• 93% of business owners said Covid-19 has made them reassess their relationship with their business
• A quarter of entrepreneurs started their business in order to create jobs, a legacy or a desire to give back to the community
• 86% of business owners state that a favourable capital gains tax rate is an important factor in their decision to build their current business, or any future one

Despite the overwhelming majority of business owners (93%) saying that the pandemic has led them to re-assess their relationship with their own business, they would still choose to build their businesses even at the risk of compromising their own health, according to the latest Heart of the Deal research from Arrowpoint Advisory, the dedicated mid-market team of Rothschild & Co in the UK.

The research found that 89% of business owners would delay selling their business if it would generate a greater financial return, even if it was at the detriment of their health. Of this cohort, 35% strongly agree that they would delay the sale of their business.

As such, it’s clear that building value is a key motivator for entrepreneurs when it comes to making decisions about the future of their business. Adding fuel to this, only 9% of owners would consider their energy level, enthusiasm or health when it comes to considering when to sell their business.

Jeremy Furniss, Managing Director at Arrowpoint Advisory, commented:

“While the pandemic has led many business owners to question the relationship that they have with their businesses, there is a clear determination from entrepreneurs that having survived the pandemic, they must now put their efforts into building their businesses, and the resulting value despite this coming potentially at a personal cost.”

The Heart of the Deal report surveyed over 350 business owners with businesses valued between £10m and £200m across financial services, business services, FMCG, manufacturing, media, technology, and healthcare sectors on the impact of Covid-19 and its influence on their motivations, perspectives on business ownership, hopes, concerns and plans for the future.

Drivers behind starting a business

Whilst creation of wealth is clearly a motivator for entrepreneurs, this isn’t the biggest driver behind why entrepreneurs chose to start their business. In fact, a quarter of entrepreneurs (24%) said the desire to create jobs, a legacy or desire to give back to the community was the main motivator for starting their business. This was followed by competitiveness with family, friends or peers (18%), a desire to create wealth (17%) and entrepreneurial spirit (15%).

This is a significant shift from the 2018 Heart of the Deal report, where only 8% stated that the desire to start their business was to create jobs and a legacy within the local community. In 2018, the number one motivator, deemed by 36% of business owners, was entrepreneurial spirit.

It’s not just health that must be considered when it comes to selling their business, 90% of owners also stated that they would bring forward the sale of their business should there be an increase in capital gains tax (CGT).

An increase in CGT would also see entrepreneurs re-think their motivation for creating new ventures as they might no longer be able to achieve an acceptable financial return – in the light of the personal sacrifices that they may have to make - at the point of sale. With this in mind, 86% of business owners state that a favourable CGT rate is an important factor in their decision to build their current business, or any future one.

The pandemic has also impacted entrepreneurs’ sale plans, with the majority of those who planned to sell their business before Covid-19 having to delay sale timings. As such, 64% of owners delayed sale plans by between six to eleven months. Whilst just over one in ten (11%) have delayed plans by a year to two. This may well play a part in sustaining the high levels of mergers and acquisitions activity seen in 2021 into 2022 and beyond.

Jeremy Furniss continues:

“Perhaps unsurprisingly, for many owners the decision to sell their business is driven by the desire to achieve personal financial security. However, since our last report, it’s clear that more entrepreneurs are determined to build businesses to create opportunity for those around them. Since the pandemic, contributing to the wider community has become increasingly important and businesses that have been able to articulate and deliver these brand values to their customers have prospered. In the years ahead, we expect more and more entrepreneurs will build businesses that have purpose.”