One important issue an owner can spend their time on, is getting the right people to fill the right positions in their company, while removing the wrong people from positions.
Situations are always changing and can change the dynamics of the business. For example; the retirement of a key owner or other key employee, the unexpected loss of a key person due to death or disability can pose a significant financial hit to any company. Planning can reduce the adverse impact.
Continuity of leadership is important. Having a backup for the key positions would be ideal. Sometimes you don’t have the personnel to accomplish this. A company training program can be a valuable tool for the long-term growth of the company. Cross training is worth the time. Having personnel filling in for important jobs when needed is a valuable element for the business growth.
Trader Joe ‘s is a very good company and a great example of a company with interchangeable job descriptions. Employees learn multiple jobs and task. They rotate their jobs every few hours on the employee’s shift. They create teams, with captains and the team helps with on the job training for the e different jobs. Their education is ongoing. Trader Joe’s has a bench ready to go. This is also done with their management team. Their candidates are always being educated to move up the line and into the position.
Board of Directors
Having an active Board of Directors can help with guidance in implementing employee growth. This is next level management. This is a value driver which is of importance to the growth and value of the company. It is what a potential purchaser looks for in a company that they may be interesting in purchasing.
The board helps provide management continuity and immediate oversight in triggering events, such as divorce, death, disability, or withdrawal. The board can be made up of key insiders and some outsiders who have insight to your business, but not necessarily in your business or industry. Continue reading “Building Your Leadership Team And Going Deep!”
A stock option plan is an option to give the key employees more incentive to stay with your company and potentially purchase your company. Usually the owner will sell to the employee (or employee group), 10%-25% in total. The amount of the stock will always be less than the majority of the stock.
The key person has a better chance of financing future stock purchases from financial institutions by owning this amount of stock in the company. This creates the building blocks of a future sale for the current owner.
This percentage of ownership doesn’t give the key employee control of votes during shareholder meetings. The majority owner can maintain control over the voting as long as the Articles of Incorporation and the Bylaws have been properly structured.
Another options is to issue only non-voting stock to the key employee(s) in Tier 1. By amending the corporations’s Articles of Incorporation, you can issues non-voting shares. You can even do this with S corporation. The one class rule of an S Corp does not apply as non voting stock is not considered a second class of stock for purposes of this rule.
CONTROL IN SELLING YOUR COMPANY
Usually corporate laws generally require at least two-thirds approval by the shareholders when the corporation has a major event as selling the company to a third party. As long as you maintain at least that amount of percentage ownership, will have the ability to control the decision regarding a future sale. Continue reading “Transferring Stock does not mean you have to give up control. “
Business owners have experienced a well-publicized meltdown in traditional financing. Now they want to know how they can prevent themselves from being vulnerable again!
Become Your Own Bank
What if you set a goal today to accumulate money on your own? Shore up reserves for use in emergencies in your business, or for business opportunities, investments and personal retirement. You take care of your employees, your vendors and your customers. What if you think about taking care of yourself? Traditional savings vehicles are not as attractive as they were in the past. Many companies have eliminated pension plans. Those companies that haven’t are finding that, in many cases, the owner can’t put a substantial amount away for himself. Today’s business owner wants to accumulate money for the future’s “what ifs” without depending on outside financing sources.
Set up a SIP
The solution is a supplemental income plan, or SIP. If properly designed, a SIP accomplishes several things. The growth is tax-deferred. If accessed correctly, the gain is tax-free. There are no contribution rules and no required distributions. Moreover, there is a pre-retirement survivor benefit paid to the family in case of the death of the business owner, also tax-free. With the cash flow rigors of owning your business, putting money aside gets more difficult every day. Traditional methods no longer work or are no longer attractive. Safety is a greater concern now than in the past. Business owners want to control their own financial destinies without depending on credit lines, business loans and outside financing. What if, going forward, you finance your own business purchases? Every cent you pay in financing costs is lost forever. Eliminate these costs in the future and use your SIP for purchases, investments, opportunities and emergencies. The savings on financing goes back into your pocket. This is perhaps the best recession-era lesson for business owners to absorb today and to never forget in the future. Do not rely heavily on outside funding in the form of loans, vendor financing or even business credit cards.
Today’s business owner wants to accumulate money for the future’s “what ifs” without depending on outside financing sources.
Do It for You
Right now, business owners must take care of themselves because no one else is going to do this for them. Valley business owners constantly tell me they are tired of lying awake at night, staring at the bedroom ceiling and worrying about cash flow. A supplemental retirement plan is simple. It does not involve any administration or fees. There is no ERISA or IRS involvement. Where is the best place to invest as you bulk up your SIP? In the past, you had two choices. You had market-driven vehicles that we now realize can be a roller coaster ride or safe vehicles that yielded small or no returns. Here is a new option for you and your professional financial advisor to consider. Life insurance—a product that has been around for more than 200 years—may present the flexibility and growth you seek.
Continue reading “What If I Want to Take Care of Myself?”