Report: Controlled Sale vs. Auction Sale of a Small Business

September 8, 2026 by YOUR BUSINESS WORTH, posted in Company Wealth, Selling Your Business, Inside Sale, Valuation, Business Growth and Transition

Report: Controlled Sale vs. Auction Sale of a Small Business

A Comparative Overview for Business Owners

By Thomas J. Perrone, CLU, CIC

1. Introduction

When selling a small business, owners typically choose between two primary approaches to engaging buyers: a controlled sale (also called a controlled or limited auction, or targeted negotiated process) and a broader auction sale. Both aim to transfer ownership, but they differ significantly in process design, level of competition, confidentiality, timeline, cost, and risk. The choice depends on the business’s size, industry, desirability, the owner’s priorities (price maximization vs. discretion and certainty), and market conditions.

This report outlines the key differences, advantages, disadvantages, and typical suitability for each method in the context of small businesses (generally those with revenue under roughly $50–100 million, though the principles scale).

2. Definitions

Controlled Sale

A structured but limited process in which the seller (usually through an advisor) identifies and approaches a select group of pre-qualified potential buyers—typically strategic competitors, complementary companies, private equity firms, or known industry players. Competition is created among this smaller pool under tight seller control over information release, timelines, and negotiations. It is not a free-for-all; the process is managed to protect confidentiality and maintain leverage.

Auction Sale

A more open competitive process designed to attract the widest reasonable universe of potential buyers. The business is marketed more broadly (via teasers, databases, industry networks, or public channels in some cases), with formal bidding rounds. The goal is maximum competitive tension so that the highest price and best terms emerge from the market. Pure “public auctions” are rarer for operating small businesses than for assets; most “auctions” in this context are still somewhat managed but far less restricted than a controlled sale.

3. Key Differences

The following table summarizes the primary differences between the two approaches:

Aspect	Controlled Sale	Auction Sale
Buyer Pool	Small, pre-selected, qualified group	Broad; many potential buyers invited
Confidentiality	High – limited disclosure, strict NDAs, controlled info flow	Lower – more parties see information; higher leak risk
Competition Level	Moderate (among few strong candidates)	High (designed for maximum bidding pressure)
Seller Control	High – over timing, process rules, information, and negotiations	Lower – market and multiple parties drive pace and dynamics
Timeline	Often shorter and more predictable	Can be longer due to broader outreach and more rounds
Cost & Complexity	Generally lower marketing costs; more focused effort	Higher marketing, coordination, and advisor costs
Risk of Disruption	Lower (employees, customers, suppliers less likely to learn)	Higher (rumors more likely to spread)
Price Outcome	Strong if right buyers are targeted; may leave some value on table	Potentially higher due to wider competition; not guaranteed
Deal Certainty	Often higher with well-chosen buyers	Can be lower if many tire-kickers or process fatigue occurs

4. Advantages and Disadvantages

Controlled Sale

Advantages:

Better protection of sensitive information and business relationships.

Seller retains more negotiating leverage and process discipline.
Reduced operational disruption and employee anxiety.
Often faster and less expensive to run.
Easier to manage for smaller businesses with limited internal resources.

Disadvantages:

May miss a higher-paying buyer outside the selected group.

Requires good advisor judgment in identifying the right targets.
Less pure market validation of value.

Auction Sale

Advantages:

Maximizes the chance of discovering the true highest bidder and extracting premium pricing or better terms (e.g., more cash at close, favorable earn-outs).

Creates strong competitive tension that can improve deal structure.
Provides clearer market feedback on valuation.

Disadvantages:

Greater risk of confidentiality breaches, which can harm the business if the sale fails.

Higher costs and management time.
Potential for process delays, “deal fatigue,” or lower-quality inquiries.
Can signal distress or desperation if not handled carefully.

5. Practical Considerations for Small Businesses

Small businesses are particularly sensitive to confidentiality because a single rumor can affect key employees, customer retention, supplier terms, or local reputation. For this reason, controlled sales are more commonly recommended and used for Main Street and lower-middle-market companies.

An auction-style process becomes more attractive when:

The business is highly desirable (strong growth, unique assets, or strategic fit for many players).
The owner prioritizes absolute maximum price above discretion.
There is a robust pool of both strategic and financial buyers.

Hybrid approaches are also common: a controlled process that expands the buyer list if initial interest is soft, or a “quiet” limited auction that maintains strict information controls.

6. Conclusion

A controlled sale prioritizes discretion, process control, and reduced risk while still generating meaningful competition among carefully chosen buyers. An auction sale prioritizes broad market exposure and maximum competitive pressure, potentially at the cost of higher risk and complexity.

For most small-business owners, a well-executed controlled sale strikes the better balance—protecting the going-concern value of the business while still pushing for strong economics. The optimal choice should be made with advice from an experienced M&A advisor or business broker who understands the specific industry, the company’s strengths, and current buyer appetite.

Note: This is a general explanatory overview based on standard practices in private-company transactions. Actual results depend on preparation of the business, quality of advisory support, market conditions, and execution.

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The One-Way Buy-Sell Agreement: An Often-Overlooked Strategy for Business Owners

September 1, 2026August 26, 2026 by YOUR BUSINESS WORTH, posted in Buy and Sell Agreements, Estate Planning, Funding your Buy and Sell, Key People_Or Group, Transfer Costs, Uncategorized, Valuation, Value drivers, Working On Your Business

Thomas J. Perrone, CLU, CIC

A Different Way to Protect a Business, Its Key People and the Owner’s Future

Business owners spend a great deal of time thinking about how to grow their companies. They hire employees, develop customers, build vendor relationships and continually look for ways to increase profitability.

But there is another question that deserves just as much attention:

What happens to the business if a key owner or key person dies unexpectedly?

A traditional buy-sell agreement can provide an answer when there are multiple owners. But there are situations where a different approach may be more appropriate—particularly when the objective is to create a mechanism for the company to purchase an owner’s or key person’s interest upon death.

One strategy discussed in this podcast is the one-way buy-sell agreement.

The concept can provide a business with a predetermined method for handling an ownership interest when an unexpected death occurs, while also potentially creating financial security for the business and the surviving family.

What Is a One-Way Buy-Sell Agreement?

A one-way buy-sell arrangement is essentially an agreement in which one party agrees to purchase an ownership interest from another party upon a specified triggering event, most commonly death.

The arrangement can be particularly interesting when a company has an important owner or key person whose continued involvement is critical to the business.

Instead of leaving the family, the business and the remaining owners to negotiate what happens after a death, the agreement establishes a process in advance.

That can provide something every business owner needs:

certainty.

The goal is not simply to create a legal document. The objective is to establish a coordinated strategy for:

Protecting the business
Providing liquidity
Creating a method for transferring ownership
Helping the deceased owner’s family receive value
Retaining important employees or key people
Avoiding a forced or poorly timed sale
Providing continuity for customers, vendors and employees

Why Key People Matter So Much

The podcast discussion begins with a real-world situation involving a company and a particularly valuable key person.

The individual was considered extremely reliable and important to the organization. The company initially considered an executive-benefit arrangement as a way of retaining that person.

That raises an important point:

Key-person planning and business-transition planning are often connected.

A business may have an employee or owner whose knowledge, relationships, production ability or leadership makes that individual extremely difficult to replace.

If that person dies unexpectedly, the financial consequences can extend well beyond the person’s salary.

The company could lose:

Customers
Revenue
Specialized knowledge
Leadership
Vendor relationships
Employees
Business value

That is why business owners should think about both retention and transition when evaluating their most important people.

The Connection Between Executive Benefits and a One-Way Buy-Sell

One of the interesting aspects of the strategy discussed in the podcast is the relationship between executive benefits and a one-way buy-sell arrangement.

An executive-benefit strategy may be used to help attract and retain an important employee.

But when the planning is coordinated with ownership and transition objectives, the same overall strategy can potentially address additional business concerns.

The key is to avoid looking at each financial strategy as an isolated transaction.

Instead, business owners should ask:

How does this strategy fit into the overall plan for the company?

A business may need to simultaneously:

Retain an important person.
Protect the company from the economic consequences of that person’s death.
Provide an orderly transition of an ownership interest.
Create liquidity for the person’s family.
Maintain control of the business.
Continue building business value.

A properly designed arrangement can bring these objectives together.

What Happens When an Owner Dies?

Without a plan, the death of an owner can create a difficult situation.

The deceased owner’s family may suddenly own an interest in a business they know little about.

The remaining owners may want to continue operating the company but may not have the cash to purchase the family’s interest.

The family may need liquidity.

The business may need time.

And everyone may have different ideas about what the ownership interest is worth.

That is a recipe for conflict.

A one-way buy-sell arrangement can establish the basic framework before the crisis occurs.

Rather than asking, “What do we do now?”, the parties have already determined what is supposed to happen.

Funding Is Just as Important as the Agreement

One of the most important lessons for business owners is that having a buy-sell agreement is not necessarily the same thing as having a funded buy-sell agreement.

An agreement can establish an obligation to purchase an ownership interest.

But where does the money come from?

This is where life insurance and other funding mechanisms may become important.

The podcast discusses arrangements involving life insurance, premiums, cash value and other planning considerations.

The basic concept is straightforward:

The funding should be designed at the same time as the agreement—not years afterward.

Otherwise, a business could have a perfectly drafted agreement but discover that it does not have the financial resources to carry out the transaction when the triggering event occurs.

The Family Has an Interest Too

Business owners sometimes focus almost entirely on what happens to the company.

But the owner’s family is also an important part of the equation.

Suppose an owner dies and leaves a substantial business interest to the family.

The family may now own an asset that is difficult to sell, difficult to value and difficult to manage.

The remaining owners, meanwhile, may need control of the business to continue operating it.

A properly structured buy-sell arrangement can potentially solve both problems.

The family receives value for the ownership interest.

The remaining owners or the business receive the ownership interest.

The company can continue operating.

That is the fundamental objective of transition planning:

Turn a potentially disruptive event into an orderly transaction.

The Importance of Starting Before There Is a Crisis

One of the recurring themes in business planning is that the best time to solve a problem is before it becomes a problem.

A death, disability, retirement or other unexpected event is not the time to begin discussing ownership.

The parties should already understand:

Who buys?
Who sells?
What triggers the transaction?
How is the value determined?
How will the purchase be funded?
What happens to the family?
What happens to the business?
What happens to the remaining owners?
How will the arrangement be reviewed as the company grows?

These questions should be addressed while everyone is healthy, the relationships are good and the business is operating normally.

Business Value Changes Over Time

Another reason these arrangements need to be reviewed is that businesses change.

A company that is worth $2 million today might be worth considerably more several years from now.

Key employees change.

Ownership changes.

Debt changes.

The company’s cash flow changes.

The owner’s personal objectives change.

The insurance funding may change.

Therefore, a buy-sell agreement should not be treated as a document that is created once and placed in a drawer.

It needs to evolve with the business.

The Bigger Lesson for Business Owners

The one-way buy-sell concept illustrates a much larger principle:

Business planning should be integrated.

Growth planning, key-person planning, executive benefits, protection planning, retirement planning and transition planning should not necessarily be viewed as separate subjects.

They can be different pieces of the same business-planning puzzle.

A successful business owner needs to build value.

But building value is only one part of the equation.

The owner also needs to protect that value and eventually determine how that value will be converted into personal financial security.

That is why transition planning should begin long before retirement.

Questions Every Business Owner Should Ask

If you own a closely held business, consider asking yourself:

What happens to my company if I die tomorrow?
Who would purchase my ownership interest?
Does my family know what would happen?
Is there a written buy-sell agreement?
Is the agreement properly funded?
Has the value of the company been updated?
Would the business have enough liquidity to complete the purchase?
What happens to our key people if they die?
Could the loss of a key person significantly reduce business value?
Does our current plan coordinate business protection with ownership transition?

If you cannot answer these questions clearly, your business may have a transition-planning gap.

Conclusion

A one-way buy-sell agreement is not simply a legal document. It can be part of a broader strategy for protecting a business, providing liquidity, retaining key people and creating an orderly transfer of ownership.

The most important point is that the agreement and the funding need to work together.

Business owners work for years to create valuable companies. The next step is making certain that an unexpected event does not destroy the value they worked so hard to create.

The objective should be simple:

Build the value. Protect the value. And have a plan to transition the value.

That is what effective business transition planning is designed to accomplish.

About the Podcast

This topic was discussed on Building and Protecting Your Business Worth, hosted by Thomas J. Perrone, CLU, CIC, of New England Consulting Group, Inc. The podcast focuses on strategies and ideas designed to help business owners build, protect and transition their businesses while creating greater financial security for their future.

tperrone@necgginc.com

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INTERNAL VS. EXTERNAL SALES

September 1, 2026August 28, 2026 by YOUR BUSINESS WORTH, posted in Uncategorized

BY; Thomas J. Perrone, CLU,CIC

Choosing the Right Path to Exit Your Business

A Business Owner’s Guide from the GWT Planning System®

Every business owner will exit their company one way or another — the only real questions are when, on what terms, and to whom. Of all the decisions in a transition plan, few shape the outcome more than the choice between an internal sale and an external sale. Each path carries distinct implications for valuation, timeline, taxes, financing, and the legacy you leave behind. This report walks through both paths so you can weigh them clearly, in the context of your own Growth, Wealth, and Transition goals.

What Is an Internal Sale?

An internal sale transfers ownership to people already inside the business — a family member, one or more key managers, a broader group of employees through an Employee Stock Ownership Plan (ESOP), or some combination of these. The buyer already knows the company’s operations, culture, and customers.

Common Internal Sale Structures

Family succession — passing the business to a child or other relative, often paired with an estate plan and a multi-year transition of leadership.

Management buyout (MBO) — one or more key employees purchase the company, frequently financed in part by the seller.
Employee Stock Ownership Plan (ESOP) — a qualified retirement plan purchases company stock on behalf of employees, offering the seller potential tax advantages and a built-in buyer.
Partner or co-owner buyout — an existing partner buys out a retiring or exiting owner’s interest, often under a pre-existing buy-sell agreement.

What Is an External Sale?

An external sale transfers the business to a buyer outside the company — a strategic buyer (often a competitor or company in an adjacent market seeking synergies), a financial buyer such as a private equity firm, or an individual entrepreneur buying their way into ownership.

Common External Sale Structures

Strategic acquisition — a buyer in your industry purchases the business for its customers, talent, technology, or market position, often paying a premium for synergy.
Financial buyer / private equity — an investment group acquires the business primarily for its cash flow and growth potential, typically with a plan to scale or resell it later.
Individual or search-fund buyer — an entrepreneur purchases the business to run it directly, often using SBA or other acquisition financing.

Key Differences at a Glance

Factor	Internal Sale	External Sale
Typical buyer	Family member, key manager(s), or employees (via ESOP)	Strategic buyer, competitor, or private equity/financial buyer
Valuation & price	Often below full fair market value; frequently seller-financed	Usually the highest achievable price, especially with strategic/synergy buyers
Timeline to close	Can be structured over years (gradual transition)	Often 6–12 months once a deal is in motion
Confidentiality	High — deal stays inside the company	Lower — due diligence exposes financials to outside parties
Financing	Seller financing, SBA loans, or ESOP debt are common	Buyer typically arranges its own financing or uses cash/PE capital
Cash at closing	Partial upfront, balance paid over time	Larger lump sum at closing is more common
Legacy & culture	Preserves culture, brand, and relationships with staff/clients	May result in integration, rebranding, or workforce changes
Owner’s post-sale role	Often a gradual, mentoring exit	Usually a clean, faster exit (sometimes with an earn-out)
Risk to seller	Buyer’s ability to repay over time is a real risk	Deal risk is concentrated in due diligence and negotiation, then resolved at close
Tax treatment	Can sometimes be structured favorably (e.g., installment sale, ESOP rollover)	Structure depends on asset vs. stock sale; often subject to negotiation

Weighing the Trade-Offs

Why Owners Choose an Internal Sale

Preserve the company culture, brand, and relationships built over decades
Reward and retain loyal employees or family members who helped build the business
Maintain a gradual, mentoring transition rather than a sudden exit
Keep the sale confidential, without exposing financials to outside parties

Why Owners Choose an External Sale

Maximize sale price, particularly when a strategic buyer will pay for synergy
Receive more cash at closing rather than relying on a buyer’s future payments
Achieve a cleaner, faster exit with less ongoing financial or operational risk
Access buyers who bring capital, infrastructure, or expertise to grow the business further

A Note on Value

An internal sale and an external sale rarely produce the same number on the closing statement. Internal buyers are usually financing the purchase from the business’s own future cash flow, which caps what they can pay; external buyers — especially strategic buyers — can sometimes pay for value the internal team cannot. Knowing your business’s true worth, and the gap between internal and external value, is the starting point for choosing a path with confidence.

Questions to Guide Your Decision

How important is it that the business stay in the family or under existing leadership?
Do you need maximum cash at closing, or can you accept a phased payout over time?
Is there a capable internal buyer — and can they realistically finance the purchase?
How much risk are you willing to carry if you finance part of the sale yourself?
What matters more to you: the highest possible price, or the legacy of who runs the business next?
How much time do you have before you need or want to exit?

Bringing It Together with the GWT Planning System®

Deciding between an internal and external sale isn’t a decision to make in isolation — it’s one piece of a broader Growth, Wealth, and Transition plan. The right path depends on where your business stands today, what your personal and financial goals require, and how much runway you have to prepare. A well-built transition plan builds real, transferable value into the business long before a specific buyer — internal or external — is identified, so that whichever path you choose, you are negotiating from strength rather than necessity.

If you’re weighing your own exit options, the most valuable next step is an honest assessment of where your business stands today against both paths — so the choice is one you make deliberately, not one that gets made for you.

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Why 75% of Businesses Fail in 10 Years (And How to Fix It)

August 30, 2026August 25, 2026 by YOUR BUSINESS WORTH, posted in Business Growth and Transition, Buy and Sell Agreements, Company Wealth, Estate Costs, Uncategorized

By Thomas J. Perrone, CLU, CIC

Your Business May Have a Plan. But Does It Have a Plan for the Details?

After more than 53 years working with business owners, I have noticed a recurring problem:

Business owners are often unaware of the things they don’t know.

And that lack of awareness can be expensive.

Most business owners are very good at running their businesses. They know their customers, their products, their employees, and their markets. They know how to generate revenue and solve the problems that show up every day.

But there is another side of business ownership that often gets overlooked—the planning that takes place behind the scenes.

I call this the Plan for Details.

It is the planning that addresses how you will grow the business, protect what you have built, create wealth from the business, and eventually transition out of the business.

It is different from the action plan that gets you into business and keeps the cash flow moving.

And that difference can have a tremendous impact on the ultimate value of your business.

Three Levels of Awareness

I believe there are three different levels of awareness among business owners.

1. You know there is a problem—but you tolerate it.

You recognize that something isn’t working perfectly, but because the business is still operating, you don’t address it.

“It’s working well enough” becomes the answer.

2. You discover a problem and fix it.

You weren’t aware of the issue, but once someone points it out, you understand it and take action.

This type of awareness can prevent financial leakage and help improve the business.

3. You don’t know what you don’t know.

This is the most dangerous situation.

You don’t know that an opportunity exists. You don’t know that a risk exists. You don’t know that something is costing you money.

And because you don’t know about it, nothing changes.

This is one of the biggest challenges facing business owners today.

There are opportunities to increase business value, protect the company, improve cash flow, retain key employees, create wealth outside the business, and prepare for a future transition—but many owners simply aren’t aware that these opportunities exist.

The Business Owner’s Action Plan vs. the Plan for Details

When most people start a business, their attention naturally goes toward the Action Plan.

They want to get their product or service to market.

They want customers.

They want revenue.

They want cash flow.

They want the business to grow.

And that’s exactly where an entrepreneur should be focused in the beginning.

The Action Plan is exciting. It’s where the energy is.

But the part that often gets avoided is the Plan for Details.

The Plan for Details addresses four critical areas:

Growth
Protection
Equity creation and distribution
Exit and transition

These are the areas that can determine whether a business simply produces an income—or ultimately creates substantial wealth for its owner.

What Happens Without a Plan for Details?

Without this type of planning, business owners can find themselves facing problems they never anticipated.

They may:

Lose key employees.
Lose customers or valuable relationships.
Face lawsuits or other unexpected risks.
Have no plan if the owner dies or becomes disabled.
Experience significant financial consequences when an owner dies.
Lose money unnecessarily through inefficient tax planning.
Fail to build wealth outside the business.
Struggle to create a strong company culture.
Have difficulty attracting and retaining talented employees.
Miss opportunities for innovation.
Discover too late that their business isn’t attractive to a buyer.

None of these problems necessarily mean the owner did a poor job running the business.

They may simply mean that the owner never had a comprehensive Plan for Details.

Building Business Value Is More Than Increasing Revenue

One of the most important concepts in business planning is understanding value drivers.

Value drivers are the characteristics of a business that make it attractive to a prospective buyer.

A buyer doesn’t simply look at what the business makes today.

The buyer wants to know:

Will this business continue to produce cash flow after I buy it?

That leads to questions about:

Growth potential
Cash flow
Key employees
Management depth
Systems and processes
Customer relationships
Company culture
Dependence on the owner
Opportunities for future growth

A business with strong systems, capable employees, good cash flow, and growth potential is generally much more attractive to a buyer than a business that depends almost entirely on its owner.

That’s why planning for a transition shouldn’t begin when you’re ready to sell.

It should begin years—even decades—before you leave.

What If You Died Tonight?

Here’s a question every business owner should ask:

What would happen to your business if you died tonight?

Or what happens if you become disabled?

What happens to your employees?

What happens to your customers?

What happens to your bank financing?

What happens to your family?

What happens to the value you’ve spent years building?

For example, the loss of an owner or key person can have an immediate impact on a company’s financial stability and operations.

And a key employee who leaves may take valuable relationships, knowledge, employees, and even trade secrets with them.

The solution isn’t simply to hope they stay.

The business needs a strategy for retaining the people who are critical to its success.

Key Employees Are Part of Your Business Value

A strong company doesn’t depend entirely on the owner.

The goal should be to develop people who can think and act like owners.

When you accomplish that, several things happen.

You create stronger management.

You create greater freedom for the owner.

You create more time for family and other priorities.

You improve cash flow.

You create a business that can operate without the owner being involved in every decision.

And you make the business more attractive to a future buyer.

A buyer wants to purchase a business—not purchase a job.

If the owner walks out the door and the business falls apart, the business becomes much harder to sell.

Culture Is a Business Asset

Another often-overlooked component of business value is company culture.

A strong culture can make recruiting easier because people want to work for companies where they feel valued and where they can see a future.

Culture can also improve retention.

And when good people stay, they accumulate knowledge, build relationships, develop systems, and become increasingly valuable to the organization.

The result is a stronger business.

Creating Wealth Outside the Business

Many business owners spend decades building wealth inside their company.

The problem is that their business may represent the overwhelming majority of their net worth.

That creates concentration risk.

It also creates a problem when the owner eventually wants to retire.

The question becomes:

How do you convert business success into personal wealth?

This is where careful planning can be particularly important.

The business may be capable of generating cash flow that can be used strategically to create wealth outside the company while continuing to grow and operate the business.

The objective isn’t simply to accumulate money.

The objective is to create a business that produces cash flow, builds equity, and ultimately allows the owner to convert business value into financial independence.

Why Traditional Planning Often Doesn’t Work for Business Owners

One reason business owners don’t have a Plan for Details is that traditional planning can become unnecessarily complicated.

Business owners are busy.

They don’t want a planning process that takes months and requires endless meetings.

They want to understand the issues, make decisions, and move forward.

Another problem is that different advisors often work independently.

The business owner may have a CPA, attorney, financial advisor, insurance professional, and business consultant—but nobody is bringing the pieces together.

In my experience, the best planning occurs when the appropriate advisors work together.

Your CPA understands the tax issues.

Your attorney understands the legal issues.

Your financial advisor understands investments and financial strategies.

Your business consultant understands the business.

Put the right people around the same table and you can begin solving the actual problems of the business rather than simply selling products.

The Four Areas of the GWT Business Planning System

The GWT Business Planning System focuses on four fundamental areas.

1. Growth

How can you increase the value of the business?

What systems, people, processes, and strategies can help the company grow?

2. Protection

What happens if something goes wrong?

What if the owner dies?

What if the owner becomes disabled?

What if a key employee leaves?

What if the company is sued?

What if cash flow suddenly becomes a problem?

Protection planning is about preparing for the “what ifs.”

3. Equity Creation and Distribution

How can the business create wealth for its owner?

And just as importantly, how can some of that wealth eventually be distributed outside the business?

The goal is to use the business strategically—not simply as a source of income, but as a vehicle for creating wealth.

4. Exit and Transition

Eventually, every business owner has to answer one question:

What happens to the business when you’re no longer running it?

That doesn’t necessarily mean selling tomorrow.

Transition could be 10, 20, or even 30 years away.

But the decisions you make today can have a tremendous impact on the options available to you later.

The GWT 30-Day Business Planning Pathway

The GWT Business Planning System was designed around a simple idea:

Business planning doesn’t have to consume your life.

The process uses a series of approximately 15–16 planning blueprints that help identify the areas that deserve attention.

You don’t necessarily need all of them.

You identify the areas that are most relevant to your business, prioritize them, and then work on them one at a time.

The process is designed to take approximately 2–4 hours of the business owner’s time over a 30-day period.

It includes short educational videos, forms, discussions, and planning sessions.

The goal isn’t to overwhelm you with information.

The goal is to help you become aware of what you don’t know, identify the areas that need attention, and establish a practical path forward.

The Real Goal Isn’t a Bigger Binder

Business planning shouldn’t be about creating a complicated document that sits on a shelf.

It should create action.

A good Plan for Details should help you:

Build business value.
Protect the value you’ve created.
Improve cash flow.
Develop key employees.
Build management depth.
Create a stronger company culture.
Reduce dependence on the owner.
Create wealth outside the business.
Prepare for unexpected events.
Increase the likelihood of a successful transition.

Ultimately, it should give the owner something that is often just as valuable as money:

freedom.

Freedom to spend more time with family.

Freedom to take time away from the business.

Freedom to make decisions based on opportunity rather than necessity.

And eventually, freedom to leave the business on your terms.

Your Business Needs More Than an Action Plan

The Action Plan gets the business moving.

The Plan for Details determines what happens after it starts moving.

If you are a business owner, ask yourself:

Do I know exactly what would happen to my business if I died, became disabled, or lost a key employee?

Do I have a plan for building value?

Do I know how I will eventually get my wealth out of the business?

Could my business operate successfully without me?

Would someone want to buy my business today?

If you don’t know the answers, that’s not necessarily a problem.

It may simply mean you’ve discovered something you weren’t aware of.

And that’s where good planning begins.

The Bottom Line

Most business owners don’t have a business planning problem because they don’t care.

They have one because they’re busy running the business.

The Plan for Details is designed to help close that gap.

It gives you a way to step back from the day-to-day operation of the company and look at the bigger picture—growth, protection, equity creation, and transition.

The earlier you begin, the more options you have.

And the objective isn’t simply to build a bigger business.

It’s to build a business that creates wealth, protects that wealth, and ultimately gives you the freedom to decide what happens next.

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Tperrone@necgginc.com

If you would like to learn more about the GWT Business Planning System and the 30-Day Business Planning Pathway, contact Thomas J. Perrone, CLU, CIC at 203-530-6615.

10 Mistakes Business Owners Make That Can Cause a Failed Transition or Exit

August 29, 2026August 26, 2026 by YOUR BUSINESS WORTH, posted in Business Growth and Transition, Buy and Sell Agreements, Company Wealth, Estate Planning, Executive Benefits, retirement, Tax Free Income, Valuation, Value drivers, Working On Your Business

By Thomas J. Perrone, CLU,CIC

1. Waiting Until They Are Ready to Sell to Start Planning

One of the biggest mistakes is treating transition planning as something that begins when the owner decides to retire or sell.

A successful transition may require years of preparation. The decisions made today can determine the options available years from now.

Mistake: “I’ll deal with the transition when I’m ready to leave.”

Better approach: Build the business with the eventual transition in mind from the beginning.

2. Making the Business Too Dependent on the Owner

If the owner has to approve every decision, maintain every major relationship, and solve every important problem, the business may be difficult to transfer.

A buyer wants to purchase a business—not a job.

Mistake: Building a company where the owner is indispensable.

Better approach: Develop capable managers and employees who can operate the business without the owner’s constant involvement.

3. Focusing Only on Revenue Instead of Business Value

Revenue doesn’t automatically translate into a valuable business.

A prospective buyer will want to know whether the company can continue producing cash flow after the owner leaves.

Growth potential, cash flow, management depth, systems, customer relationships, culture, and owner dependence all affect the attractiveness of a business to a buyer.

Mistake: Assuming “more revenue” automatically means “more value.”

Better approach: Identify and strengthen the company’s actual value drivers.

4. Failing to Develop Key Employees and Management

A business that relies heavily on one owner—or a small number of key people—can become vulnerable when those people leave.

A strong management team gives the business continuity and can make it significantly more attractive to a future buyer.

Mistake: Keeping the business dependent on a few individuals.

Better approach: Develop people who can think and act like owners.

5. Ignoring Company Culture

Culture is often treated as something soft or secondary. But a strong culture can improve recruiting, retention, knowledge transfer, and employee loyalty.

When good employees stay, they accumulate knowledge, develop relationships, and strengthen the organization.

Mistake: Assuming culture has nothing to do with business value.

Better approach: Treat culture as an asset that contributes to the strength and continuity of the business.

6. Failing to Prepare for the Owner’s Death or Disability

One of the most important questions an owner should ask is:

“What would happen to my business if I died tonight?”

The consequences can affect employees, customers, financing, family members, and the value of the business.

Mistake: Assuming there will always be time to deal with an unexpected event.

Better approach: Have a strategy for protecting the business against the unexpected.

7. Keeping Most of Their Wealth Trapped Inside the Business

Many owners spend decades accumulating wealth inside their company.

That can create concentration risk and make retirement more difficult because the owner eventually has to figure out how to convert business equity into personal financial security.

Mistake: Building a valuable business without developing a strategy for converting that value into personal wealth.

Better approach: Create wealth outside the business while continuing to build the company.

8. Failing to Build Systems and Processes

A buyer is not simply buying today’s income. The buyer wants confidence that the company can continue operating successfully after the transaction.

If the business’s knowledge, customer relationships, and operating procedures exist primarily in the owner’s head, the business becomes harder to transfer.

Mistake: Running the business through personal knowledge instead of documented and repeatable systems.

Better approach: Build systems and processes that allow the company to operate consistently without depending on the owner.

9. Having Advisors Who Work Independently Instead of Together

A business owner may have a CPA, attorney, financial advisor, insurance professional, and business consultant—but if each advisor works independently, important pieces of the transition plan can be missed.

The material emphasizes that effective planning occurs when the appropriate advisors work together to address the actual problems of the business.

Mistake: Assuming several individual plans automatically create one comprehensive plan.

Better approach: Coordinate the legal, tax, financial, insurance, and business planning.

10. Having No Written Plan for What Happens When the Owner Leaves

Ultimately, every business owner has to answer:

“What happens to the business when I’m no longer running it?”

That could mean selling to a third party, transferring to family, transitioning to employees, or another strategy. The specific method isn’t the only issue—the important point is to begin preparing before the owner needs to make the decision.

Mistake: Building a successful company without deciding how that success will eventually be transferred.

Better approach: Develop a transition strategy years before the anticipated exit.

The Bottom Line

A failed transition is often not caused by a bad business.

It can be caused by a good business that was never prepared to survive the owner’s departure.

The business owner should be able to answer five basic questions:

Could my business operate successfully without me?
What makes my business valuable to a buyer?
What happens if I die or become disabled tomorrow?
How will I turn my business equity into personal wealth?
What happens to the business when I leave?

The earlier these questions are addressed, the more options the owner has—and the greater the opportunity to build a business that creates wealth, protects that wealth, and ultimately gives the owner the freedom to leave on their own terms.

Comprehensive Business Planning Guide – FREE DOWNLOAD

Toms Calendar:

The Most Important Document a Sole Proprietors Needs

August 26, 2026August 23, 2026 by YOUR BUSINESS WORTH, posted in Business Growth and Transition, Buy and Sell Agreements, Estate Planning, Executive Benefits, Funding your Buy and Sell, Inside Sale, Life Insurance Types, Working On Your Business

By Thomas J. Perrone, CLU,CIC NEW ENGLAND CONSULTING GROUP OF GUILFORD, INC.

It is an overlooked planning strategy. What happens to a sole proprietor’s business when they die? The business is a financial hub for the family. At death, the hub dries up. What will happen to the owner’s financial support for the family? What can be done to protect this fiscal impact? Along with the death of the business owner, there is the business’s assets, such as, equipment, receivable, inventory, and other business property. What happens to this property? Are the heirs in a position of receiving the top dollar for what is to be sold?

Most business owners spend years building their companies. They develop relationships with customers, employees, vendors, and suppliers. They create systems, build a reputation, and work hard to make the business successful.

For many owners, the goal is either to pass the business to their family or to sell it at a future value providing financial security for themselves.

But there is a problem:

What happens to the business if the owner suddenly dies, becomes disabled, retires, or simply can no longer run it?

Without a plan, the future of the business—and the financial security of the owner’s family—can become uncertain very quickly.

That is why a sole owner should consider a One-Way Buy-Sell Agreement, sometimes called a unilateral buy-sell agreement.

A Buy-Sell Agreement Isn’t Just for Businesses with Multiple Owners

Many people associate buy-sell agreements with businesses that have two or more owners. However, a 100% owner can also use a buy-sell agreement to establish what happens to the business when a triggering event occurs.

A sole owner can enter into a One-Way Buy-Sell Agreement with:

Children or other family members

A trust

A competitor

An employee or group of employees

Another individual or entity interested in purchasing the business

The purpose is simple:

Create a predetermined path for transferring the business and provide liquidity to the owner’s family.

Instead of leaving the family to figure out what to do with the business after the owner’s death, the agreement establishes a framework before the crisis occurs.

What Happens If the Business Is Simply Left to the Children?

Leaving a business for one’s children may sound like an obvious solution.

But ownership does not automatically mean that the children are prepared to run the company.

Some children may have the experience and desire to operate the business. Others may not.

They may not understand the industry, have the necessary management skills, or even want the responsibility of owning the company.

And if they inherit the business and decide they want to sell it, they may be forced to sell under circumstances that are not favorable to them.

The market determines the value. Competitors may recognize that the family is inexperienced and attempt to purchase the company at a significant discount.

A properly structured buy-sell agreement can provide a much more orderly alternative.

What About Leaving the Business to a Spouse?

Similar issues can arise when the business is left to a spouse.

In many cases, the spouse’s primary concern will not be running the business. It will be replacing the income and financial security that the owner provided.

That can create tremendous pressure to sell.

A spouse who suddenly finds themselves responsible for a business they have never operated may understandably want to convert the business into cash as quickly as possible.

A One-Way Buy-Sell Agreement can establish a predetermined buyer and a method for determining the value of the business.

The agreement can be funded with life insurance or, depending on the circumstances, through the future cash flow of the business.

What If a Competitor Is the Buyer?

A competitor can be an attractive buyer because it may already understand the industry and recognize the value of the company.

More importantly, a properly structured agreement can establish the price and terms in advance.

This can help protect the owner’s family from negotiating with potential buyers at a difficult and emotional time.

What If Some Children Want the Business and Others Don’t?

This is another situation that should be addressed before it becomes a problem.

Perhaps three children inherit the business; only one wants to do it.

Or one child has spent years working in the company and understands how to run it, while the other children have little or no business experience.

The agreement and the owner’s estate plan should address these differences.

The children who want to own and operate the business may have an opportunity to purchase the interests of those who do not want to participate.

Other assets can potentially be used to equalize inheritance among children.

The critical point is to make these decisions before the family is forced to put them under pressure.

Six Questions That Should Be Answered

If children or other family members will eventually own the business, the buy-sell agreement should address some fundamental questions:

Who will control the business?

What happens if one owner wants to sell?

Can an owner sell their interest to an outsider?

Does another family member have a right to refusal?

How will the business be valued?

What are the terms of a future purchase or sale?

These questions may seem straightforward today.

They can become extremely complicated after the owner is gone.

What Should a One-Way Buy-Sell Agreement Address?

A well-designed agreement should go beyond simply stating who can purchase the business.

Future Owners Should Be Bound by the Agreement

If ownership is transferred to another person, the agreement should provide a mechanism requiring subsequent owners to become subject to its provisions.

Otherwise, the original agreement may lose much of its effectiveness over time.

Establish a Valuation Process

Business value changes over time.

Rather than waiting until a triggering event occurs and then arguing about what the business is worth, the owner can establish a valuation process in advance.

One approach is to have the business valued periodically by an independent appraiser.

For example, the agreement could provide an annual or biennial valuation.

A consistent valuation process can help establish a history of the company’s value and reduce disagreements when a transaction eventually occurs.

Restrict Transfers to Outsiders

The agreement can establish restrictions on transferring ownership of interest to someone outside the designated group.

It can also provide remaining owners or family members with a right to first refusal.

This can help prevent an unwanted third party from suddenly becoming an owner.

Establish the Terms of a Future Transaction

Price is only one part of a business transaction.

The agreement should also establish the terms under which a future purchase may occur.

How will the purchase be paid?

Will there be installment payments?

What happens if the business does not have enough cash?

These issues should be addressed before they become problems.

Identify Triggering Events

Death is not the only event that can create the need for a buy-sell agreement.

Other triggering events may include:

Retirement

Disability

Termination

Voluntary departure

Other circumstances that make continued ownership or management impractical

The agreement should clearly identify the events that activate its provisions.

Address Funding

Having an agreement to purchase the business is one thing.

Having the money to complete the purchase is another.

The agreement should address how the purchase will be funded when a triggering event occurs.

Depending on the circumstances, funding could involve life insurance, business cash flow, financing, or other sources.

The agreement should not simply identify the buyer. It should provide a realistic mechanism for completing the transaction.

Who Should Be Concerned About a Buy-Sell Agreement?

The Business Owner

The owner has spent years building the business.

Without a plan, the future of the company can be left to chance, potentially creating confusion and disagreements among family members and other interested parties.

The Family

For many families, the business represents a sizable portion of their financial resources.

It may also represent their future source of income.

The family should know what is supposed to happen to the business and how its value will be converted into financial security.

The Owner’s Advisers

A One-Way Buy-Sell Agreement should not be viewed as a document that exists independently from the owner’s overall planning.

The owner’s attorney, CPA, insurance professional, financial adviser, and business transition or exit-planning professional may all have important roles in designing and implementing the plan.

Each adviser brings a unique perspective, and coordination among them can improve the likelihood of achieving the owner’s objectives.

The Real Reason a Sole Owner Should Have a Buy-Sell Agreement

There is one important reason for a sole owner to have a plan.

The owner knows the business better than anyone else.

The owner has developed relationships with customers, employees, vendors, suppliers, and other stakeholders that have helped make the business successful.

The owner has also developed an instinct for making the decisions necessary to keep the company moving forward.

When that owner suddenly disappears because of death, disability, or another triggering event, the business experiences a transition.

Customers may have questions.

Employees may be uncertain.

Vendors may become concerned.

Family members may not know what to do.

Potential buyers may see an opportunity to negotiate from a position of strength.

A One-Way Buy-Sell Agreement cannot eliminate every challenge associated with the loss or departure of an owner.

But it can provide something extremely valuable:

Clarity.

It can establish who will acquire the business, how the business will be valued, what the transaction terms will be, and how the owner’s family can receive the value that has been created.

For a business owner who has spent years building a valuable company, that may be one of the most important parts of the overall business transition plan.

Building a business is difficult. Protecting the value you have created should not be left to chance.

Article related: Single appraiser buy and sell agreement

The Cheapest Way to fund your Buy and Sell Agreement – article- Download your free article

Let’s discuss the topic: Toms Calendar

tperrone@necgginc.com

Where You Are – Where You Could Be!

August 24, 2026 by YOUR BUSINESS WORTH, posted in Company Wealth, Estate Costs, Estate Planning, evaluations, Income from your business, Inside Sale, Life Insurance, One Big Beautiful Bill, Passive Ownership, retirement, Uncategorized, Value drivers, Working On Your Business

Why an Annual Review Is the Most Overlooked Step in Business Owner Planning

By Thomas J. Perrone, CLU, CIC | Founder, New England Consulting Group of Guilford, Inc.

Ask most business owners how their planning is doing, and they’ll tell you it’s fine. They’ll say it with confidence, too — the same way most of us would say we feel healthy on any given day. But ask that question in the middle of a CT scan, and the confidence tends to disappear. The difference isn’t your health. It’s what you can’t see.

Business owner planning works the same way. The plans you built years ago may have looked airtight the day you signed them. But time passes, tax law changes, your business changes, and your family’s needs change — and none of that shows up on the surface. The documents still sit in the drawer looking just as official as they did the day you filed them. What they don’t tell you is whether they still fit.

We get the documents completed and executed, feel good about it, and then one morning realize it’s been five years — or more — since anyone looked at them again.

A Familiar Story

This pattern shows up constantly — with my clients, and with the professional colleagues I work alongside every day. The planning gets done. Everyone feels the relief of finally having “taken care of it.” Then life takes over, and the plan quietly ages in place while the world around it keeps moving.

The real risk isn’t skipping the planning altogether — most owners eventually get that part done. The risk is discovering, years later, that Washington has rewritten the rules, your business has grown or changed shape, your family situation is different, and no one ever flagged it. If any of those shifts would have changed your strategy, the only real question worth asking is: when would you have wanted to know?

Building the Fix Into the System

This is exactly the problem I built the GWT Planning System® to solve. GWT stands for Growth, Wealth, and Transition — the three areas every business owner’s planning needs to work together, not in isolation. But good structure alone isn’t enough. A plan that’s well designed on day one and never revisited is still a plan that goes stale.

So, from the very beginning, the GWT Planning System® was built with an automatic annual review woven directly into it — not an optional add-on, but part of how the system runs. Every year, that review happens. Sometimes it’s in person. Sometimes it’s a phone call. Sometimes it’s a Zoom conversation. The format isn’t the point. The consistency is.

That built-in review does three things for every client:

It catches tax and legal changes coming out of Washington before they quietly undermine a strategy that used to work.

It keeps the plan aligned with the business itself, which rarely looks the same from one year to the next — revenue, staffing, ownership, and value all shift.
It accounts for changes at home — a marriage, a health event, a child’s changing role in the business, a shift in retirement timing.

The Most Critical Part of Planning

Over more than fifty years of doing this work, I’ve come to see this as the most important part of what I do — not just putting the right plan in motion but making sure it stays right as everything around it keeps changing. A plan is not a document you finish once. a relationship you maintain.

If you can’t remember the last time your plan was reviewed against today’s tax law, today’s business, and today’s family circumstances, that’s worth changing before it becomes a costly surprise. The goal isn’t to redo the planning every year — it’s to know, every year, exactly where you stand and where you could be.

The goal isn’t to redo the planning every year — it’s to know, every year, exactly where you stand and where you could be.

If it’s been a while since your plan had a real second look, let’s put one on the calendar.

tperrone@necgginc.com

Questions? Call me. My Calendar

Download Your Free GWT Report- Learn how the GWT Planning System® can be your pathway to solid up to date planning and help you with decisions for the future: Click

Check this Article out:

Are you Building your Business by Design…or by luck?

THREE WAYS TO GROW YOUR BUSINESS WEALTH!

August 22, 2026 by YOUR BUSINESS WORTH, posted in Executive Benefits, Income from your business, Inside Sale, Key People_Or Group, Passive Ownership, retirement

Business owners get confused as to the purpose of their business. They put most of their time into their business with the hope of good business growth and future security. However, in many cases, they are not updated on the most effective way of using their cash flow to create outside wealth. There are three ways to use your business to create personal wealth and and economic future.

Thomas J. Perrone, CLU, CIC – NEW ENGLAND CONSULTING GROUP OF GUILFORD, INC

Growing value in your business can create tremendous wealth, however, only 15-30% of the small businesses will sell, which creates the “if factor”, the unknown.

The percentage of sales is lower for the smaller owned business, more like 15%.

Building your business to its highest potential value is possible by having guidelines of what must be done as you grow the business.

To hedge the “what if’s” of selling it, you can use the cash flow of the business to create other assets such as executive compensation and qualified benefits and plans.

Many owners neglect to consider these options and end up with too much wealth in their business, causing liquidity and tax problems when they leave, die or become disabled. This presents the problem of “how do you get your wealth out of your business on a tax advantaged method” when you want to leave the business and you need it?

Building Your Business to Sell in The Future!

Here is a list of strategies that will help in growing a robust business and greatest potential value.

Develop value drivers
Create a culture- employees come to you because of it
Develop a middle management
Systematize your business
Customer diversification
Avoid being dependent on a few customers for your sales
Marketing plan- and always update it and analyze it
Focus on growth of revenue, lowing of costs
Protect yourself from litig
Make sure you protect yourself such as
Fund your Buy & sell agreements, bank loans, audit your liability insurance, protective documents, etc.
Have a strategy to sell or transition your business, such as growing the middle management, and key people to step in and run the company, or even buy it. This is a long-term process, but you must put things in order and work on strategies to get the greatest potential value from the business.

When Considering Using Your Business Cash Flow to Develop Executive Compensation and Other Benefits,

Such as:

Executive Compensation plans, where the company contributes to the plan, and you as owner pay as little as 2% in taxes on the contribution.
Salary Continuation and deferred compensation arrangements for you.
Deposit into your company’s retirement plan (like 401k, profit sharing, 403b, etc.). However, if you are a “high earning business owner”, do not load up on 401k contributions and other contributory plans as the tax consequences are severe.
Make sure your buy and sell agreements are funded and updated. Make sure they cover at least the seven major triggers (death, disability, voluntary and non-voluntary termination, divorce, bankruptcy, retirement).
Have critical illness plans set up such as medical reimbursement plans, disability, and health coverage.
Tie your major Key group to your company as they are the value of the company and contribute to the cash flow of your company, allowing you to implement these strategies.
Create vested benefit schedules to keep them with you
Have a company evaluation /appraisal periodically.
Focus your attention on growing sales, as all things point to sales revenue.

Executive Compensation Is a Fantastic Way to Extract the Value of Your Company on a Tax-favored Basis, And Not Tie It Up in Your Company, Having It Available to You When Needed.

Download the Jfk Era Benefit Report – Free- Learn how to create maximum benefits on a tax-advantaged strategy. This is how savvy business owners use their business cash flow to create wealth! Download

Like to discuss: Call me. My Calendar

www.bpbpgrp.com/Tom

check this article out – When your Income Outgrows your 401k

When Your Income Outgrows Your 401(k): The Retirement Funding Problem for High-Earning Business Owners

August 22, 2026 by YOUR BUSINESS WORTH, posted in Company Wealth, Estate Planning, Executive Benefits, Income from your business, Inside Sale, Key People_Or Group, Passive Ownership, Selling Your Business, Tax Free Income, Working On Your Business

Summary: Business owners can’t save enough for their retirement because of the cash flow demands. 401k, and profit sharing plans limit their contributions, consequently they don’t save enough for retirement and have to depend on the value of their company for their future security. Unfortunately, only a small percentage of companies sell. This creates the Gap in their retirement planning.

By Thomas J. Perrone, CLU, CIC

One of the biggest retirement planning problems facing successful business owners is not earning enough money to retire.

It is the inability to put enough money into a traditional 401(k) or other contributory retirement plan to replace the income they are accustomed to earning.

For many business owners, this problem becomes especially important during the final three to five years before retirement.

The Contribution Limitation Problem

A business owner may be earning $250,000, $300,000, $400,000, or more per year. Naturally, as retirement approaches, the owner wants to accumulate enough retirement capital to maintain a reasonable percentage of that income.

The problem is that a traditional contributory retirement plan does not necessarily allow the owner to contribute in proportion to his or her income.

The amount the owner can contribute may be affected by the plan’s design, employee participation, employee compensation, nondiscrimination requirements, and applicable contribution limits.

This creates an important question:

How do you fund the retirement needs of a highly compensated business owner when the traditional retirement plan limits how much that owner can put away?

Consider a Simple Example

Imagine a business owner earning $250,000 per year.

Now compare that owner with an employee earning $100,000 per year.

Both may participate in the same 401(k) or contributory retirement plan. Yet the business owner’s retirement income need is substantially greater.

If the owner wants to retire at a level that is reasonably close to his or her final earnings, the amount that can be accumulated through the traditional plan may not be sufficient.

The employee earning $100,000 may have a much more manageable retirement funding objective.

The owner earning $250,000 has a much larger gap to fill.

And this becomes even more significant when the owner is only a few years from retirement.

The Last Three to Five Years Can Be Critical

Many business owners spend decades building their companies.

They reinvest profits.

They purchase equipment.

They hire employees.

They expand facilities.

They build working capital.

They grow the value of the business.

As a result, much of their wealth may remain inside the business rather than inside a retirement account.

Then, three to five years before retirement, the owner begins asking:

“How am I going to turn the value I’ve created in my business into retirement income?”

That is when the limitations of a traditional contributory retirement plan can become particularly apparent.

Trying to solve a lifetime retirement accumulation problem during the final few years with a plan that has contribution limitations may simply not work.

The Real Issue May Not Be Your Retirement Plan

This is why I believe business owners need to look beyond the question:

“How much can I contribute to my 401(k)?”

The more important question may be:

“How am I going to convert the wealth I’ve created in my business into the retirement income I want?”

Those are two very different questions.

A 401(k) is an important retirement planning tool. But for a successful business owner, it may be only one piece of the overall strategy.

The business itself may represent the owner’s largest asset.

The challenge is developing a coordinated strategy for:

Building business value
Protecting business value
Accumulating retirement assets
Creating additional sources of retirement capital
Reducing unnecessary taxes
Preparing the business for transition
Converting business equity into personal wealth

Don’t Wait Until Retirement Is Five Years Away

The earlier this issue is addressed, the more alternatives may be available.

If you are a business owner earning substantially more than your employees, don’t assume that maximizing your 401(k) contribution automatically means you have maximized your retirement planning.

Your business may be producing significant income today while simultaneously creating a retirement funding gap for tomorrow.

Most business owners don’t have a retirement savings problem. They have a business planning problem.

The goal should not simply be to put as much money as possible into a qualified retirement plan.

The goal should be to develop a coordinated strategy that allows you to grow, protect, and eventually transition the value of your business into the financial resources you will need after you stop working.

That requires looking at the entire picture—not just the retirement plan.

The Bottom Line

If you are a highly compensated business owner, especially one earning $250,000 or more, take a close look at the relationship between your current income, your retirement income goal, your retirement assets, and the value of your business.

If there is a significant gap, don’t wait until the final few years to discover it.

Your business may be your greatest retirement asset—but only if you have a plan for turning its value into personal wealth.

DOWNLOAD YOUR FREE “JFK ERA BENEFITS REPORT FOR BUSINESS OWNERS” and learn how high earning business owners are creating tax advantaged retirement plans.

CLICK HERE

Video: Endorsement RETIREMENT PLAN

If you have an interest in discussing your planning please call.

Tom’s Calendar

The Insurance-Holding LLC: A Smarter Way to Fund Your Buy-Sell Agreement

August 20, 2026 by YOUR BUSINESS WORTH, posted in Buy and Sell Agreements, Estate Costs, Estate Planning, Funding your Buy and Sell, Key People_Or Group, Life Insurance, Life Insurance Types, Selling Your Business, Strategies of growing business, Uncategorized, Valuation, Working On Your Business

By Thomas J. Perrone, CLU, CIC

Every multi-owner business eventually asks the same uncomfortable question: what happens if one of us dies, becomes disabled, or wants out? A buy-sell agreement answers the “what” — it’s the legal contract that says the remaining owners (or the business) will buy out a departing owner’s interest. But a buy-sell agreement is only as good as its funding mechanism. Promises to pay are worthless if the cash isn’t there when it’s needed.

Life insurance is the most common way to fund a buy-sell agreement, because it delivers cash exactly when it’s needed most — at death. The harder question is *who should own the policies*. For businesses with more than two or three owners, a growing number of advisors are turning to a special-purpose LLC created solely to hold those policies. Here’s how it works, and why it might be the cleanest solution on the table.

The Problem With the Traditional Options

There are two classic ways to structure buy-sell funding:

Cross-purchase agreements** have each owner personally buy a policy on every other owner. This works fine with two owners (two policies), but the math explodes quickly. Four owners need twelve policies. Six owners need thirty. Every time an owner joins or leaves, policies have to be rewritten. It’s an administrative nightmare, and it often means owners of different ages and health statuses paying wildly different premiums for equal buyout rights.

Entity-purchase (redemption) agreements** solve the multiple-policy problem — the company itself owns one policy per owner — but they create a different issue: when the company redeems a deceased owner’s shares, the surviving owners don’t get a step-up in the cost basis of their own interests. That can mean a much bigger capital gains tax bill down the road when they eventually sell

The LLC Solution

An insurance-holding LLC splits the difference. The owners form a separate LLC — sometimes called a “special-purpose entity” or “insurance LLC” — whose only job is to own and administer life insurance policies on each business owner. The LLC is typically structured as a partnership for tax purposes, with each business owner holding a membership interest proportional to their stake in the operating company.

Here’s the flow:

– The LLC purchases one policy on each owner’s life (not one per pairing, so the policy count stays low no matter how many owners there are).

– Each owner (or the operating business) contributes cash to the LLC to cover premiums.

– When an owner dies, the LLC receives the death benefit tax-free.

– The LLC uses those proceeds to purchase the deceased owner’s interest in the operating business, distributing it to the surviving members according to the buy-sell terms.

Because the LLC — not the individual owners — is treated as the policy owner and beneficiary, and because it’s taxed as a partnership, the surviving owners generally receive a basis step-up in their LLC interests similar to what a cross-purchase arrangement provides, while avoiding the multiple-policy headache of a true cross-purchase.

Why Owners Like It

–Fewer policies, less administration. One policy per owner, held in a single entity, instead of a tangle of cross-owned contracts.

– Basis step-up preserved. Surviving owners’ tax basis generally increases, which can meaningfully reduce future capital gains taxes.

– Avoids the transfer-for-value trap. Because all owners are members of the same LLC from the outset, properly structured transfers among them typically fall within IRS exceptions that keep the death benefit income-tax-free.

– Built-in flexibility. New owners can be added as LLC members without rewriting a web of cross-purchase contracts.

– Creditor separation. Holding policies in a distinct entity can offer a layer of separation from the operating company’s business risks.

What to Watch Out For

This structure isn’t a free lunch. It adds a second legal entity to maintain — its own operating agreement, its own tax filings, its own bank account for premium payments. The IRS has scrutinized partnership-owned life insurance arrangements in the past, so the LLC operating agreement needs to be drafted carefully, with real economic substance and clear treatment of premium contributions as capital contributions rather than disguised gifts. It also requires everyone to stay disciplined about funding premiums on time, since a lapsed policy defeats the entire purpose of the plan.

Is It Right for Your Business?

The insurance-holding LLC tends to make the most sense once you have three or more owners, where cross-purchase becomes unwieldy but the tax advantages over a straight entity redemption still matter. For two-owner businesses, a simple cross-purchase or entity-purchase plan may be all you need.

As with any buy-sell funding decision, this isn’t something to set up from a blog post. Work with a business attorney and a tax advisor who can model the specific numbers for your ownership structure, confirm the entity is respected for tax purposes, and make sure the policies, the operating agreement, and the buy-sell agreement itself are all pulling in the same direction. Get it right once, and it’s one less thing your partners have to worry about when the unexpected happens.

This article is for general informational purposes only and does not constitute legal, tax, or financial advice. Consult a qualified attorney and tax professional before implementing any buy-sell funding strategy.

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