Successful business owners often want more than just the maximum amount of money they can get. These owners have deeply ingrained values-based goals that guide why and how they do business. But many of those same owners don’t apply an appropriate amount of weight to values-based goals until it’s too late to achieve them.

Some owners neglect their values-based goals because they don’t come up on a balance sheet or income statement. Others don’t realize how important their values are until those values are threatened. Regardless, as a business owner, it’s important for you to understand what your values-based goals are so you can pursue them.

Let’s look at a typical example of how values-based goals can determine whether your plans for your ownership in the future are successful.

What’s Money Worth If There’s No One to Share With?

Arya Fiers had a reputation as a tough business owner who always focused on the bottom line. Over 25 years, she managed to not only guide her trucking business through three major recessions but also continue growing it. She was a master negotiator and expected her employees to work just as hard as she did. Despite her rigorous management style, people lined up to work for her because she paid her employees well above industry average.

As she approached 60, Arya began thinking about retirement. Because she had no family and none of her key employees were interested in ownership, she began to consider the many offers larger companies had made to buy her business. She contacted her longtime financial advisor, Patty, and determined how much she would need to retire with financial security.

As Arya began talking to potential buyers on her own, she realized that they were all willing to pay her well above the amount she’d need. But she also discovered that none of the buyers would commit to keeping her employees and paying them well above the average market rate. After a few informal talks, Arya decided to start playing hardball.

She went back to Patty, who was her most trusted advisor, and was blunt.

“All of these companies are offering me more money than I need, which is nice. But what I want more than money is for my employees to continue having lots of work and good wages. No one I’ve talked to can promise me that. And if a buyer lays off my workers, then everything I’ve built will be worthless to me.”

This was surprising to Patty. She had known Arya for 20 years, and this was the first time Arya had ever talked about a goal that wasn’t focused on profit.

“The good news is you realized that this is important to you early,” Patty said. “I’m confident that we can create a plan that helps you achieve that goal.”

Patty and her Advisor Team began formalizing Arya’s processes and hiring professional managers to run the company. As the team vetted buyers, Arya insisted that any buyer must commit to paying employees no less than what she had paid them. She also demanded that the buyer would not lay off any employees without cause for one year after the sale. Written employment agreements, wage continuation plans, and bonus plans were introduced for various groups of employees.

Arya received several bids to buy her company that refused those conditions but tried to offset them with more money for the business. Arya flatly refused these offers, to the surprise of many buyers. Only one buyer was willing to abide by the conditions and also pay her enough for financial security. Though it wasn’t the highest offer, it was the offer that made Arya happiest.

She accepted the offer, retired, and committed to mentoring young women in her community in her free time. Two years after the sale, the buyer of her company partnered with her non-profit mentoring group and helped her expand it throughout the state.

What Are Your Values-Based Goals?

There are countless kinds of values-based goals, including the following:

• Protecting employees and company culture
• Bettering the community
• Assuring a comfortable lifestyle for your family
• Leaving a legacy to be proud of
• Developing a reputation for highest quality products

Arya wanted to protect her employees and mentor young women. It wasn’t until she articulated these goals that she could find a way to achieve those goals while still obtaining financial security.

As you plan for the future of your ownership and your business, it’s important for you to identify which values matter to you. Just because something doesn’t show up in the business financials doesn’t mean it’s not important. In many cases, values-based goals determine whether you consider your ownership successful at all.

We strive to help business owners identify and prioritize their objectives with respect to their business, their employees, and their family. If you are ready to talk about your goals for the future and get insights into how you might achieve those goals, we’d be happy to sit down and talk with you. Please feel free to contact us at your convenience.

The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial professional. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial professional. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. Exit Planning is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need.

This is an opt-in newsletter published by Business Enterprise Institute, Inc., and presented to you by our firm.  We appreciate your interest.

Any examples provided are hypothetical and for illustrative purposes only. Examples include fictitious names and do not represent any particular person or entity.

For professional use only. All information can be subject to change without notification.

 KAFL Insurance Resources
800 Linden Ave
Rochester, NY 14625
www.kafl.com
585-271-6400 

Copyright © 2021 Business Enterprise Institute, Inc. All rights reserved.

COBRA Premium Assistance under the American Rescue Plan Act

 

Last month Congress passed the American Rescue Plan Act, which provides 100% COBRA subsidies from April 1 to September 30 of 2021. Today the Department of Labor released guidance and model notices that determine how the COBRA subsidies will be administered.

 

The DOL’s Employee Benefits Security Administration posted the following:

 

·     COBRA Premium Subsidy dedicated page

·     FAQs

·     Five Model Notices: General Notice and Election Notice, Notice in Connection with Extended Election Period, Alternative Notice, Notice of Expiration of Premium Assistance and Summary of the COBRA Premium Assistance Provisions

 

NAHU will provide a review of the COBRA guidance in this Friday’s Washington Update along with a Compliance Corner webinar on April 29.

CyberSecurity Certification

The deadline for NYS resident insurance licensed professionals to file your cybersecurity certification is DUE April 15th!

https://www.dfs.ny.gov/industry_guidance/cybersecurity

 

Helpful How To’s

 

FAQs

Q:  I’ve qualified for an exemption in previous years, do I need to do anything?

A: Yes, even if you fall into one of the exempt categories, you must go on to the website listed to the right and file a notice of exemption.

Q: Great, what are the steps for filing?

A: Go to https://www.dfs.ny.gov/industry_guidance/cybersecurity

  • Go to “Industry Guidance” and in that section go to “Cybersecurity Resource Center”
  • In the middle of the page you will see “Instructions on How to File”
  • Enter your account information and sign in
  • To file an exemption click “Begin” under the Exemption heading
  • Enter your NYS Insurance license number
  • This should bring up your name (or corporate name) and click “Next”
  • Select “This is the first exemption filed for this entity or individual”
  • This will bring up a list of exemptions and select those that you qualify for (You can select more than one, if applicable). Click submit and then done.  You will receive a receipt number which will also be emailed to you

Q: What are the exemptions?

500.19(a)(1) – You are entitled to this exemption when a Covered Entity has fewer than 10 employees, inclduing independent contractors. THis is a limited exemption and you must still design and implement a cybersecurity program that meets some but not all the regulatory requirements

500.19(a)(2) – You are entitled to this exemption when a Covered Entity has less than $5,000,000 in gross annual revenue in each of the last 3 fiscal years from NY business. This is a limited exemption and you must still design and implement a cybersecurity program that meets some but not all the regulatory requirements.

500.19(a)(3) – You are entitled to this exemption when a Covered Entity has less than $10,000,000 in year-end total assets. This is a limited exemption and you must still design and implement a cybersecurity program that meets some but not all the regulatory requirements

500.19(b) – You are entitled to this exemption when you are an employee, agent, representative, or designee of another Covered Entity and you are following that entity’s cybersecurity program. Under this exemption persons do not need to create their own program, but will be required to idenitfy the Covered Entity’s whose program you ae following to claim this exemption.

500.19(c) – You are entitled to this exemption when a Covered Entity does not operate, maintain, utilize, or control any IT systems and does not,and is not required to control. own, access, generate, recieve or possess Nonpublic Information. This is a limited exemption and you must still design and implement a cybersecurity program that meets some but not all the regulatory requirements

500.19(d) – You are entitled to this exemption if you are a Covered Entity that is a captive insurance company that does not, and is not required to control, own, access, generate, recieve, or possess Nonpublic information

Q: If I’m exempt, are there any requirements for me?

A: Yes, if you filed for an exemption under subsection (a) of 23 NYCRR 500.19, you still must: maintain a Cybersecurity Program as required in section 500.02; maintain a Cybersecurity Policy as required in section 500.03; limit Access Privileges as required in section 500.07; conduct a Risk Assessment as required by section 500.09; implement a Third Party Service Provider policy as required by section 500.11; limit your Data Retention as required in section 500.13; and provide Notices to the Superintendent as required by section 500.17, which includes filing an annual Certification of Compliance. If you filed for an exemption under subsections (c) or (d) of 23 NYCRR 500.19, you still must: conduct a Risk Assessment as required by section 500.09; implement a Third Party Service Provider Policy as required by section 500.11; limit your Data Retention as required in section 500.13; and provide Notices to the Superintendent as required by section 500.17, which includes filing an annual Certification of Compliance.

Q: Is there a template for a privacy policy I can use to create my own policy?

A: Yes, see above to access the sample policy template link.
This is an annual certificate filing requirement. If you have any issues, please contact our office.

Still not sure? Call your Broker Manager or KAFL Team Member at 1 (800)-272-6488

 

 

For Immediate Release: 3/23/2021 GOVERNOR ANDREW M. CUOMO

 

 

ON 11TH ANNIVERSARY OF THE AFFORDABLE CARE ACT’S SIGNING, GOVERNOR CUOMO ANNOUNCES EXPANDED ELIGIBILITY FOR FINANCIAL ASSISTANCE IN NEW YORK

 

Extends Open Enrollment Period to the End of 2021

 

NY State of Health’s Implementation of the American Rescue Plan Will Lower Premiums for Most Consumers

 

Higher Tax Credits Also Available to Current Enrollees in Early April and to Higher-Income New Yorkers For the First Time Starting in June

 

Governor Andrew M. Cuomo today announced expanded tax credits available through NY State of Health, New York’s health plan marketplace. The expansion will result in more New Yorkers being eligible for financial assistance and the further reduction in health insurance premiums in New York State. Through the American Rescue Plan, which President Biden recently signed into law, increased tax credits are available to more than 150,000 consumers who are already enrolled in coverage, further lowering health care costs. In addition, in June 2021, NY State of Health will for the first time expand tax credits to tens of thousands of additional New Yorkers with higher incomes who, before the American Rescue Plan, did not qualify for financial assistance to lower the cost of premiums. Governor Cuomo also announced that the 2021 Open Enrollment Period will be extended through the end of this year. The announcements come on the 11th anniversary of President Obama signing the Affordable Care Act into law.

 

“Access to high-quality affordable health insurance is crucial at any time, but the COVID-19 pandemic has made it even more important to make sure New Yorkers are insured in case they face the virus or other health issues,” Governor Cuomo said. “With the availability of increased tax credits and the extended Open Enrollment Period, health insurance premiums will be reduced for more New Yorkers than ever before. I encourage anyone who needs health insurance to sign up through NY State of Health.”

 

Beginning in early April, enhanced federal tax credits will be available for low- and moderate-income consumers (income up to $51,040 for individuals and $104,800 for a family of four) to lower the cost of Qualified Health Plans. Individuals already enrolled through NY State of Health at these income levels will be notified to visit NY State of Health, call the NY State of Health Customer Service Center, or contact a certified NY State of Health assistor to update their information. Consumers who complete their updated enrollment in April will receive a premium invoice from their health plan that reflects the lowered premium amount beginning in May.

 

NY State of Health Executive Director Donna Frescatore said, “As we continue to respond to a global pandemic that has impacted our lives for more than a year, the American Rescue Plan has provided some very good news for New Yorkers. We are working to make enhanced tax credits available to New Yorkers as quickly and as seamlessly as possible.”

 

By June 2021, NY State of Health will update its system to automatically apply the enhanced tax credits without the consumer needing to take any action to receive them. Also in June, NY State of Health will update its system so that higher income consumers (income above $51,040 for individuals and $104,800 for a family of four) can access the federal tax credits. Consumers at these income levels were not previously eligible for tax credits.

 

To allow as many consumers as possible to access these enhanced tax credits, and in light of the ongoing public health emergency, NY State of Health is also announcing an extension of the Open Enrollment Period to December 31, 2021. On February 17, Governor Cuomo announced that New York’s health insurance Open Enrollment Period was extended to May 15, 2021, aligning with states across the country. Ensuring access to affordable health coverage and care is more important than ever, so that individuals do not avoid seeking testing or medical care for fear of cost during the ongoing public health emergency. This deadline extension allows consumers additional time to enroll for 2021 coverage.

 

Over the past eleven years, New York has led the nation in its implementation of the ACA and made more than $4.4 billion in federal tax credits available to New Yorkers to lower the cost of Qualified Health Plans purchased through the NY State of Health Marketplace. More than 5.8 million people, nearly 1 in 3 New Yorkers, now access health coverage through NY State of Health, New York’s official health plan marketplace. The state has seen an unprecedented reduction in uninsured – from 10 percent to 5 percent between 2013 and 2019.

 

Now, with the passage of the American Rescue Plan, NY State of Health will build on these gains to further extend affordable coverage to hundreds of thousands of New Yorkers. Depending on enrollment levels, New Yorkers could receive more than $700 million in additional tax credits in 2021 because of the American Rescue Plan.

 

Individuals who are eligible for other NY State of Health programs—Medicaid, Essential Plan and Child Health Plus—can enroll year-round. As always, consumers can apply for coverage through NY State of Health online at nystateofhealth.ny.gov, by phone at 1-855-355-5777, or by connecting with a free enrollment assistor.

 

For nearly 5,500 years, human beings have written things down. From Hammurabi’s Code and the U.S. Constitution to your personal business plans, writing things down helps people follow rules and best practices, and pursue goals and action items. However, many successful business owners don’t have any written plans they can follow to help them achieve the future for their ownership that they most desire.

“I’ll start when I’m ready,” “This business can’t ever run without me,” and “I’d like to exit but I don’t know what I’d do” are just a few of the most common reasons that business owners don’t create written plans for the future of their businesses and their ownership. Ironically, written plans can offer solutions to these arguments. Let’s look at how.

Written Plans Help You and Your Business Get Ready

One of the most common refrains among business owners when talking about future business transitions is “I’ll start planning when I’m ready to go.” However, by the time many owners are ready, it’s often too late for them to exit on their terms.

One of the most important aspects of a successful business transfer or transition is achieving financial security (i.e., exiting the business and never having to work again unless you choose to). In fact, if you don’t achieve financial security as you transition out of the business, that business exit is a failure. But how can you know how much you’ll need to achieve this lofty goal?

The answer lies in writing things down. Accounting for what you have and comparing it to what you’ll need is much easier when you can see it on paper (or on a screen). When owners start writing things down (with help from their professionals on their advisor team), many discover a gap between what they have and what they need for financial security.

When owners can see that gap, it’s no longer a problem that exists in a distant, theoretical future. Even the most successful business owners can face this gap, despite all of their business success. Since you’re likely to rely on your business to fill in any gaps, seeing the gap in written form can shatter illusions about what you must do to achieve financial security, and how long it might take.

In short, written plans can show you that even if you’re ready to exit, the business may not be ready. That can give you time to start planning for how your business and personal situations will interact as you try to reach your goals.

Written Plans Support Accountability

When you write things down, you and your advisor team or management team can review your plans more regularly and see where things are dragging or going off track. For example, writing down who is responsible for which action items to position the company for a successful future ownership transition gives detail and timeline expectations to those involved.

Written Plans Can Uncover Values-Based Goals

Written plans are rarely static. As you meet milestones and free up your time, you might find that certain values-based goals become important to you. For example, as your company becomes less reliant on you, you may find that providing your family more chances to travel the world is more of a priority than it had been in the past.

Written Plans May Help Your Family

Finally, a written plan may reduce the likelihood of arguments after you die. Putting your wants and wishes in writing provides your family, employees, and advisors guidance on what to do with everything you have after you die. For many owners, strong legacies and minimal infighting are important. Without a written plan, it can be much harder for the people you care about to carry out your wishes.

We strive to help business owners identify and prioritize their objectives with respect to their business, their employees, and their family. If you are ready to talk about your goals for the future and get insights into how you might achieve those goals, we’d be happy to sit down and talk with you. Please feel free to contact us at your convenience.

The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial professional. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial professional. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. Exit Planning is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need.

This is an opt-in newsletter published by Business Enterprise Institute, Inc., and presented to you by our firm.  We appreciate your interest.

Any examples provided are hypothetical and for illustrative purposes only. Examples include fictitious names and do not represent any particular person or entity.

For professional use only. All information can be subject to change without notification.

 

KAFL Insurance Resources
800 Linden Ave
Rochester, NY 14625
www.kafl.com
585-271-6400

 

Copyright © 2021 Business Enterprise Institute, Inc. All rights reserved.

Planning for a successful future without your business is a smart strategy. One of the traps that business owners commonly fall into as they begin planning for their successful future without the business is seeing what they need to do and trying to do everything all at once. However, much like your business didn’t spring into success overnight all those years ago, future-oriented planning doesn’t need to be a one-and-done proposition.

Let’s look at how a phased approach to planning can help you get the most out of your efforts and make the process more manageable.

You Can’t Catch the Fish Without Throwing in a Line

Bill Burns was ready to go fishing. Over 40 years, he grew what was originally a one-man logistics consulting agency into a mid-sized inventory management services business with 15 offices. His daughter Katie and longtime employee Lester Clay played big roles in the company’s growth through a proprietary software they’d created in the early years. Bill knew exactly how much he needed to retire with financial security. But he didn’t know how to go about getting it. He originally wanted to sell the business to Katie and Lester, but he knew they didn’t have the kind of people skills he had to attract new clients. He worried that if he sold to an outsider, they’d just buy for the proprietary software and lay his employees off. Plus, he wasn’t even sure what he’d do in retirement other than fish, and he was afraid he’d get bored.

Bill felt overwhelmed with how much he had to figure out. He shared these thoughts with Glen, his most trusted business advisor.

“I think the most important area to focus on is making you inconsequential to the business,” Glen said. “You’re the rainmaker now, and to get the money you need, you’ll need to replace yourself.”

After reconfirming that Bill’s financial security target was accurate, Glen told Bill something that took much of the weight off his shoulders.

“Since Katie and Lester are comfortable sticking on the operations side, we can bring in a professional management team to help develop skills on the sales side. That’ll open up a lot of different paths for you to reach your personal and financial goals. It may also give you some leverage when you decide to sell.”

Bill was tentative at first. No one had ever outsold him at his company. But after seeing the professional management team that Glen and a new recruiting firm helped put together, he felt more confident, and for good reason.

The management team formalized his company’s sales process. Profits began to increase year over year because Bill wasn’t the only one capable of making big sales anymore. The management team used the additional profits to attract strong managers and operations people, which led to even more increases.

With more people helping to grow the company, Bill had more free time. He found hobbies he liked in addition to fishing and found himself spending more time away from the office doing them because of the strength of his sales team. He built a new plan for the future based on his new interests and goals.

Best of all, the expanded advisor team that Glen helped assemble had the expertise to negotiate with potential third-party buyers. Sales performance had finally caught up to the cutting-edge developments in operations, making his new team, including Katie, Lester, and new managers, just as valuable as the software.

With a strong management team and encouragement from Katie and Lester, Bill sold the company to a large international buyer, achieved financial security, and protected his employees.

Phased Planning Can Make the Process More Manageable

Like many business owners, Bill saw how much work he had to do and felt overwhelmed. When you’re responsible for your business’ success, it’s not uncommon to feel this way. Fortunately, with advice from a planning-oriented advisor and his new advisor team, Bill learned that he could do his planning in phases and didn’t have to be everything to everyone.

Phased planning allowed him to focus on the most important actions he could take and work through the initial challenges in a more limited area. His success in one portion of planning led to success in other areas over time, which also allowed Bill to move forward with planning for his personal future once the business future was clear. By committing to phased planning, Bill reaped the benefits, proving to himself that he didn’t have to tackle everything all at once.

We strive to help business owners identify and prioritize their objectives with respect to their business, their employees, and their family. If you are ready to talk about your goals for the future and get insights into how you might achieve those goals, we’d be happy to sit down and talk with you. Please feel free to contact us at your convenience.

The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial professional. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial professional. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. Exit Planning is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need.

This is an opt-in newsletter published by Business Enterprise Institute, Inc., and presented to you by our firm.  We appreciate your interest.

Any examples provided are hypothetical and for illustrative purposes only. Examples include fictitious names and do not represent any particular person or entity.

For professional use only. All information can be subject to change without notification.

KAFL Insurance Resources
800 Linden Ave
Rochester, NY 14625
www.kafl.com
585-271-6400

Copyright © 2021 Business Enterprise Institute, Inc. All rights reserved.

“All those years of work are thrown away. To ease your mind is that all you can say? But what about that grandson on your knee? Them railroad songs, Tom would sing to me.” –Robert Plant

Many business owners dedicate decades to making their businesses successful. Far fewer owners plan for how they and their businesses will maintain success once they leave them (by choice, death, or otherwise). Without a complete, robust plan, you may not get the outcomes you want or deserve once you inevitably exit your business. Consider the example of Tom Poor, a fictional but representative business owner whose failure to plan led to poor consequences.

The Tale of Tom Poor

Tom Poor always vowed to never live up to his namesake. The seventh son of an ironworker, Tom spent years building his successful steel manufacturing company. His success allowed him to provide a lifestyle for his wife and two children that no one in the Poor family had ever had. His company employed 135 people, and his two children were taking on more responsibilities at the company as Tom got older.

Just before Tom’s 70th birthday, he made a startling announcement to his family and company. A large steel conglomerate had offered him $15 million for his company, and he verbally accepted the offer. He assured his employees and children that their jobs were safe based on a handshake agreement he’d made with the buyer. He assumed that $15 million was more than enough to allow him a comfortable lifestyle since his $500,000 salary and benefits package had provided so much for his family to that point.

Before the deal went through, Tom’s children told him that they had expected to run the company once he left. They’d been training hard to prepare, and so the sale to an outside party shocked and upset them.

“I built this business into what it is today,” Tom told them. “I’ve earned the right to make this decision because my decision-making got us here. Besides, I want to see the grandkids more.” As the sale date approached, both of Tom’s children quit to start their own venture together in a related business. When the buyer learned that two key employees were leaving, they told Tom that he would either have to replace them or accept a lower offer. Tom refused to accept a lower offer, but the employees he promoted to fill his children’s roles were incapable of running the business.

As Tom tried to renegotiate, his employees began leaving the company one by one, citing low morale and a lack of commitment from Tom.

The original buyer pulled the offer. Though Tom managed to keep some employees from leaving, the exodus caused company production and value to plummet. His children refused to talk to him or let him see his grandchildren. His wife—heartbroken by what had happened—took their side.

Tom ended up selling the business at age 75 for $3 million. After taxes, he took home just over $1 million. With his family refusing to talk to him and barely enough to survive on his own after a year of poor health, Tom was forced to re-enter the workforce at the company he had sold just a year earlier.

Despite his promises to himself, Tom Poor ended his life living up to his namesake.

Strong Exit Planning Can Help Owners Avoid This Fate

Planning a successful business exit requires different skills than running a successful business. While Tom was a great business owner, he failed to think about what drove business value and what he needed to pursue a successful post-exit life. Consider some of the things Tom neglected to think about:

What he needed for financial security:

Tom simply assumed that $15 million would be enough for him and his family once he left. He was so committed to this assumption that he neglected to see what a big role his children played in achieving financial success and security. Proper planning could have shone light on what the business was worth, the factors that made the business more valuable, and the amount he actually needed to continue being comfortable and protect what he had built.

The fallout of his family’s reaction:

Tom completely disregarded his children’s commitment and desire to run the company. That not only led to the company’s downfall but also prevented Tom from his goal of seeing his grandchildren more often. Comprehensive planning could have helped Tom understand his children’s contributions and how to leverage them, which could have prevented the fallout caused by his lack of consideration.

What kind of legacy he’d leave:

Tom assumed that everyone would welcome his decision to sell the company. Obviously, that wasn’t true. By working through his planning, starting with setting specific and objective goals, Tom could have better considered his legacy and involved his family and employees in the plan differently.

The consequences of a failed sale:

Adding salt to the wound, Tom’s failure to sell the first time was a black mark on the company. When he finally found another buyer, they were only willing to pay a fraction of the original offer price. Because Tom wasn’t prepared for a third-party sale, he suffered financially.

Conclusion

Without a clear, comprehensive, written plan, business owners have little control over their future. Had Tom properly prioritized his goals and planned for all aspects of his company’s future, it’s less likely he would have lost everything that mattered to him. We strive to help business owners identify and prioritize their objectives with respect to their business, their employees, and their family. If you are ready to talk about your goals for the future and get insights into how you might achieve those goals, we’d be happy to sit down and talk with you. Please feel free to contact us at your convenience.

The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial professional. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial professional. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. Exit Planning is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need.

This is an opt-in newsletter published by Business Enterprise Institute, Inc., and presented to you by our firm.  We appreciate your interest.

Any examples provided are hypothetical and for illustrative purposes only. Examples include fictitious names and do not represent any particular person or entity.

For professional use only. All information can be subject to change without notificaiton.

 

KAFL Insurance Resources
800 Linden Ave
Rochester, NY 14625
www.kafl.com
585-271-6400

 

Copyright © 2021 Business Enterprise Institute, Inc. All rights reserved.

As a business owner, you manage all sorts of complexity in your work. Goals, expectations, and the people who help you meet them may change. But even though things constantly change, you can still adapt, thanks to smart and focused business planning. After all, if your company couldn’t adapt to change, it likely wouldn’t be as successful as it is today.

The same ideas apply when you’re planning for your business’ future and the evolution of your relationship to it. Change is often more than just OK—it may be necessary to position yourself to reach your future ownership goals and give your business the best chance to thrive long term. One key to your ability to adapt is a well-formed, written plan.

Comprehensive planning can help you stay focused and flexible as you prepare for your business’ future (and your future with or without the business) by providing you, your family, and the key employees in your company with a road map. While providing this focus, it also gives you the flexibility to change your plan, whether you need to or just want to. Let’s look at some examples of how planning can make change more predictable.

Reasons Why You Might Change Your Plans
Many business owners begin their plan for the future with strong, emotionally driven ideas about their eventual departures. Here are just a few of the more common goals owners focus on as they start their planning journey:

1. I want my children to run the business once I’m gone.
2. I want to get top dollar for my business, but I also want to do right by my employees.
3. I need to exit my business by a certain date so I can start pursuing outside interests.

Each of these goals can be a good place to start the planning process. But consider some of the more common obstacles you’ll likely confront with goals like these.

1. My children haven’t proven they can handle the responsibility of running my business well.
2. The buyer that’s offering top dollar wants to shut down local operations.
3. If I leave on my chosen date, I might have to go back to work in the future to make ends meet.

Without a complete and written plan, these issues might force you to stay in your business far longer than you want to (or can). However, thoughtful planning can help you anticipate and adapt to unexpected roadblocks.

How Good Planning Gives You Flexibility to Change Your Mind
Good planning gives you options for when things don’t go as intended. First and foremost, good planning helps you establish the amount of money you need to become financially secure. Sometimes, owners take for granted how many perks and income streams their business provides them. Once you leave the business, those perks and streams will likely end. Good planning anticipates that and positions you to improve your chances of leaving your business with enough money to pursue what you want in the future without having to go back to work.

A strong and well-rounded plan can also help you develop the people and systems necessary to exit the business on your terms. For example, if you want your children to run the company but they haven’t proven they’re capable, a written development and incentive plan can plot out the timeline and training necessary to get your children ready to run the business by your expected departure date.

Similarly, good planning gives you the flexibility to pivot if your original plans go awry. For instance, your plan may provide time and training to get your children ready to run the business, but your children may still not get the hang of it in ways that allow you to change gears with financial security. A written plan connecting business achievements and financial targets can help you take the next-best course of action by finding the people who can run the business well, while still giving business-active children a role in the future and positioning you to transition on your terms.

Good Planning Provides Options When Initial Plans Go Awry

Just because things don’t go as planned initially doesn’t mean you’ve failed. Instead, good planning can give you more options to succeed on your terms. Typically, change is the only constant in a successful business. Disciplined planning can let you focus on what you want and how to get it, and give you the flexibility to adapt when your initial route isn’t feasible.

We strive to help business owners identify and prioritize their objectives with respect to their business, their employees, and their family. If you are ready to talk about your goals for the future and get insights into how you might achieve those goals, we’d be happy to sit down and talk with you. Please feel free to contact us at your convenience.

The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial professional. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial professional. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. Exit Planning is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need.

This is an opt-in newsletter published by Business Enterprise Institute, Inc., and presented to you by our firm.  We appreciate your interest.

Any examples provided are hypothetical and for illustrative purposes only. Examples include fictitious names and do not represent any particular person or entity.

For professional use only. All information can be subject to change without notification.

 

KAFL Insurance Resources
800 Linden Ave
Rochester, NY 14625
www.kafl.com
585-271-6400

Copyright © 2021 Business Enterprise Institute, Inc. All rights reserved.

When planning for the future, you have a wealth of options related to who should continue to run your business. Many business owners’ plans fall short because they are unaware of the many options they have available to them and the pros and cons of each path.

One common exit path is a family business transfer. This allows you to keep the business in the family and still have an attachment to the business. You may not get as much money for this type of transfer and it could take longer to complete, but there may be real benefits as well.

Benefits of a Family Business Transfer

There are many benefits that come along with transferring the ownership of your business to your children or someone else in your family.

Financial Security: If you properly structure the business transfer, you may be able to receive the amount of income you need and want by the end of the transition process. Further, you can design the transfer so that you retain control of your business during the transfer period and until you receive all of the money you want. You might achieve this benefit through ongoing involvement with the company, participation in profits as an owner, and/or sale of ownership.

Time: If you are not ready to leave the business today, you can structure the transfer to the next generation to take 5–10 years, depending on your goals and objectives. You can create a custom transition that addresses the abilities of the successor owners and the readiness of the business.

The timeline for this path gives you time to slow down, develop new interests, and prepare yourself and your business for life after the transfer. It also gives you time to collect income from salary, perks, and distributions while maintaining control.

Taxes: Using a strategy customized to family transfers, you may be able to minimize certain taxes. You might create a balance among income tax, capital gains tax, and gift and estate tax that fully leverages multiple tax planning techniques. You may be able to achieve a better outcome with a thoughtful combination of planning strategies.

Values-Based Goals: Owners often choose to transfer their businesses to children because, if done correctly, it achieves so many of their values-based goals. From the role of the business in the community to taking care of future generations, family business transfers can help to achieve these types of goals in ways that a traditional sale might not.

Challenges of a Family Business Transfer

Although there are some obvious perks to keeping the business in the family, there can be some challenges you need to be aware of before you make your decision.

Financial Security: Basing a business transfer on your family ties, especially ties to someone who can’t or won’t run the business properly, is a huge threat to your financial security and the very existence of your business.

Time: If you want to leave your business within a year, remember that getting paid full value for the company from children generally takes several more years than a sale to a third party or Employee Stock Ownership Plan (ESOP).

Taxes: Without careful tax planning, you could pay far more in taxes than necessary when transferring ownership to your family.

Values-Based Goals: Sometimes family transfers run amok if your goals are not in line with those of your family.

None of these challenges are insurmountable unless you fail to recognize the existence and significance of each and create a written and comprehensive road map to address them.

The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial professional. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial professional. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. Exit Planning is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need.

This is an opt-in newsletter published by Business Enterprise Institute, Inc., and presented to you by our firm.  We appreciate your interest.

Any examples provided are hypothetical and for illustrative purposes only. Examples include fictitious names and do not represent any particular person or entity.

For professional use only. All information can be subject to change without notification.

 

  

KAFL Insurance Resources
800 Linden Ave
Rochester, NY 14625
www.kafl.com
585-271-6400

Copyright © 2021 Business Enterprise Institute, Inc. All rights reserved.

 

It is safe to say that this year was full of surprises. Some businesses thrived, while in other areas jobs were lost, companies were forced to go under, and we even lost loved ones along the way. Many businesses were affected by the pandemic in some way or another. According to a survey conducted by the PNAS (Proceedings of the National Academy of Sciences of the United States of America), 43% of businesses temporarily closed, and nearly all of these closures were due to COVID-191.[1]

We also learned that many small businesses are financially or structurally fragile. Companies were often strapped for cash, even when they had access to temporary government stimulus funds.

Although we may not have been able to foresee and properly plan for this year’s business and family disruptions, there are a few lessons to be learned about planning for the future so that your business can be more flexible and tolerant to change. We saw that responding to tough situations can be a good way to showcase your creativity and motivation to stay on track.

Flexibility is Key

Major changes in the economy, your industry, or your health can happen quickly. Companies that have the ability to turn aspects of their business model and operations on and off more quickly can minimize negative impacts (or maximize positive impacts) of unexpected changes. Remember that it may not be enough to be prepared to change direction in your own mind.  Communication with your employees can keep everyone moving together and smooth out rough spots if you have to change gears.

Having a strong and adaptable team and team leaders will also help with transitions. Industry changes happen often, and sometimes randomly, so having a team in place that is able to think on their feet and come up with creative improvements to the business can help your business thrive even in trying times.

Also, by leasing your equipment, vehicles, office space, and even employees, you can make your business more agile. Hiring contract labor or utilizing outsourced vendors can give you more freedom to make changes quickly. Think of it as adjusting dials in your business rather than locking yourself into fixed or inflexible investments.

Fire Drills Improve Outcomes

It can take valuable time to work through emergency or disaster scenarios, and it can be awkward to “practice” what you’ll do if faced with a major threat or disruption in your business. As awkward as it may seem, fire drills do work. When your team knows what the process is during an emergency or major change of events, they tend to act more calmly and make better decisions when an actual emergency does arise. Work through and document what you will do if:

·     You lose your largest customer or contract.

·     You lose your top executive or manager unexpectedly.

·     Your distribution channels are disrupted.

·     One or more components of your technology stack fails.

The more prepared you are for the unexpected, the better off your company and your employees will be. Don’t let them get thrown off by surprises. Have open communication about what they can expect if a major change happens.

A Belt and Suspenders Work Better

Planning for multiple solutions to a single problem is a good way to manage the impact of a disruption in your business (or in your life). Owners of closely-held businesses often have a lot of their wealth, and their family’s security, tied up in their business. However, the business is often illiquid, or its value may not be enough to support your family for an extended period of time. Owners who prepare for unwelcome changes might be able to use either a “belt” or some “suspenders” to hold up their family, such as:

·     Investing in income-producing assets outside of the business.

·     Reducing company debt (or at least removing yourself from personal guarantees for company debt).

·     Maximizing opportunities for funding retirement through qualified retirement plans.

·     Developing a “sinking fund” in the business.

Having some type of variation of solutions to any given problem can also ease the tension you or your family might have about the unknown future ahead of you. Preparation for the worst will only benefit the business down the road. You can truly never be too prepared.

We strive to help business owners identify and prioritize their objectives with respect to their business, their employees, and their family. If you are ready to talk about your goals for the future and get insights into how you might achieve those goals, we’d be happy to sit down and talk with you. Please feel free to contact us at your convenience.

[1] https://www.pnas.org/content/117/30/17656

The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial professional. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial professional. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. Exit Planning is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need.

This is an opt-in newsletter published by Business Enterprise Institute, Inc., and presented to you by our firm.  We appreciate your interest.

Any examples provided are hypothetical and for illustrative purposes only. Examples include fictitious names and do not represent any particular person or entity.

For professional use only. All information can be subject to change without notification.

  

KAFL Insurance Resources
800 Linden Ave
Rochester, NY 14625
www.kafl.com
585-271-6400

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