Survey findings and insights from The Northern Trust Institute highlight growing need for proactive and comprehensive wealth planning among business owners and entrepreneurs

Northern Trust (Nasdaq: NTRS) announced today the results of its second annual Business Owner Benchmark, a survey of more than 150 business owners conducted by The Northern Trust Institute. The report, based on the survey conducted in third quarter of 2022, provides an inside view across four key themes on how business owners and entrepreneurs are deploying their wealth and what drives them as they look to the future.

The “New” Retirement

While many business owners may be looking forward to downshifting as they approach retirement age, a third of the survey’s respondents (32%) indicated that they are not interested in retiring and plan to be actively involved in their business as long as they can. A full 19% indicated that they do not plan to retire at all and instead intend to work just as hard starting something new, such as building a new business or creating a family foundation.

“This shift in what retirement looks like reflects the pursuit of purpose and impact that many business owners value beyond just the drive to create wealth,” said Eric Czepyha, Northern Trust’s Director of Business Services. “To prepare for this second phase, business owners should consider implementing a formulaic approach to evaluating new private investment opportunities, exploring various sources of capital for funding their ‘next big thing’ and making sure that their heirs are prepared to inherit the unique and complex assets they invest in.”

Inheritance: Who Gets What, and Why?

Although over 90% of survey respondents indicated that they have some sort of estate plan in place, one in three have not updated their estate plans over the past year, and 11% have not done so for at least the past three years. The top three drivers that led respondents to create their estate plans were achieving a certain level of wealth (52%), encouragement from their advisors (46%), and having a child (33%).

While major life events tend to be the main catalysts for motivating business owners to make estate planning a priority, estate plans should be reviewed at least every few years absent a change in circumstances. This is particularly true for entrepreneurs, whose business and wealth may change rapidly in size and complexity. “These findings underscore the need for entrepreneurs to shift away from a ‘set it and forget it’ mentality and instead take a more proactive approach to their wealth plan,” Czepyha said.

The Emotional Rollercoaster of Selling a Business

For most business owners, selling their business is a life-changing event that has profound, multi-generational financial implications and may also impact the business owner’s family dynamics and even their overall outlook on life. Although survey respondents who have sold one or more businesses reported experiencing a range of positive and negative emotions after the sale, 37% reported that their lives had become better since the sale, and 47% reported that their lives had become much better.

Nonetheless, many respondents reported having certain regrets post-sale. For instance, more than half (59%) felt concerned about how the buyer was treating their former employees, 43% felt they had walked away before the full potential of their business had been realized, and 36% admitted they were not entirely on board with the buyer’s vision for the company.

“Between the insights from this research and my own observations from working with entrepreneurial clients, it is clear that selling a business is more than just a financial transaction—it’s almost always personal, too,” said Czepyha. “That is why pre-transaction planning is so critical–from creating a ‘post-exit checklist’ to negotiating the deal with a view toward your long-term financial plans. Discipline before the sale will help minimize regrets thereafter.”

Finding Purpose Post-Sale

Business owners tend to keep busy after the sale of their business. Survey respondents spend an average of a third of their time (29%) on starting a new business, 14% on consulting and sitting on boards, and 13% on pursuing philanthropic endeavors.

“Without the ‘centerpiece’ of a business to run and an office to visit, the task of reorganizing life after the sale and pursuing your various interests can often feel disjointed and even overwhelming,” said Czepyha. “It’s important to get ahead of this transition by employing strategies such as establishing a post-exit infrastructure for how you will deploy and manage your newfound liquidity, and reimagining how you will make an impact on the world beyond your business.”

The Northern Trust Institute is a research center dedicated to advising affluent families. More than 175 experts collaborate across 34 areas of expertise to analyze behavioral patterns and identify the strategies that have been most effective for our clients — bringing the breadth and depth of our firm to each unique situation. The resulting insights position you to take action with confidence and achieve optimal outcomes with your wealth.

Northern Trust Wealth Management offers holistic wealth management services for affluent individuals and families, family offices, foundations and endowments, and privately held businesses. It is recognized for its innovative technology, service excellence and depth of expertise, with $336.2 billion in assets under management as of Sept 30, 2022. The Northern Trust Company is an Equal Housing Lender. Member FDIC.

About Northern Trust

Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of wealth management, asset servicing, asset management and banking to corporations, institutions, affluent families and individuals. Founded in Chicago in 1889, Northern Trust has a global presence with offices in 25 U.S. states and Washington, D.C., and across 23 locations in Canada, Europe, the Middle East and the Asia-Pacific region. As of September 30, 2022, Northern Trust had assets under custody/administration of US$12.8 trillion, and assets under management of US$1.2 trillion. For more than 130 years, Northern Trust has earned distinction as an industry leader for exceptional service, financial expertise, integrity and innovation. Visit us on northerntrust.com. Follow us on Twitter @NorthernTrust or Northern Trust Corporation on LinkedIn.

Northern Trust Corporation, Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A., incorporated with limited liability in the U.S. Global legal and regulatory information can be found at https://www.northerntrust.com/terms-and-conditions.

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