UK company owners gamble wealth on business

Haines Watts have undertaken a UK company owner survey and found that business owners are drawing modest salaries and eschewing lavish lifestyles in favour of investing heavily in their business. They surveyed over 500 business owners from every region of the UK, from a complete range of sectors and a complete range of company sizes. UK Business owners are “crossing their fingers and hoping” that their business will deliver the returns needed to support them and their families – despite certain major risks to their business that have been heightened by the recent Brexit vote.

The Haines Watts Survey is based on interviews with companies between £1 million and £50 million turnover. It revealed the earnings, wealth and spending habits of UK business leaders.

Risking it all

The study reveals that the average UK company owner earns £95,000 per annum (including salary and dividends) – less than half the average salary of the CEO of an AIM-listed company (£202,000, Fast Growth Company, 2014).

Company owners told Haines Watts that they are instead investing their wealth back into their business or taking other risks such as gambling their financial future on a stock exchange. The average company owner has £121,000 in financial investments, such as stocks and shares.

Conversely, the humble pension has fallen out of favour with all age groups, and yet company owners attest to having significant amounts of property debt. A third (32%) of company owners do not have a pension fund, while the average UK business owner has £223,000 combined residential and commercial property debt.

The Haines Watts study reveals that UK company owners are gambling their wealth on their business, leaving their financial security hanging in the balance. This is surprising given how hard they work to generate that wealth in the first place and the obvious risks involved. It’s easy to understand why business owners believe that their company is a safe investment. But if they held up a mirror, many owners – whatever their age or stage in their life – would be uncomfortable with what they saw. They would wish they had a contingency plan in place and spent more time considering their options.

Blind faith

Not only are company owners putting all of their eggs into one basket, but they are also leaving their business open to significant risks. More than two fifths (42%) of company owners feel their business could not survive more than a week without them, while more than one in ten (11%) believe it could only manage for up to 3 days.

As many as half (50%) of company owners have a main supplier that they could not survive without, while 43% have a major customer that they rely on. In fact, 78% say their main customer contributes a third (30%) or more of their revenue. Furthermore, half (50%) of company owners could not survive without a key member of staff.

The study reveals an alarming degree of risk of downtime in the event of an accident or disruption. As witnessed with the UK’s recent Brexit vote, the potential for significant market disruption is never far away and any company could fall to its knees if it doesn’t have the right contingency plans in place to deal with such an event.

Business owners’ wealth is about more than just the here and now; it’s about protecting their financial future, their family and their staff. As accountants and business advisers, it’s our job to ensure that business leaders realise it’s careless to cross their fingers and hope for the best. Company owners need to understand how much is at stake, address their biggest areas of vulnerability and regain control of their future.

Michael Davidson

Haines Watts, More than 60 offices throughout the UK
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Published: November 2016 l Photo: Rafael Ben-Ari -

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