Inheritance business boom: One in five business owners use inheritance to kickstart their business, Charles Stanley

• One in five (20%) businesses are initially funded by inherited money, and almost the same number (19%) are funded by parents.
• Business owners and entrepreneurs remain reliant on family for subsequent growth funding, with 15% of business owners using inheritance for further growth investment.
• Almost half (49%) of business owners are first time entrepreneurs, whilst one in five (18%) are accidental entrepreneurs.

The bank of mum and dad has a huge part to play in funding many UK startups, with 20% of businesses funded by inheritance and a further 19% by parents, according to new research from wealth manager Charles Stanley.

The research, which sheds light on how business owners are funding and starting their businesses, indicates just how interlinked family and business enterprises have become in the UK. 14% drew on a family trust for their initial funding of the business, and 10% went to their grandparents or other family members (10%).

Even as businesses become more established, business owners and entrepreneurs remain reliant on family for subsequent growth funding. 15% of business owners and entrepreneurs said they used an inheritance they came into for further growth investments, while 13% leant on their parents.

However, entrepreneurs and business owners also utilise other funding options for their enterprises. 44% said that they dipped into their own savings to initially fund their ventures, and a further 21% took out bank loans.

Where initial and subsequent growth funding came from for business owners and entrepreneurs’ primary business:

The research also investigated the circumstances that led business owners and entrepreneurs to start their primary business. 11% said they acquired it from a relative, while 23% said they came into a sum of money, such as inheritance, used to purchase it.

Looking at how business owners and entrepreneurs describe themselves, nearly a third (29%) said they are custodians of a family business. Nearly half (49%) said they are first time entrepreneurs, while almost one in five (18%) said they are accidental entrepreneurs.

Andrew Meigh, Managing Director of Financial Planning at Charles Stanley, said: “The Fortune Favours study reminds us that UK business is, at least in part, a family institution. For many entrepreneurs starting a new venture it is their own savings or inheritance on the line, so it is important that there are conversations about their personal and family wealth alongside a drive to build their business in the most tax efficient way. 

“Careful planning is essential so that entrepreneurs and business owners, who have multiple considerations to manage, end up with the best possible outcomes. This assertion is especially supported by the finding that almost half of business owners are first-time entrepreneurs, and 20% are accidental entrepreneurs.

“At Charles Stanley, we offer professional advice and work alongside multiple partners to help effectively manage your finances. We offer planning across the generations with both personal and business finances fully considered.”

Charles Stanley is on hand to provide a financial planning perspective to business owners and their advisers as they decide the best way to fund their business. It works with legal, tax, and accountancy teams to help owners structure and manage owner wealth outside their business and ensures that a wealth plan aligns with a holistic plan for life including philanthropy, new business causes, and personal life and retirement.

To access Charles Stanley’s Exits in the UK report, please visit: https://www.charles-stanley.co.uk/insights/knowledge/exit-in-the-uk.