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As a business owner, you know what it’s like to lie awake at 2 a.m. Maybe it has happened when you are excited and full of new ideas for your business. More often, it’s because you are worried about issues you will face the next day. Sometimes, it’s because you just woke up with the solution to a problem. I’ve experienced all those emotions about my businesses over the years. Awake at 2 o’clock? is where I share them with you, and hopefully help with answers that will let you sleep.
John F. Dini, CExP, CEPA
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Small business owners are the Hunters of the 21st century. We are 3% of the US population, and yet we create over half of all American jobs. As Hunters, we may not be inclined to manage by the numbers or stick to systems. Are you a Hunter or a Farmer?
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How prepared are you to exit your company?
The Assessment breaks down the four major categories of exit readiness; Finance, Planning, Operations and Revenue/Profit.
Tag Archives: Boomer Bust
How Can You Sell a Business to a Buyer Who’s Broke?
According to a recent report from the Federal Reserve Bank, over half (52%) of Americans could not pay for a $400 car repair without borrowing. We can assume that most of these folks would not be legitimate prospects to purchase … Continue reading
3 Responses to How Can You Sell a Business to a Buyer Who’s Broke?
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The Luxury of No Resources
Among the Baby Boomer business owners who are beginning to plan their retirement, there are millions who founded the companies they plan to sell. Many of these were technicians when they started. They began as employees, and then used their … Continue reading
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7 Responses to Key Man Policies May Not Cover a Buy/Sell Agreement
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John
Another “Wide Awake Article” – To be advised is to be prepares, and you continually do that.
Always look forward to the next !!!
Thank you
Frank
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John,
Agreement that key-man insurance policies should be separate from buy/sell – ownership agreements. Having lived through the unexpected loss of two employees, I would encourage small businesses to look beyond ownership when considering key man insurance as part of their disaster planning process.
Brad
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Another type insurance to consider is whole life purchased using Section 79 Insurance.
Allows the company to pay for the insurance ( deduction to the company) owner pays tax on only part of cost, however beneficiary is the stock holders estate ( or wife) .
Company pays for policy , stockholder owns and benefits from it directly.
Can tied funding this to some part of stock valve in the future. -
John- My 43 years in the life business has taken me into many areas of practice. The usual KEY MAN POLICY is usually designed for one purpose only.It is to cover the loss of a “Key Man” such as a top salesman that brings in more than 50% of the companies business or an engineer or project manager that a company could not operate or complete a job if they should die. Buy and Sell agreements are usually to cover owners , partnerships or corporations for death or long term disabilities to owners or stock share holders to keep the business from imploding or having to deal with non producing spouses or minor corporate owners.All these plans should be drawn up by a law firm that is experienced in Business Law! not Legal zoom! The last thing is making sure that the agreements are funded with the proper products to meet the contracts specifications in the B&S agreement. I would shy away from Sec 79 plans in funding these agreements and look at the latest IRS rulings on SEC 79 use in business insurance? Comments Welcome! RICH FREELAND CBC
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A key man insurance policy is different from a buy sell insurance policy. You hit the nail on the head. The purposes are different.
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The trick is to get the business owner to planning table. In my 34 years of selling life insurance and disability insurance there is a significant resistance by small business owners to approach the topic. The vast majority of small business owners do not have these plans in place. It is even more critical for family businesses. I completed a large plan for a family business in 2004, the business was started in 1946. Good luck to all the life insurance purveyors out there. It’s a mine field.
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Where Will All the Small Businesses Go?
What would the small business landscape look like if over one million small businesses disappeared? Get ready, it’s about to happen. I write and speak frequently about the passing of the entrepreneurial generation. Driven by competitive pressures to succeed, the … Continue reading
One Response to Where Will All the Small Businesses Go?
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Hi
Congratulations on your award. I ran across your book and your IBPA award in the newsletter I am one of the relatively few lawyers around with a foot in the publishing and food and ag entreprneurship camps. I blog at http://schellacres.typepad.com/ and your book would be a natural to review if you are interested in having a review on the blog. Best Success with your book, I think it’s a crucial insight about temperament–can’t make cows hunt, can’t make lions graze (happily).
Best
Rich Schell
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The Migration from Service to Knowledge
As I have pointed out frequently in this space, the Baby Boomers’ entry into entrepreneurial business moved the core of the American economy from products to services. (see www.theboomerbust.com) Multiple dynamics created the shift. Boomers were degreed at four times the … Continue reading
can you identify the source of the chart stats? thanks, N
Sure, the birthrates are from the US Census. The chart is my own.
What John Dini writes is so true. Seller financing sells businesses. Savvy buyers expect the seller to have some skin in the game post-acquisition.