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Tag: business owners

  • Why Many Business Owners Are Hesitating to Make Succession Plans

    Formally handing over control of a small private business is usually the moment when owners can step into retirement, assured that the financial future of their company is in capable hands. Yet new data shows nearly half of founders surveyed fear the next generation isn’t sufficiently prepared to take over, leading less than quarter to have established formal succession plans.

    Those were the top findings of an annual survey by private investment bank and financial advisory firm Brown Brothers Harriman (BBH), which sounded out nearly 500 family-owned and privately owned companies. With 76 percent of respondents saying they had no formal succession plan or were only in the process of working one up, the results reflected the strong hesitations of many founders and current owners about passing their businesses to the next generation. Nearly 50 percent of participants described the family cohort that’s first in line to take over their businesses as being only “somewhat prepared” to manage its finances and operations, with 40 percent saying the next generation isn’t at all ready to shoulder the responsibilities involved.

    As a result, only 38 percent of company owners said they’d been entirely open and transparent to next-generation family members about their plans for passing along their personal wealth and business holdings. In some cases their hesitancy — or aversion to prepare for succession at all — was simply because current leaders were too busy or lacked a sense of urgency to do so. But other reasons they cited offered insights into the sensitivities and worries frequently involved in handing over a business.

    Top concerns that prompted owners to remain somewhat or entirely vague about their succession plans included not wanting disrupt family dynamics, and an aversion to revealing their intentions before the right time.

    Others were based on fears that designated successors wouldn’t continue working as hard and earning their keep once they’d learned of transmission plans, as well as worries that inheriting too much money would undermine the new leader’s dedication to and industriousness in the business.

    “Some owners fear that talking about wealth too soon may spark entitlement or anxiety instead of instilling gratitude and responsibility,” said BBH principal Ali Hutchinson in comments accompanying the report. “Starting early and tailoring these conversations to the age and maturity level of each family member can make the eventual transition smoother and more natural. This ongoing dialogue helps instill values, trust, and confidence over time.”

    Despite those hesitations, nearly two-thirds of respondents said they intended to transition company ownership to the next generation — at some point, anyway. Another with another 8 percent of participants said planned to have managers or employees to take control. But if leaving the business to children, close relatives, or chosen subordinates was a foregone conclusion for a majority of owners, many still expressed reservations about formally establishing and announcing those plans.

    Resondents cited potential family strife or other anticipated negative reactions most frequently at 46 percent of the time, with the lack of seeing a clear, single successor as another top response. Others included leaders’ own emotional reluctance to step away, and probable tax consequences as explanations why current owners hesitated to establish and reveal a firm exit strategy.

    According to BBH partner Kathryn George, those concerns are often further reinforced by the doubts business owners have about their natural successors being up to the task. In some cases, they may even inspire leaders to skip a generation, and transfer their company to younger family members they see as better equipped to assume the responsibilities involved.

    “Succession planning remains one of the biggest vulnerabilities for private businesses, and a large part of that often stems from worries around successor readiness,” George said. “Owners may know who of the next generation they’d like to take over, but how can they know when the next generation is ready?”

    Awaiting their eventual exit, a large majority of owners said their main focus remains building their business further, and leaving it as strong as possible for successors when they do hand it off. Over 77 percent of respondents said growing their company was their top capital priority, surpassing expansion of equity stakes for leaders who shared ownership, or increasing dividends they benefit from in a multi-party proprietary structure.

    The final deadline for the 2026 Inc. Regionals Awards is Friday, December 12, at 11:59 p.m. PT. Apply now.

    Bruce Crumley

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  • Does Owning a Business Push People to the Political Right? A Stanford Study Says Yes

    Picture a hard-working small business owner, maybe someone who operates a car dealership, a consulting business, or a fast-food franchise. If I tell you nothing else about this person, would you guess they’re more likely to vote for Republican or Democratic? 

    I am willing to go out on a limb and guess most of us would say Republican.

    The image of small business owners as steady, practical, hard-working and interested in pro-growth, pro-business policies aligns with the traditional Republican brand, after all. The extremely high-profile recent shift of Silicon Valley founders towards the right only underlines the link between entrepreneurs and Republicans. Add to this everyday interactions with entrepreneurs and the scales tip decisively towards the right in many people’s minds. 

    But does data back up this intuition? And perhaps more interestingly, if gut feel proves correct, why is it exactly that most small business owners tend to lean right in their politics? A large new Stanford study dug into these questions with interesting results. 

    Data shows small business owners do lean right

    For the study, published in the British Journal of Political Science, a team of researchers out of Stanford and University College London used a few clever methods to get a handle on small business owners’ political loyalties and motivations. 

    The first was the most straightforward: just ask them. The team looked at two historical polls that included questions on self employment and political affiliation and found, “both surveys showed that self-employed Americans were more likely to lean Republican,” according to Insights by Stanford Business 

    That even held true after controlling for demographic characteristics like race, gender, education, and income that tend to influence voting patterns. The researchers then broadened their lens, looking at similar data internationally. In Japan, Germany, and Australia small business owners tend to lean right politically as well. 

    Finally, they compared doctors who own their own practices to those employed by others. Would self-employed physicians have different politics from the otherwise demographically similar doctors who work for someone else? The answer was yes again. 

    Self-employed doctors were up to 5 percentage points more likely to register as Republicans and up to 6 percentage points more likely to donate to Republican candidates. 

    Why do small business owners tend to be Republican? 

    This last finding is particularly interesting as it suggests that it’s not just that those who lean Republican tend to become small business owners. Rather it looks like owning your own business tends to nudge people to the right. 

    The researchers came up with another crafty way to test if this hypothesis was correct. And if it was correct, why entrepreneurs generally move rightwards. They used data from the Covid-era Paycheck Protection Program (PPP) to identify small business owners. Then they surveyed them about their personalities, as well as their political and social views. 

    Confirming what the previous evidence suggested, the small business owners again leaned right. As a group they were 18 percent more likely to vote Republican. This wasn’t because of their more generally conservative temperament, the data revealed. Instead, the primary reason for their preference for Republicans was dislike of government regulation.  

    “The experience of running a small business — especially when other employees are involved — increases the likelihood of having to deal with onerous government regulations, which in turn influences one’s political views rightward,” the co-authors concluded.

    Everyday intuition confirmed 

    This is hardly the most shocking research finding ever published. As Gene Marks, founder of small business consulting firm The Marks Group, explained on The Hill, these findings align with his impressions of entrepreneurs after working closely with them for 20 years.  

    “Business owners, though optimistic and opportunistic, are also generally wary and untrusting,” he writes. “Like the rest of us, they know that politicians lie for a living. Tax cuts, economic growth, grants and investments are promised and then never materialize. All things being equal, they would rather hear less from their government leaders than believe in promises that are often broken.”

    Republicans, traditionally, have promised to meddle less. They’ve been rewarded with the votes of more small business owners. Politicians interested in reversing this trend will need to flip the expectations of entrepreneurs. 

    The way to earn an entrepreneur’s political support, this research confirms, is to convince them you’ll stay out of their way. The way to lose it is to give them even more things to worry about. 

    The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.

    Jessica Stillman

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  • Restaurant owner makes ingenious move to protect business after nearly losing everything: ‘Don’t wait … get ready for it’

    After losing everything in his Naples, Florida, restaurant to flooding from Hurricane Ian in 2022, one business owner decided to invest in the proper precautions to keep his newly rebuilt establishment safe.

    Alberto Varetto, who owns Alberto’s on Fifth, has enlisted the help of Xero Technologies for flood-protective precautions, according to WFTX. Xero Flood, its custom-fit, inflatable device that barricades doors and prevents floodwater from entering the structure, could save the restaurant from a catastrophic flood.

    The device works by building pressure as the device inflates and expands to fit the width of an opening, such as a door or a window. The device will counteract the force of external water pushing against the door, preventing the barricade structure from caving in.

    According to the company’s website, this device can be installed without additional fixed-point hardware, making it easy to install and remove as necessary.

    “It doesn’t matter how big the opening is, how small the opening is — we build it to size,” said Mark Crabtree, CEO of Xero Technologies, per Fox 4 News.

    Extreme weather events such as Hurricane Ian are becoming more common and more severe, brought on by rising global temperatures.

    The community must work together to protect the town and prepare against unpredictable extreme weather events, because if all but one business survives flooding, then the town may as well be in ruins. That’s not good for business for anyone.

    Crabtree recommends that more business owners be proactive and invest in flood-prevention technology such as Xero Flood to avoid a repeat of Hurricane Ian in 2022.

    “Don’t wait until the hurricane will come, but start to work and get ready for it,” said Varetto, per Fox 4 News.

    Join our free newsletter for weekly updates on the latest innovations improving our lives and shaping our future, and don’t miss this cool list of easy ways to help yourself while helping the planet.

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  • Civil Rights Undone

    Civil Rights Undone

    In late 2020, even as the instigators of insurrection were marshaling their followers to travel to Washington, D.C., another kind of coup—a quieter one—was in the works. On December 21, in one of his departing acts as attorney general, Bill Barr submitted a proposed rule change to the White House. The change would eliminate the venerable standard used by the Justice Department to handle discrimination cases, known as “disparate impact.” The memo was quickly overshadowed by the events of January 6, and, in the chaotic final days of Donald Trump’s presidency, it was never implemented. But Barr’s proposal represented perhaps the most aggressive step the administration took in its effort to dismantle existing civil-rights law. Should Trump return to power, he would surely attempt to see the effort through.

    Explore the January/February 2024 Issue

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    Since the legislative victories of the civil-rights movement in the 1960s, legal and civil rights for people on the margins have tended to expand. The Civil Rights Act of 1964, the Voting Rights Act of 1965, and the Fair Housing Act of 1968 were followed by voting provisions for Indigenous people and non-English speakers, a Supreme Court guarantee of the right to abortion, increased protections for people with disabilities, and formal recognition of same-sex marriage. The trend mostly continued under presidents of both parties—until Trump. Though his administration could be bumbling, the president’s actions matched his rhetoric when it came to eroding civil-rights enforcement.

    From the March 2021 issue: American democracy is only 55 years old—and hanging by a thread

    Under Trump, the Justice Department abandoned its active protection of voting rights. The Environmental Protection Agency ignored civil-rights complaints. The Department of Housing and Urban Development scaled back investigations into housing discrimination. Trump’s appointees to the Supreme Court, for their part, have whittled away at landmark civil-rights legislation and presided over the end of affirmative action.

    In a second term, the most effective way for Trump to continue rolling back protections would be to dismantle disparate-impact theory. Under the theory, the federal government can prohibit discriminatory practices not just in instances of malicious and provable bigotry, but also in cases where a party’s actions unintentionally affect a class of marginalized people disproportionately.

    The theory is important because discrimination can be perpetuated without ill intent; even seemingly benign or neutral policies can perpetuate a legacy of bias, or create new inequities. But disparate impact is also essential because landlords, business owners, and municipal officials who do wish to discriminate have learned how to operate without expressing overt bigotry. Under disparate impact, the government’s burden is not to prove that these actors intended to discriminate, only that their actions resulted in discrimination.

    For decades, lawyers have invoked disparate impact as a means of fighting discrimination. The standard has been applied across the federal government. After the housing crisis of 2008, the DOJ brought a series of lawsuits against banks that had charged higher mortgage rates and fees to minority borrowers, winning hundreds of millions of dollars in settlements from the lenders. In 2015, the DOJ released a damning report on the practices of the police department in Ferguson, Missouri, after an 18-year-old Black man, Michael Brown, was shot and killed by a police officer. Disparate impact was mentioned at least 30 times in the report, including in its main takeaway: “African Americans experience disparate impact in nearly every aspect of Ferguson’s law enforcement system.”

    Adam Serwer: Trump is making it easier to get away with discrimination

    Many conservatives have long been suspicious of disparate impact. The most principled objections center on the claims that it invites government overreach and inefficiency, that it impedes state and local policy development, and that it always entails some degree of ghost-chasing—in a country as unequal as America, discerning what exactly contributes to a disparate outcome can be difficult.

    But these philosophical and practical objections to the theory have always served to disguise a more visceral disdain. Many conservatives simply believe that ensuring equality is not a legitimate federal priority. In the Trump era, as the Republican Party has embraced white nationalism, its leaders have been emboldened to abandon the guise. They edge closer to the line once held by the architects of Jim Crow: Equality is undesirable because people are not equals; some of us might not even be people.

    Trump himself has always had a preternatural gift for identifying and channeling grievance; white backlash against civil-rights legislation was one of the major forces behind his advancement to the presidency, and that backlash can be traced directly to disdain for civil-rights legislation and enforcement. Once Trump was in office, one of his early targets was HUD. In 2020, the department finalized a rule that demolished its discriminatory-effect standard, which had been the basis for enforcement at the department for at least 40 years. Trump’s HUD secretary, Ben Carson, said that the move would spur efficiency at the local level without undermining the department’s antidiscrimination work. But Carson has long been a skeptic of desegregation; during his 2016 presidential campaign, he described desegregation efforts in cities as “failed socialist experiments.” Ultimately, Carson’s attempt to undermine the discrimination standard was stymied by lawsuits. But the cause of fighting bias suffered nevertheless. In 2020, at the end of Carson’s tenure, the number of secretary-initiated complaints had gone from several dozen in 2015 to three.

    Trump did serious damage to disparate impact as president; there’s little question that he would finish the job if given another chance. A second Trump administration could go beyond simply abandoning the theory, perhaps even bringing lawsuits seeking to declare the entire concept unconstitutional. Trump could thus attack civil-rights law from both sides, sabotaging the government’s capability to adjudicate cases while also arguing that it should not have that capability in the first place. If this two-pronged strategy succeeds, it will be difficult for any future administration to undo the changes. With today’s conservative-dominated judiciary and high levels of political polarization, any substantive changes Trump makes to civil-rights enforcement could effectively become permanent.

    Without disparate impact, the DOJ would lose its primary tool for addressing brutality in police departments, and current efforts to finally enforce environmental laws in communities of color and hold cities accountable for creating slums in Black and Latino neighborhoods would be stalled. Given the damage that has already been done by the courts, there is a future—perhaps a likely future—in which the remaining foundations of the civil-rights era are undone. If Trump were to win in 2024, he would see the victory as a mandate to tear everything down now.

    This article appears in the January/February 2024 print edition with the headline “Civil Rights Undone.”

    Vann R. Newkirk II

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