Category: Key People_Or Group

THREE WAYS TO GROW YOUR BUSINESS WEALTH! 

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

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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

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

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.

 

Discussion: :My Calendar

Website: www.bpbpgrp.com/tom

203.530.6615

tperrone@necgginc.com

Check out this : Cheapest Way To Fund Your Buy and Sell Agreement

FREE DOWNLOAD CLICK HERE: THE BSA GUIDE

 

Seven Things Buyers May Pay More for When Purchasing a Business

by YOUR BUSINESS WORTH, posted in Business Growth and Transition, Buy and Sell Agreements, Company Wealth, evaluations, Inside Sale, Key People_Or Group, Passive Ownership, retirement, Selling Your Business, Strategies of growing business, Tax Efficient, Valuation, Value drivers, Working On Your Business


By: Thomas J. Perrone, CLU, CIC

How to Build a More Valuable and Transferable Company

Many business owners ask:

What is my business worth?

That is an important question. But an even more valuable question may be:

What can I do today to make my business worth more in the future?

When buyers evaluate a company, they are not simply looking at past revenue. They are evaluating the company’s ability to generate future cash flow—and the risks that could prevent that from happening.

Businesses with dependable earnings, strong customer relationships, capable employees, effective systems, and less dependence on the owner may be more attractive to buyers.

Here are seven things buyers may be willing to pay more for because you build the business around strong value drivers. 

1. Predictable and Growing Cash Flow

Revenue is important, but consistent profits and reliable cash flow are often more meaningful.

A company with steady earnings may be more attractive than a company with higher but unpredictable profits. Buyers want confidence that the business can continue generating cash after the sale.

Business owners should focus on improving profit margins, controlling unnecessary expenses, and creating a history of dependable financial performance.

2. Recurring Revenue and Strong Customer Relationships

Recurring revenue can make future earnings easier to predict.

Service agreements, subscriptions, maintenance contracts, memberships, and repeat customers may provide greater visibility into future revenue.

Buyers may also look at customer retention and customer concentration. A company that depends heavily on one or two customers may present more risk than a business with a broad and diversified customer base.

An important question is:

Are customers loyal to the company—or primarily loyal to the owner?

Customer relationships that can continue after the owner leaves may increase the company’s transferability.

3. A Business That Can Operate Without the Owner

Owner dependence can reduce business value.

If the owner is responsible for most sales, customer relationships, major decisions, and daily operations, a buyer may question what will happen after the owner leaves.

A useful test is to ask:

Could the company continue operating successfully if the owner were absent for 30, 60, or 90 days?

transferable it may become.

4. A Strong Management Team and Capable Employees

Buyers are not only acquiring the company’s assets. They may also acquire the knowledge and experience of their employees.

A capable management team can provide continuity and help the business maintain its performance after a sale.

Business owners should identify key employees, develop future leaders, and create strategies that encourage important people to remain with the company.

A business with leadership depth may be less dependent on any one individual.

5. Documented Systems and Operating Processes

Businesses are often more transferable when important processes are documented and repeatable.

Written procedures for sales, employee training, customer service, pricing, quality control, and financial management can help a buyer understand how the company operates.

Strong systems may also improve consistency, reduce errors, and make the business easier to manage.

The goal is to build a company that operates through reliable systems—not simply through the owner’s experience and memory.

6. A Sustainable Competitive Advantage

Why do customers choose your company instead of a competitor?

Your advantage may be a compelling reputation, specialized expertise, proprietary technology, a recognized brand, a unique service model, or long-term customer relationships.

The key is whether that advantage is sustainable and difficult for competitors to duplicate.

A strong competitive position may help protect customer relationships, support healthy profit margins, and create greater confidence in the company’s future.

7. Clean Financial Records and Lower Business Risk

Buyers need to understand the company’s financial performance.

Accurate and timely financial records can make it easier to evaluate revenue, expenses, profits, cash flow, and future opportunities.

Buyers may also examine risks involving customer concentration, debt, legal issues, insurance, technology, employee obligations, and ownership agreements.

Reducing risks can be just as important as increasing revenue.

The Common Factor: Buyer Confidence

These seven value drivers have one important thing in common:

Buyers may pay more when they have greater confidence in the future of the business. 

They want confidence that:

– Cash flow will continue.

– Customers will remain.

– Employees and management can operate the company.

– Systems are documented and repeatable.

– The company has a sustainable competitive advantage.

– Financial information is reliable.

– Business risks are identified and managed.

Two companies with similar revenue and profits may receive very different valuations because one is more predictable, less dependent on its owner, and easier to transfer.

Build Value Before You Need to Sell

Business owners should not wait until retirement is approaching to begin building value.

Improving cash flow, developing management, documenting systems, reducing owner dependence, and strengthening customer relationships may take years.

These improvements can benefit the owner even if the business is never sold. A stronger company may produce greater profitability, reduce owner stress, improve operational efficiency, and provide more choices for the future.

Through the GWT Planning System®, Business owners can evaluate where their company is today, identify opportunities to build and protect value, and develop strategies for converting business equity into future financial security.

The goal is not simply to build a business that someone else wants to buy.

The goal is to build a business worth owning, worth protecting, and worth paying more for. 

tperrone@necgginc.com

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Website: www.bpbpgrp.com/Tom

Resources:

Free Download Business Building Guide Call “  Growing Your Business On Purpose”

Podcast: What Buyers Really Look For When buying Your Business!

How to Identify and Solve the Problems Holding Your Business Back

by YOUR BUSINESS WORTH, posted in Business Growth and Transition, Company Wealth, Income from your business, Inside Sale, Key People_Or Group, Passive Ownership, retirement, Selling Your Business, Strategies of growing business, Tax Efficient, Team

A Simple Business Planning Process for Growth, Value, and Future Freedom

By Thomas J. Perrone, CLU, CIC

Most business owners are excellent at solving immediate problems — customer concerns, cash flow, staffing, vendor issues. What often gets neglected are the larger problems quietly limiting growth, value, and future options.

The greatest danger isn’t having problems. It’s failing to identify the ones that could affect your business’s future — and your own financial security.

That’s the purpose of the One Page Solution: a simple process for evaluating your company, identifying the most important issue, and taking manageable steps toward a solution — one problem at a time.

Growth and Transition Are Connected

Business owners tend to treat growth and transition as separate issues. They aren’t.

Growth is about the systems, people, and performance that build a stronger company. Transition is about your eventual exit — retirement, sale, family succession, or an unexpected disability or death.

The two are linked: greater profitability creates options for personal wealth and retirement security, while your personal goals (retiring in five years? reducing involvement? no clear successor?) shape the decisions you make in the business today.

The One Page Solution Framework

Start with one question: What is the most important problem that could prevent you from reaching your business and personal goals?

Then map it out:

  1. The problem — what needs addressing
  2. The consequences — what happens if it’s ignored
  3. The desired outcome — what success looks like
  4. The roadblocks — what could get in the way
  5. The action steps, owners, and timeline — who does what, by when
  6. The review process — how you’ll track progress

You don’t need to fix everything at once. One important problem. One practical solution. One step at a time.

A Job vs. a Business

Ask yourself: Could you leave your business for three months without checking in, and still expect it to run well?

If not, the company may depend too heavily on you — which means you’ve built a job, not a transferable business. A buyer doesn’t want to purchase your personal effort; they want a company with systems, culture, and a management team that can operate without you.

Identify Roadblocks Early

Every strategy has roadblocks — a management gap, an under-financed buyer, too much personal wealth tied up in the company. Naming these early gives you time to solve them before they become forced decisions driven by illness, a downturn, or an unplanned sale opportunity.

Small Steps, Coordinated Advisors

Building value and preparing for transition takes time, but the first step can be small: review your company’s value, document one key system, or schedule a meeting with your advisor team (accountant, attorney, financial advisor, valuation professional). Coordinating their efforts — not just having them — is what drives results.

Start With the Right Question

If you had to leave your business tomorrow, would it continue to succeed — and would you be financially prepared?

Your answer points to the one issue worth solving first. Identify it. Understand the consequences. Define the outcome you want. Then take the first step.

Ready to identify what’s limiting your company’s growth, value, or future options? Schedule a conversation to start building a practical strategy for building and protecting your business worth.

Thomas J. Perrone, CLU, CIC is a business planning professional, author, and host of the podcast Building and Protecting Your Business Worth.

About the Author

Thomas J. Perrone, CLU, CIC is a business planning professional, author, and host of the podcast Building and Protecting Your Business Worth. He works with business owners to help them build business value, protect the company from unexpected events, develop strategies for business transition, and convert business success into long-term personal financial security.

Ready to identify the problems that may be limiting your company’s growth, value, or future options?

Schedule a conversation to discuss your business goals and begin developing a practical strategy for building and protecting your business worth.

 

For A full Report Click Here:

tperrone@necgginc.com

www.bpbpgrp.com/tom

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POdcast: Hidden Dangers Every Business Owner Needs to Address

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What Buyers Really Look For When They Buy a Business

by YOUR BUSINESS WORTH, posted in Buy and Sell Agreements, Company Wealth, Estate Costs, Funding your Buy and Sell, Income from your business, Key People_Or Group, Life Insurance, Life Insurance Types, Transfer Costs, Value drivers, Working On Your Business

 What Buyers Really Look For When They Buy a Business

It’s Not Just About Profits—It’s About Confidence

By Thomas J. Perrone, CLU,CIC

Many business owners assume that if their company is profitable, buyers will line up and pay top dollar when it’s time to sell. Unfortunately, that’s rarely how the market works AND how a transition of their business happens. Professional buyers don’t simply buy earnings—they buy certainty when purchasing a business. They want confidence that the business will continue to produce predictable profits after the current owner walks away. The less risk they see, the more they’re willing to pay. Whether you plan to sell in three years or twenty, understanding what buyers value today gives you the opportunity to dramatically increase the value of your business before you ever put it on the market.

Buyers Want Predictable Cash Flow The first question every serious buyer asks is simple: Will this business continue generating cash flow after the owner leaves? Businesses with recurring customers, consistent profitability, stable margins, reliable financial reporting, and strong cash flow command significantly higher valuations because they reduce uncertainty. The more predictable your financial performance, the more valuable your company becomes.

Buyers Want a Business—Not a Job One of the biggest reasons businesses receive lower offers is owner dependence. If every important decision requires you… If customers only trust you… If employees rely on you… If sales stop when you stop… Then buyers aren’t purchasing a business. They’re purchasing your job. The more independent your company becomes, the more attractive it becomes to buyers.

Strong Financial Records Build Trust Professional buyers expect financial statements they can rely on. They look for:

  • Accurate financial statements
  •  Clean tax returns
  •  Monthly reporting
  •  Normalized earnings
  • Organized documentation

Disorganized books create doubt, and doubt always lowers value. Great Leadership Creates Premium Value Businesses with strong leadership teams consistently receive higher purchase offers.  Why? Because buyers know the company can continue operating successfully without the owner being involved in every decision. Companies with defined responsibilities, accountability, low employee turnover, and future leaders already in place are viewed as lower-risk investments.  

Systems Are More Valuable Than Heroics Many successful businesses rely on talented people. Exceptional businesses rely on systems. Documented procedures, operating manuals, training programs, technology, and standardized processes allow a company to produce consistent results regardless of who is running the day-to-day operations. People eventually leave.  Systems remain.

Diversification Reduces Risk Imagine one customer accounts for 40% of your revenue. A buyer immediately sees risk. The same concern exists if your company depends on one salesperson, one supplier, or one product. Diversifying your customer base and revenue sources creates stability—and stability increases business value.

Buyers Purchase Future Growth Buyers aren’t just investing in today’s profits. They’re investing in tomorrow’s opportunities. They want to know:

  •  Can revenue increase?
  •  Can margins improve?
  •  Are new products possible?
  • Can technology improve efficiency?
  • Can the business expand into new markets?

Often, future growth potential is worth more than current earnings.

Eliminate Deal Killers Before Buyers Find Them Unexpected problems can quickly reduce purchase price—or stop a transaction entirely.

  • Common deal killers include:
  • Pending legal issues
  •  Poor contracts
  •  Tax problems
  •  Environmental concerns
  •  Employee disputes

The fewer surprises buyers uncover during due diligence, the smoother and more profitable the transaction becomes.

The Most Valuable Businesses Are Transferable Ultimately, buyers ask one question: **”Can I step into this business and continue operating successfully?”** If the answer is yes, buyers compete. If the answer is no, they negotiate. Transferability is one of the greatest drivers of business value. ## The Best Time to Prepare Is Years Before You Sell Increasing the value of your business isn’t something you accomplish six months before retirement. The most successful exits are planned years in advance.

Owners who prepare early enjoy:

  • Higher business valuations
  •  More negotiating leverage
  •  Greater financial security
  •  More retirement options
  •  Less stress during the sale process

How the GWT System Helps Business Owners Increase Business Value The GWT System was designed to help business owners move beyond simply operating their company to building a business that creates long-term wealth. By focusing on enterprise value, executive compensation strategies, retirement planning, succession planning, and owner independence, business owners can strengthen both their company and their personal financial future. The goal isn’t simply selling your business.  The goal is creating financial freedom.

Ready to Find Out How Valuable Your Business Really Is? If you’d like to learn how prepared your business is for a future sale—or discover the areas that could significantly increase its value—schedule a confidential conversation today. Thomas J. Perrone, CLU, CIC, New England Consulting Group of Guilford, Inc. **Building and Protecting Your Business Worth**,Helping business owners build wealth, increase enterprise value, and retire with confidence.

VIEWPOINT: To plan for the future you need to know where you are currently in your planning, This short 4 minute survey is enough information for us to complete and send you a report called the “Where You Are Report”.  This will help you plan for your future.   To take the survey CLICK HERE

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What Buyers Are Really Buying

by YOUR BUSINESS WORTH, posted in Business Growth and Transition, Buy and Sell Agreements, Company Wealth, Estate Costs, Estate Planning, evaluations, Inside Sale, Key People_Or Group, Selling Your Business
WHITE PAPER

Building Business Value Before You Sell:

Why a Stable, Motivated Management Team Is Your Most Powerful Value Driver

By: Thomas J. Perrone, CLU, CIC

New England Consulting Group of Guilford, Inc.

Business Consultants of New England

Part of the GWT Planning System™  ·  Transition Planning Series

Executive Summary[i]

When a buyer evaluates your business, they look far beyond your balance sheet. They are buying your future earnings — and they will pay a premium price only if they believe those earnings are protected, sustainable, and not dependent on you alone.

The single most important factor in commanding a top-dollar sale price is a stable, motivated management team supported by a high-performing workforce. Without it, no other value driver can fully compensate. With it, every other aspect of your business becomes more credible, more transferable, and more valuable.

Prior to a sale, you must create value within the business and then conduct a sale process that compels the buyer to pay top dollar for it. The time to act is now — not when you are ready to sell.

What Buyers Are Really Buying

In the Merger & Acquisition marketplace, your company will undergo intense buyer scrutiny. Buyers look at more than EBITDA; they look for attributes they believe reduce risk and increase return. In short, the business must have a good story — in both past and future tenses.

These attributes are called Value Drivers. They are the qualities that cause buyers to pay a premium price for a business. The absence of Value Drivers can mean that your business has no value to a third-party buyer at all.

The primary Value Drivers a buyer evaluates include:

  • Stable, motivated management and a high-performing workforce
  • Systems that sustain the growth of the business
  • Established and diversified customer base
  • Appearance of the business facility consistent with asking price
  • Realistic growth strategies
  • Effective and documented financial controls
  • Growth in cash flow, profitability, revenue and sales
  • Presence in an attractive business sector
  • The existence of protected proprietary technology

Note that Value Drivers do more than increase the amount of cash in your pocket at closing. They also increase the marketability — or sale ability — of your business. For example, if you lack a capable management team, many buyers will have no interest in your company regardless of your financial performance.

Value DriverWhy It Matters to Buyers
Stable, Motivated Management TeamFoundational — enables all other value drivers
High-Performing WorkforceEnsures continuity of production and service
Systems That Sustain GrowthScalable operations reduce owner dependency
Established & Diversified Customer BaseReduces revenue concentration risk
Realistic Growth StrategiesDemonstrates future earnings potential
Effective Financial ControlsSignals reliability and credibility to buyers
Growth in Cash Flow & ProfitabilityDirectly influences EBITDA multiples
Protected Proprietary TechnologyCreates competitive moat and premium pricing

The Premier Value Driver: Your Management Team

Of all the Value Drivers, the stable, motivated management team stands first among equals. This is the chapter’s central thesis, and it is worth understanding why.

None of the other Value Drivers can be achieved through your efforts alone. It takes a team — a strong management team — to accomplish all of them. As any sophisticated buyer understands, the absence of a management team signals that other vital aspects of the business are also deficient.

Buyers want to know two things about your management team:

  • Does the team extend beyond the owner?
  • Will that team stay when the owner leaves?

If you cannot answer yes to both questions, you have significant work to do before you approach the market.

“If no one came to work tomorrow, what would the company produce?” — Paula Cope, Business Consultant. The answer is nothing. Your workforce is not a cost center; it is your primary production asset.

What a Management Team Actually Does

Your management team includes the people responsible for:

  • Setting and implementing the company’s strategic direction
  • Aligning strategic objectives with the company’s mission and vision
  • Monitoring and controlling high-level activities within the business plan
  • Motivating and supervising other employees

In many small businesses, this “team” is one person: the owner. To build a championship organization — and to command a championship sale price — the management team must include people with a variety of complementary skills. A football team with a star quarterback who lacks supporting players cannot win a season. The same principle applies to your business.

Key Employee Incentive Plans: The Retention Strategy

Building a strong management team is only half the challenge. Keeping them is the other. This is where Key Employee Incentive Plans become essential tools for every business owner planning an eventual exit.

Short-Term Plans: The Stay Bonus

A Stay Bonus is a straightforward but powerful tool designed to retain key employees through a specific event — most commonly a business sale or ownership transition. The structure is simple: the employee receives a defined bonus if they remain with the company through a specified date or event.

Stay Bonuses serve multiple strategic purposes:

  • They signal to key employees that they are valued and critical to the transition
  • They protect the buyer’s investment by ensuring continuity of the team they are acquiring
  • They provide the seller with leverage to maintain workforce stability during the sale process

For the business owner, the cost of a Stay Bonus is almost always recaptured in the form of a higher purchase price. A buyer who knows the management team is secured through transition will pay more for that certainty.

Long-Term Plans: Non-Qualified Deferred Compensation

For owners who want to retain key employees over the long term and build meaningful financial incentives tied to business performance, Non-Qualified Deferred Compensation (NQDC) plans offer significant flexibility.

Unlike qualified retirement plans, NQDC plans are not subject to ERISA contribution limits or nondiscrimination rules. This means you can:

  • Design customized compensation packages for specific key employees
  • Defer compensation to reduce current payroll tax obligations
  • Tie vesting schedules to tenure or performance milestones
  • Create a golden handcuff that makes it financially costly for key people to leave

When structured properly, these plans do not appear on your balance sheet as funded liabilities, while still creating a compelling retention incentive for the people most critical to your business’s continued success.

EBITDA, Multiples, and Why Management Matters to the Math

Buyers in the lower middle market typically value businesses using an EBITDA multiple. The multiple they apply — which might range from 3x to 8x or more depending on industry and size — is not arbitrary. It reflects their assessment of risk.

A business that is owner-dependent receives a lower multiple because the buyer perceives that the business may not survive the owner’s departure. A business with a stable, documented management team receives a higher multiple because continuity is de-risked.

ScenarioEBITDAIllustrative Value
Owner-dependent (4x multiple)$500,000$2,000,000
Strong management team (6x multiple)$500,000$3,000,000

Same EBITDA. A $1,000,000 difference in business value — driven entirely by management team quality.

The Action Plan: What to Do Before You Are Ready to Sell

The business owner who begins building Value Drivers three to five years before an anticipated exit will always receive a higher price than one who waits until they are emotionally ready to leave. Here is the framework we recommend:

Step 1: Identify Your Key People

Who in your organization is essential to your continued success? Who would a buyer insist stays through and after the transition? These are your key people, and they require a deliberate retention strategy.

Step 2: Design the Right Incentive Structure

Not all key employees are motivated by the same rewards. Some are driven by equity participation; others by guaranteed income; others by long-term deferred compensation. The right plan depends on the individual, the timeline, and the tax implications for both parties.

Step 3: Document Your Management Processes

A management team is only as valuable as the systems it operates. Buyers look for documented processes, defined accountability, and evidence that the business can run without you. Org charts, operating manuals, and performance management systems all contribute to business value.

Step 4: Coordinate with Your Advisory Team

The most effective pre-sale value building happens when your financial planner, HR consultant, compensation specialist, and business strategist are working from the same playbook. This is precisely why Business Consultants of New England was formed.

The GWT Planning System addresses three threats to every business owner’s financial future: Overpaying Taxes, Wealth Erosion, and Business Transition Failure. Building a motivated management team is a direct intervention against the third threat.

About the Author & Business Consultants of New England

Thomas J. Perrone, CLU, CIC is the Founder and Principal of New England Consulting Group of Guilford, Inc., with over 55 years of experience serving business owners in Connecticut and New England. He specializes in advanced plan ning strategies including the GWT Planning System, business succession and exit planning, executive compensation, and wealth transfer.

Business Consultants of New England is a collaborative alliance of five independent specialists united around a single purpose: helping business owners grow, protect, and transition their businesses with confidence.

 

Free Report:  Where You Are Report!  You can’t plan the future if you don’t know where you are today.  This report will help you define where you are today and where you are going with your business and estate economic future. FREE DOWNLOAD 

 

Schedule Your Complimentary Business Clarity Conversation

No cost. No obligation. Just clarity on where you stand and what you can do.

Thomas J. Perrone, CLU, CIC

tperrone@necgginc.com  ·  203-530-6615  ·  www.bpbpgrp.com

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© 2026 New England Consulting Group of Guilford, Inc. · Business Consultants of New England · All Rights Reserved.

[i] Ref:  Cash Out Move On – John H. Brown publication This white paper draws on Chapter 6 of Cash Out — Move On to explain the concept of Value Drivers, why a strong management team is the foundation of business value, and what business owners with 5 to 50 employees can do — starting today — to build that value before they are ready to sell.

Your Best Employee Is Being Recruited Right Now — And You May Not Even Know It.

Featured by YOUR BUSINESS WORTH, posted in Business Growth and Transition, Buy and Sell Agreements, Company Wealth, Estate Costs, Estate Planning, evaluations, Executive Benefits, Key People_Or Group, Passive Ownership, Selling Your Business

BY: Thomas J. Perrone, CLU, CIC

Employee retention strategies are important and losing a key person isn’t just an inconvenience. When you factor in recruiting, training, lost relationships, and lost revenue, it can cost well into six figures. So, what’s the solution?

Phantom equity or ghost stock! A great tax strategy!

In this video, I break down exactly how phantom equity (also called phantom stock or ghost stock) works — and why it may be the most powerful retention tool available to closely held business owners today.

This video explains the “Phantom Stock Golden Handcuff” plan, a strategy for businesses to retain top talent without giving up equity. Learn how this plan, which involves a written agreement where key employees receive “phantom” shares, can significantly boost staff retention. We detail how the plan works, its benefitsas an employee benefits package, and its tax treatment within human resources strategies.

✅ What you’ll learn:

  • What phantom equity actually is — and what it isn’t
  • How hypothetical shares are granted, valued, and paid out in cash
  • Full Value vs. Appreciation Only — which design is right for your situation
  • How taxation works at distribution — for you AND your key employee
  • How to informally fund the obligation using tax-efficient financial instruments
  • Why this tool protects your ownership, preserves your control, and is.   fully deductible

No ownership given up. No ERISA compliance headaches. No complicated legal structure. Just a simple, flexible, written agreement that aligns your key person’s financial future with the growth of your business.

If you’re a business owner with 5 to 50 employees and you rely on key people

to drive your success — this video is for you.

📩 Questions about your specific situation? Email me directly: tperrone@necgginc.com

📞 Call: 203-530-6615

📞Or better yet, I would love to have a meaningful conversation with you of what you are thinking concerning your employees.

 Feel free to schedule a spot in my calendar;  https://fantastical.app/b5bhcvxwev-lPTY/call-meetings-general   

👍 If this was helpful, please like and subscribe. I publish new content regularly to help business owners build, protect, and transfer wealth —

https://youtu.be/kVXel27bAEc?si=vzy2R0siYfBvNcXH

Four Pillars of a Strong Business: Growth, Protection, Transition, Equity

by YOUR BUSINESS WORTH, posted in Business Growth and Transition, Buy and Sell Agreements, Company Wealth, Executive Benefits, Income from your business, Key People_Or Group, Selling Your Business, Strategies of growing business, Working On Your Business

Are You Building Your Business by Design… or by Luck?

By Thomas J. Perrone, CLU, CIC

Most small business owners don’t start their journey with a lack of ambition. They work hard, grow steadily, and pour everything into their company. But at some point, an uncomfortable question surfaces:

Is my business growth intentional… or is it just happening?

If you’re like many owners, you’re fully absorbed in the daily demands of running your business. And while revenue may be increasing, key areas—financial planning, protection strategies, and long-term transition—often go overlooked.

That’s where risk quietly builds.

The Hidden Gaps in Growing Businesses

Many business owners are aware—sometimes painfully aware—that critical elements are being neglected. Not because they don’t care, but because they simply don’t have the time, clarity, or structure to address them.

These gaps often include:

  • No clear long-term growth strategy
  • Limited protection against unexpected events
  • Inefficient tax planning
  • No defined exit or succession plan
  • Uncertainty about how to turn business success into personal financial security

Without addressing these, even a successful business can become fragile.

The Questions Every Business Owner Should Ask

Take a moment to consider:

  • Do you have a clear, fail-safe plan to grow, protect, and eventually transition your business?
  • If you had to step away tomorrow—due to retirement, disability, or worse—what would happen?
  • Could you extract your business value in the most tax-efficient way possible?
  • Are you maximizing your compensation and benefits through your business?
  • Do you have a plan for the unexpected—economic downturns, key employee loss, or sudden life events?

If any of these questions are difficult to answer, you’re not alone—but it’s a sign that planning is overdue.

From Uncertainty to a “Destiny Plan”

What many business owners need isn’t more complexity—it’s clarity.

A structured approach—often referred to as a “Destiny Plan”—focuses on aligning your business with your ideal life and financial future. It brings together the key elements that drive long-term success and security into one cohesive strategy.

At its core, this approach focuses on four essential pillars:

1. Growth: Building with Purpose

Growth should be intentional, not accidental. That means:

  • Implementing systems that scale
  • Developing strong leadership and teams
  • Focusing on the true drivers of business value

 

2. Protection: Preparing for the “What Ifs”

Every business faces risk. The question is whether you’re prepared.

  • What if a key employee leaves?
  • What if cash flow tightens?
  • What if you can’t continue running the business?

Proper protection planning ensures your business can withstand the unexpected.

 

3. Equity: Turning Success into Wealth

Your business is likely your largest asset—but are you leveraging it effectively?

  • Accessing equity without unnecessary tax burdens
  • Structuring compensation to maximize benefits
  • Building wealth both inside and outside the business

The goal is not just to grow a business—but to create real, usable wealth.

 

4. Transition: Planning Your Exit Before You Need It

Every business owner will eventually leave their business. The only question is how.

  • Will it be on your terms?
  • Will you receive full value?
  • Is your family or team prepared?

A well-designed transition plan ensures you can exit smoothly, efficiently, and profitably—whether that’s through sale, succession, or retirement.

 

A Simple First Step

You don’t need to solve everything today—but you do need to start.

Even a quick self-assessment can reveal where your biggest opportunities lie. Small adjustments in the right areas can lead to significant improvements in both business performance and personal financial outcomes.

Final Thought

Your business should serve your life—not the other way around.

With the right planning, you can move from uncertainty to clarity… from reactive decisions to intentional strategy… and from building a business to building a legacy.

The question is:

Are you ready to start designing your future—on purpose?

Free download report:

Where you are, and where you could be!

https://www.allclients.com/Form3.aspx?Key=E29266E845E39AFF52FA8CF13E04A8F9

tperrone@necgginc.com

 

Performance Management for Small Businesses: 5 Things Every Owner Needs to Know

by YOUR BUSINESS WORTH, posted in Business Growth and Transition, Company Wealth, evaluations, Income from your business, Key People_Or Group, Passive Ownership, Team, Value drivers

From the Building and Protecting Your Business Worth Broadcast | Guest: Ken Somers

By: Thomas J. Perrone, CLU,CIC

Running a small business means wearing every hat — but one role too many owners neglect is that of a true people manager. On a recent episode of the Building and Protecting Your Business Worth Broadcast, hosted by Thomas J. Perrone of New England Consulting Group of Guilford, guest Ken Somers broke down five critical areas where small businesses can’t afford to fall behind.

1. Performance Management Isn’t Just for Big Companies

Even the smallest teams need structure around performance. Without clear expectations, feedback loops, and accountability, small businesses often lose their best people — or keep their worst ones too long. Performance management doesn’t have to be bureaucratic. Done right, it creates clarity, motivation, and a culture where people actually want to show up and do their best work.

2. Management Succession: Plan Before You Have To

Most small business owners have never thought about what happens if they step away — suddenly or by choice. A basic management succession plan doesn’t require an HR department. It starts with identifying who on your team could step up, what gaps exist, and how you’d develop them over time. Waiting until a crisis hits is the most expensive way to learn this lesson.

3. Rising Healthcare Costs? There Are Smarter Options

Medical insurance is one of the fastest-growing costs for small business owners, and many are still using outdated group plan structures. Two alternatives worth exploring: ICHRA (Individual Coverage Health Reimbursement Arrangement) and QSEHRA (Qualified Small Employer HRA). Both allow employers to reimburse employees for individual health insurance, giving owners cost control and employees more flexibility — without the volatility of traditional group premiums.

4. Every Leader Needs a Coach

Small business owners tend to go it alone. But the most effective leaders — at every level — have coaches. Whether it’s a business coach, executive coach, or peer advisory group, outside perspective helps leaders see blind spots, make better decisions faster, and avoid the isolation that comes with being at the top. If you want your leadership team to grow, coaching isn’t a luxury — it’s infrastructure.

5. Culture: Why It Matters More Than You Think

Culture in a small business isn’t a ping-pong table or a mission statement on the wall. It’s the set of unwritten rules that determine how your team behaves when you’re not in the room. A strong culture attracts better talent, reduces turnover, and makes your business more resilient. Ignoring it doesn’t mean you don’t have one — it just means someone else is defining it for you.

Questions or comments from the broadcast? Reach out to Thomas J. Perrone directly at tperrone@necgginc.com. His book, “Unlocking Your Business’ DNA,” is available on Amazon in paperback and Kindle — with profits going to Veteran Groups.

ken@somershrsolutions.com

(508) 507-1207