Category: Funding your Buy and Sell

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. 

There are but a few thoughts concerning building wealth through your business while building your business.  

If you would like to receive my report on the “JFK ERA BENEFITS THAT CREATED SUBSTANTIAL WEALTH FOR BUSINESS OWNER”, CLICK THE link and it will download. This benefit was around in the 50’s, but only for the bigger companies, now it is available to the smallest of businesses, and may be one of the greatest business owner benefits available.  CLICK JFK