Cognitive Factors in U.S. Small Business Planning

Abstract

Millions of small business owners are nearing retirement age but lack succession plans which could imperil their businesses and lead to loss of income and employment. Small business owners may be susceptible to cognitive biases, such as delayed discounting and cognitive dissonance, impeding their creation of legal succession plans. This study examined these two cognitive biases in a sample of 42 small business owners. Results found that a majority (76%) of business owners did not have a succession plan. Business owners included delayed discounting (45%) and cognitive dissonance (28%) reasons for not creating a succession plan. These findings are important since cognitive biases can be changed and future research may focus on approaches to combat such cognitive biases leading to business owners creating succession plans.