A study by UBS of high net worth investors shows strong appetite to start a business but also reveals that owners are often unprepared to sell and fear what their heirs might do.

A survey of high net worth investors by UBS finds that most believe now is a good time to own a business, emboldened by economic growth and changes such as US cuts to corporate and other taxes, while more than half of those polled want to start a firm soon. 

The study, by UBS Wealth Management, found that 73 per cent of wealthy investors find owning a business attractive since the recent regulation and tax reforms. The 22nd edition of the UBS Investor Watch, took the views of 2,245 high net worth investors (with at least $1 million in investable assets) from December 13, 2017 - January 2, 2018, including 264 with at least $5 million.

Some 58 per cent of wealthy investors are considering plans to start a business now or in the near future. Among that group, Millennials lead the pack, with 72 per cent responding positively. But there is hesitation amongst the generation to conquer their dreams. In fact, 77 per cent of Millennials think becoming a business owner is too risky, compared to 55 per cent of Gen Xers and 43 per cent of Baby Boomers. Millennials also feel that the stress level of owning a business is too high (83 per cent), while only 64 per cent of Gen Xers and Baby Boomers agree.

Selling
The economic environment also prompts some business owners to look for an exit and 41 per cent of owners expect to quit their business in the next five years. More than half of these owners (52 per cent) plan to sell, not only because many are approaching retirement age but because timing may boost their chances of securing a favorable sale price. 

UBS uses the data to suggest that many firms' owners haven't planned for succession or business transfer - the kind of area that such banks like to advise on. Some 48 per cent of expected sellers have no formal exit strategy in place and no owner transition plan. Only 20 per cent plan to leave the business to their family. Around 58 per cent have never had their business formally appraised, the study said.

Reluctant Heirs
Among business owners who plan to sell but unsure about leaving the business to family members, 89 per cent cite a lack of interest from their potential heirs as the main reason for holding on, while 21 per cent felt that their family members were not qualified to take over the business. These would-be sellers said their children would rather inherit assets from the sale of the business (82 per cent) than take over the business itself.

Business owners who plan on passing their business to family are worried about their legacy. Most (57 per cent) fear their heirs will take a business in a different direction, and an equal number are worried that heirs might sell the business outside the family. Their biggest fear, however, is missing their role in the business (62 per cent) after spending a lifetime building a successful enterprise.