As a successful business owner, you have no doubt worked hard and made many sacrifices to grow your business. You know there are no short cuts to success! That is why you should put just as much energy into protecting it as you did building it.
When you look at long-term plans for your business, you should ask yourself these important questions:
· What plans do I have for retirement?
· In the event of my or my partner’s untimely death or disability, is my business capable of surviving and thriving?
· Is my family adequately protected upon my death or disability?
· Have I done my best to attract, retain and reward the key employees who are vital to my business success?
If you answered “no” to any of these questions, you may want to consider implementing a formal business planning strategy. Proper planning can help you protect your business, attract and retain key employees, and help ensure that your business transfers in the manner that you choose.
Take the steps necessary to protect your most valuable assets
Start by exploring all your protection options. After that, you’ll be able to develop a long-term strategy that can help protect the continuity of your business if you, a partner, or key employee decides to retire or leave the business, becomes disabled, or dies unexpectedly.
Two of the most important areas in developing this short and long-term strategy are your ability to attract and retain key employees and the protection of the business you’ve worked so hard to build.
Attracting and retaining key employees
In this highly competitive executive marketplace it has become increasingly difficult to attract and retain top talent. Some important and effective strategies that are often used are plans such as: Nonqualified deferred compensation plans, Split dollar plans and Executive Bonus (section 162) plans.
The purpose of these strategies is to attract key employees or prospective employees with compensation over and above the negotiated salaries. Try to distinguish your business from others so that you can attract valuable executives as part of your workforce.
Protect the Business you’ve worked so hard to build
You’ve built your business with the hope that it will withstand the test of time, even if you or the key employees you have now aren’t able to participate as you have been. There are strategies that can help cover you if the worst happens.
One such strategy is Key Person Insurance. This insurance can offer peace of mind in knowing that the financial stability of your business is protected in the event of a valued employee’s untimely death or disability. The proper life or disability insurance is used to cover this vulnerability.
A second strategy is Individual disability Income Insurance which allows a monthly benefit to continue to come into the business if an owner becomes disabled.
Also important is creating a Buy- Sell Agreement when there are at least two partners in the business entity. This serves as a way to buy out the other partner’s interest in the business for the benefit of the deceased heirs. Life insurance is commonly and effectively used to fund these.
Business Overhead Expense is also vital in reimbursing business owners for overhead expenses incurred while they are disabled, keeping the company running while the owner recovers.
Qualified Sick Pay Plan is a way that sets company policy before an employee disability occurs. It establishes whom to pay, how much to pay, when to start payments, and how long to pay. The strategy is important in the budget and viability of the company’s continued success.
Whether it’s attracting and retaining key employees and executives, or protecting your business and continued success, it is critical to implement the proper and effective tools into your business to achieve these goals. A competent financial adviser or attorney will be able to guide you on your path in improving what you have already implemented or create a strategy that will prove effective.