Two-thirds of wealthy business owners plan to sell or retire sooner due to Covid pandemic, survey finds

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Two-thirds of wealthy business owners accelerated their plans to retire or sell their business during the Covid pandemic, according to a new survey, reflecting the new psychological and financial landscape for business.

The survey, from Clarfeld Citizens Private Wealth, said 66% of high net-worth business owners indicated that the pandemic pulled forward their plans to sell their business or retire.

Half plan to sell their business as a result of the pandemic.

The survey covered 150 business owners with net worth of at least $2 million and investable assets of $5 million or more. It was conducted online in July by Ipsos on behalf of Clarfeld, which provides bank and wealth management services for people with high net worth.

Clarfeld said wealthy business owners came to value their time and families more during the pandemic and made the decision to cut back on work and business.

“They reset their priorities,” said Joannie Bozek, director of trust services and chief fiduciary officer at Clarfeld. “Their mortality became more real.”

Uncertainty around taxes and the growing likelihood of higher taxes on the wealthy is also adding pressure on business owners to sell. President Joe Biden, the Senate and the House have all proposed an increase in the capital gains tax rate and potential changes to the estate tax, which would increase the tax bite of any business sale. Biden and Democrats in Congress are also proposing higher income-tax rates on high earners.

“They realize that, for those that have been successful, now is the time to monetize that business,” Bozek said.

Most — 88% — plan to leave their businesses to family members, including spouses, children and grandchildren.

The pandemic and threat of higher taxes also caused business owners to think about moving. Two-thirds of wealthy business owners surveyed said they have moved their businesses during the pandemic. The chief reason: taxes, with 34% moving to lower-tax states. The second reason was to be closer to family and the third was remote work, which offers more flexible locations.

Of course, not all businesses can move and the Clarfeld survey was heavily concentrated in services businesses and tech-related fields, which are more easily shifted. Yet three-quarters of business owners surveyed see themselves physically moving their business in the next three to five years, especially if taxes go up, making high-tax states such as California, New York and New Jersey less attractive.

“Remote work easily led to ‘Where do I want to live?'” Bozek said. “If taxes go up and the economy is further affected I think that trend will continue.”