Last week I met with a new business owner. He was somewhat reserved and reluctant to talk with me, even though he was referred from another business owner client. This is an unfortunate public view as our predecessors in the past, painted the lowly insurance advisor as the person who knocks on your door and sells you a product that he or she wants to sell you because it pays the highest commission. The fact of the matter is, times have changed, rules have changed how we run our practice can’t be further from how things were done.
Our discussion starts the same for all businesses no matter of their size, tenure or what they sell. There’s a general timeline for all businesses. Discussing this timeline gives our prospective clients some insight into what hurdles to expect and how we can help remove the worry and issues that these hurdles inflict.
Years 1 to 3 – this is the most crucial time period for any business owner. Cash flow is limited, debts are high and vulnerability to creditors is a major issue. Insuring yourself against potential loss is the first recommendation. You should have some form of life insurance to pay your debts and disability insurance to protect your income. Creditor protecting your investments is a key item here as well. Investing in Segregated Funds will ensure that if your business were to be attacked by creditors — your investments will not.
Years 3 to 7 – this is where the business has seen some positive growth. Cash flow is stable but you still have the same hurdles as in the first three years. You still need to protect your business from you dying, becoming critically ill or disabled. Protecting your assets is also a must because there’s still a great chance that the creditors could come knocking. During this time, you may have employees and perhaps “Key Employees” who you do not want to lose. These key people are now an asset to the business and you must treat them as such. Building a wall around them by implementing Group Health, Dental and Savings plans is a great option in lieu of an annual salary increase. You also need to protect your key employee investment from the same Death, Critical Illness & Disability issues that you are subject to. Lose one of these people and you have to start the investment of training them all over again.
Year 7 and Beyond – your business is well established. Cash flow is consistent and the hurdle of the health of you and your employees is always going to be an issue. Group Plans are in place and key people investments are protected. At this stage you are looking at how you can start using your business for your pending retirement and succession planning is the topic of the day. That “Key Person” you started investing in years ago now has the knowledge and financial ability to buy you out. Protecting your company and the assets you have worked hard to grow is the strategy here. The discussions will focus on investing in your company so that the day you do sell, all assets are retained by you but the operations of the business transfer to the new owner.
One of the things I most enjoy about being a Financial advisor is being there when our clients take their businesses from the grassroots and watching them grow. By using the multitude of resources at our fingertips and in our rolodexes we work with you through every step of the way while you build your empire.
Alford & Associates is a family owned and operated financial practice in Brantford. For over 25 years we have helped our clients secure their financial goals. First and foremost we help you secure your greatest asset… Your Family