to achieve this goal.
(source: Female Entrepreneurs and Retirement Planning – MoneyWeave Academy moneyweave.org and Financial Goals, Concerns and Actions of Women Business Owners yumpu.com)
21. Women are Leading Family-Owned Businesses
More women are taking a leadership role in family-businesses. A 2007 study of over 1,000 firms showed that 24% of family-owned businesses have a female CEO or President (up from 10% in 1997).
Nearly a third (31.3%) of family businesses indicated their next successor would be a female, and 57% had women in a top management position.
(source: American Family Business Survey 2007 pdf massmutual.com)
Fewer 4th-Generation Family Businesses
The PwC 8th Family Business Survey, which gathered data from over 2,800 firms worldwide, revealed that 88% of family owners want to pass it on to the next generation.
- 30% of family-owned businesses survive into the 2nd generation,
- 12% make it to the 3rd generation, and
- 3% make it to the 4th generation.
(sources: PwC Global-Family-Business-Survey-2016 pwc.com and About the Family Business Alliance fballiance.org)
Goals in Family Businesses Post COVID
In a study of family-owned businesses around the world, nearly half (46%) became more involved in the business because of COVID; just 2% had become less involved. Owners said their ability to tighten cash flow was essential, and nearly three-quarters said they used at least 3 methods to preserve cash:
- cut operational expenses,
- reduce dividends, and
- delay capital investments.
(source: Banyan Global COVID Survey – Banyan Global)
The most significant challenges post COVID include
- loss of revenue
- insufficient cash flow
- family conflict
- loss of key employees, and
- damage to company culture
Very few family business owners are concerned about losing control of their business, and most (67%) do not feel any need to sell or close it.
(source: Banyan Global COVID Survey – Banyan Global)
Image source: Banyan Global COVID Survey – Banyan Global
Qualities of an Effective Successor
An analysis by Gallup found that the likelihood of a family-owned business succeeding is dependent on 3 factors for the successor:
- natural talent
- key experiences
- focused development.
(source: Solving Succession Problems in Family-Owned Businesses gallup.com)
22. Most Business Owners Do Not Create a Succession Plan
Unfortunately, even with the best of intentions, every company eventually transitions to a new owner. This can be due to retirement, illness, incapacitation, or even death. Many owners are worried about the future of their business but don’t know how to be prepared.
A survey of over 500 companies in 2008 showed that
- 9% have a formal, written transition or succession plan (91% did not have a fully formed plan),
- 33% have an informal plan, and
- 58% of business owners have no exit plan.
(source: Business Exit – Business Transition/Succession White Paper 2008 businessexit.com)
The majority of business owners do not have a written succession plan that defines who will take over if something happens to them (such as this excellent worksheet by Massachusetts Mutual Life Insurance Co).
Family-Owned Business Succession
The 2021 Family Business Survey interviewed over 2800 family-owned companies worldwide with annual revenue of $5M to $6B. The study showed that:
- 51% have a documented vision and written purpose statement,
- 30% have succession plans (up from 15% in 2018), and
- 29% say there is a resistance to change to a professionalized approach to governance (rather than an emotion response)
The pwC study also revealed that family-owned businesses with both a written Values statement and a documented a succession plan has risen from 20% pre-COVID to 41% post-COVID. Owners were also more likely to revise their succession plan in response to the pandemic.
Family businesses with a written values statement were 54% more likely to see an improvement in their staff’s emotional & mental health support (compared to 39% for family businesses without a values statement).
(source: 10th Global Family Business Survey: From trust to impact: Why family businesses need to act now to ensure their legacy tomorrow pwc.com)
23. Female Owners More Likely Than Men to Use Financial Advisor
Female owners are more likely to retain a financial advisor to help their business: 15% of women, compared to 10% of male owners.
The financial advisor sector is dominated by males; as of 2018, just 33.5% of financial advisors are female. A Mercer study showed a disparity in female versus male executives in the financial industry, as well as a higher number of exiting females compared to males.
(sources: How Male and Female Small Business Owners Differ in Running Their Businesses – PaymentsJournal.com and What Does Diversity and Inclusion Look Like in Financial Services mercer.com)
In general, women:
- are less confident investors,
- have a lower tolerance for risk, and
- are less likely to invest in risky funds than men.
(sources: Reinventing Wealth Management for Women accenture.com and German Institute for Economic Research “Risk Attitudes and Investment Decisions” 2009 diw.de)
24. Female Owners Achieve Higher Income and Net Worth Than Employees
A study of 1,354 business owners revealed that female owners see a higher household income ($144K) than full-time female employees ($94K), as this chart demonstrates.
[image: SMB Insights The Business Journals “Do Women Business Owners Have It All?” 2015 bizj.us]
Female owners also enjoy a significantly higher net worth of $1.1M, compared to $319K for full-time female employees.
(source: SMB Insights The Business Journals “Do Women Business Owners Have It All?” 2015 bizj.us)
Business Ownership is Tied to High Net Worth
Net worth is closely tied to business equity. In 2015, families with self-employed individuals have a median net worth of $380K (compared to $122K for non-owner families) and a mean net worth of $2.7M (compared to $747K for non-owner families).
A 2020 survey by the Federal Reserve Board revealed that 13% of US families in owned a privately held business (similar to 2016) and that higher income and business ownership are related: nearly 40% of families in the top 10th percentile of income also own a business.
(source: The Federal Reserve – Changes in U.S. Family Finances from the Survey of Consumer Finances federalreserve.gov)
Families with business holdings tend to generate higher incomes and a higher level of wealth than those who are not business owners. This pattern is true of both mean (“average”) and median (“midpoint”) of both net worth and income, as this table shows:
Image source: The Federal Reserve – Changes in U.S. Family Finances from the Survey of Consumer Finances federalreserve.gov
The Small Business Administration has determined that high net worth is associated with business equity—nearly half of families in the top 10th percentile of net worth also have business equity, and another 23% of families from the 75th to 89th percentile of net worth have a business stake, as you can see from this table:
(sources: The Importance of Business Ownership to Wealth sba.gov and Business Ownership to Wealth Small Business Facts sba.gov)
Image source: Business Ownership to Wealth Small Business Facts sba.gov
25. Women Want to Increase Their Business Value
The vast majority of business owners (84%) said the sale of their business was important to their retirement plan, but only 1 in 10 owners sell their company for what they wanted or expected.
Even after exiting their business, more than 60% of owners said they had done so unsuccessfully. The top reason for a poor transition is “improper planning.”
(source: Business Exit – Business Transition/Succession White Paper 2008 business exit.com)
In Part 5, you will hear Grace LaConte’s perspective on how female business owners can achieve more success.
Curious about what your business could look like if you had higher profit margins? Find out more about what we do.
If you’re ready to talk, contact us so we can discuss your situation.