Business-Owner Households: Attractive, Sophisticated, and Active MacroMonitor Marketing Report Vol. III, No. 13 November 1998

Business-owning households are unique. As this report demonstrates, they are a major part of the consumer engine that represents two-thirds of the U.S. economy. At the same time, the businesses that these households own make a major contribution to the other third of the economy, both from the products and services provided by the nearly 10 million businesses with revenue under $10 million and from the hundreds of thousands of jobs they create each year.

The financial services industry has recently given much attention to the profitability of the small-business market. Despite the fact that only 12 percent of households have a business owner, they represent more than a third (36 percent) of all consumer assets. And that number does not take into account their business assets. Business-owner households are significantly different from all others in their demographics, use of financial products and services, and financial attitudes. For example:
  • Business-owner households are better educated, more affluent, and younger than all other households and average nearly twice the annual income. They own more than a third of all consumer assets and a fourth of all consumer debt.
  • Business-owner households are more likely to own nearly every type of transaction product, financial account, and asset and debt instrument. They are likely to have more in those instruments and to use those transaction vehicles more than all other households.
  • Business-owner households have more confidence that they will achieve their financial goals, are willing to take more risks, and are more sensitive about tax implications.

Confidence and Sophistication

Overall, business-owner households believe that they are qualified to make their own financial decisions, but that belief does not preclude their interest in using financial professionals for information and advice. A particularly interesting subset of business-owner households—those with professionals—also feels qualified to make its own investment decisions and is even more likely to consider its members to be sophisticated investors.

Traditional depository institutions continue to be the most frequently used primary financial service providers—but this position is not as strong among business owners as it is among nonbusiness owners, and it may be at risk from investment providers. The current perception of banks and other depository institutions is eroding as alternative providers expand their service offerings.

Although this report delves into the personal finances of business-owning households, it does not address the businesses' financial needs, much less how a financial provider might take advantage of potential synergies between these areas. To date, no study has explored the dynamic between business owners' personal and business financial needs and how financial institutions should market to them.