1. what keeps you up at night? A seminar for business owners Norm Weston Financial Representative Northwestern Mutual Life Insurance Company · Milwaukee, Wisconsin
2. Can I retire in 10 years? Can this business fund my retirement? What if my partner dies? Do I want to do business with his son? Now I’ve personally guaranteed a loan for this business. I could lose everything. If I get hurt and can’t work, what happens to this business? To my family?
3. Expanding the business makes sense. Can I get the credit I need? This business is a key part of my life and my family’s life. How do I make sure my family gets to enjoy the value of all my hard work? Why are there so many questions? Where are the answers?
4. I can’t keep doing it all myself. How do I attract the best and brightest to help me grow this business? My biggest competitor provides top notch benefits. Do I need to provide better benefits? I can’t believe I missed another school event working late. The kids are disappointed, and so am I.
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23. Employee Benefits * The Network of City Business Journals: The Pulse of American Business 2005, Buying Power 15,920 7,181 1,500 490 Life/disability insurance 78,900 35,580 3,920 2,070 Pension plans 27,470 7,130 1,890 530 Education/training $ 325,980 $ 92,480 $ 14,680 $ 2,490 Health insurance 18,080 3,450 480 30 Dental insurance 100 to 499 EEs 20 to 99 EEs 5 to 19 EEs 1 to 4 EEs Average Per Firm Spending:
49. I’m confident that all my questions have answers, and that they’re the right answers for the business, my family and me. Its going to be a great day.
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Editor's Notes
Welcome. I’m Norm Weston. It’s great to have you here today to meet each other and to react to some business planning ideas I’d like to share with you which may have value for you and your business. As a business owner myself, I’m sensitive to the financial issues and challenges we face running our businesses and the importance of planning for growth, recruiting and retention of human capital and finally, succession and retirement. I am passionate about working with business owners and have dedicated a great deal of my financial services practice to helping individuals like you sleep better at night knowing you’ve covered your financial security needs both for your business and you personally.
During the next 30 to 40 minutes, I’m going to share some business planning strategies that may be of interest to you and your business. I’m not going to go into too much depth on any one of them, but if you find that you want more information or want to consult with me on your particular business needs, you’ll have the opportunity to request a complimentary follow-up consultation with me after today’s workshop.
One of the handouts at your place is a speaker and workshop evaluation form. Following the workshop today, I would appreciate your feedback on the value of the information I presented. If you’d like a complimentary follow-up consultation, please check the “yes” box indicating so. If you check the box “no”, I will honor your decision and not contact you. However, if you decide later that you’d like to visit about your needs, my contact information is on your handout.
Research conducted in 2008 by The Network of City Business Journals indicated that the rising cost of health insurance for employees was the biggest concern on the minds of business owners, closely followed by recruiting and retaining employees. Next was having enough money for retirement. Worrying if their business was safe and secure, having a business succession plan and finding business advisors to trust were also concerns.
You might be surprised when you have to commit your concerns to paper and prioritize them. In the handout you have at your place, using a scale of 1 – 10, with 10 being the most important, prioritize and rate your concerns on the “Objectives and Priorities” checklist with 1 being low and 10 being high. Participants who have attended my workshops tell me that this exercise alone was worth their time and participation. Ready for self discovery? Take a few minutes and complete the exercise.
(Put this slide on the screen while participants complete the exercise and rate their priorities. Give them at least 3 to 5 minutes to complete.
What are some of the themes that jumped out at you? Obviously as business owners we’re constantly thinking about the balance sheet – how are we doing managing assets and liabilities? Depending on the type of business we have, it’s sometimes easy to overlook the fact that our employees are assets and to that fact, we want the best and brightest. How do we attract and retain them? The employee benefits we offer often times can separate us from the competition for talented, loyal human capital.
Other questions that drive our behavior as business owners; how much do we need to invest to grow our business, to expand our employee force, buy equipment, and still deal with our personal needs and save for retirement? And if you’re like me, who are the financial advisors I can count on for honest, objective advice; a CPA, banker, lawyer and financial representative?
Let’s consider how we should think about protecting the assets of our business by categorizing assets into 4 classes: Physical assets – buildings, machinery, etc Employees – “human capital” The business itself – goodwill, reputation, client relationships, etc. And you, the business owner, the key person who holds it all together!
There are 4 basic financial areas of your business to consider and frankly, to protect. Let’s look at each one. Managing risk Selecting and providing employee benefits Business succession and exit strategies And, personal financial needs
The challenge we have is that each financial area is interdependent with the others and the success of our businesses is integral to how we manage and plan for our personal financial needs. That’s why I use an integrated approach to helping business owners create their financial roadmap. Based on your particular size and type of business and what stage of development relative to business life cycles, you will have different issues and needs to address than the guy or gal sitting next to you. For the sake of today’s workshop, we’re going to enter the business strategy map at the risk management need.
Risk management means protecting your business assets from loss; physical assets like patents, copyrights, property, machinery, office space and furniture and equipment and people assets like non-compete clauses, owner and employee disability, long term care needs, key person and other people dependent revenue issues.
So let’s take a minute and look at how other business owners manage risk: (Site slide facts.) LIMRA – The Life Insurance Marketing Research Association conducted a survey and found that 84% of businesses own property/casualty insurance…
Ask yourself these questions and examine if you’re comfortable with your answers: Do you have adequate liability coverage? How about protecting your intellectual property like patents and copyrights? What if you became disabled, how would you generate income and also pay business expenses? What would you do if a key employee became disabled or died? Would you have the funds to replace him or her? These are critical areas of concern that need to be addressed with financial strategies.
Now let’s look at your employee benefits needs like group health, life, LTC and executive benefits; not only for your employees, but for you, too. Some of these to consider are: Group health, group life, group DI, LTC Retirement benefits – 401K, other Maybe executive benefits or other specialized benefits for a select group What benefits do you want to provide and pay for?
There are two basic categories of employee benefits; qualified – offered to all full time employees and non-qualified or those benefits offered to select employees and/or offered on a voluntary basis . Some times benefits not offered to all employees are referred to as a “carve out”, executive benefits or other voluntary offerings.
Reiterate information on the slide.
In the same LIMRA study that I referred to earlier, respondents reported that employee benefits are king when they’re considering job opportunities…and …
Health insurance includes only company contributions to hospital and medical plans, costs for eye-care and prescription plans Pension plans include stock purchase plans, union-negotiated retirement plans, etc. Education/training includes on and off-site seminars, courses, conferences, and reimbursed educational expenses Life/disability insurance includes only company contributions to premiums Dental insurance includes only company contributions to premiums
Employee Benefits Trend by Size of Company +17.3% 5,700 4,800 1-4 +2.6% 21,000 20,500 5-19: +0.7% 140,000 139,100 20-99 +5.4% 450,000 426,900 100-499 ’ 03 vs. ‘04 2004 2003 We all know this-Health insurance costs continues to increase. Remember it was the greatest concern of business owners. Education and training on available benefits also increased –Employers are concerned, but are doing things to keep their employees.
If you can answer these questions and feel good with the steps you’ve taken, you’ve done the requisite planning for this asset class – human capital. Some more questions: Do you know what your competitors are offering? Have you asked your employees how they view you benefit package? Afraid to? Do they perceive a value equal to the costs you are incurring? Do you have an overall employee benefit strategy?
Next, let’s look at your estate needs relative to succession planning, and other end stage needs.
There are a number of considerations when planning for the orderly transfer of your business. In the best of situations, you plan to someday retire from your business; either by passing it on to a family member, a partner an employee or maybe you plan on selling it or even liquidating it. However, prudent business owners also know they need to think about what would happen to their business if they were to become disabled or even die before they made the decision to exit the business.
Remember, few family businesses survive beyond the first generation without adequate foresight and planning.
Without knowing what your business is worth, the rest of your planning is on hold. It is a critical piece to creating and implementing your overall plans.
These questions NEED to be addressed now. Adequately preparing for leaving the business cannot happen the day before your off for your long awaited vacation in Cancun! Information needs to be gathered and alternatives reviewed. It’s never too soon to start!
Reviewing your personal financial security needs many times gets subordinated to worrying about the needs of your business. However, they are not any less important for the long haul than the success of your business. Let’s now look at the personal side of our strategy map.
Your business is the economic and emotional driver for you and your family. It allows you and your family to maintain an adequate standard of living. It is your primary investment. Finally, in may ways, the business is a mirror reflection of who you are and what you want to be.
In a study conducted in 2000 and again in 2001, LIMRA found that the average age a business owner is 50 and …(recite some of the facts on the slide)
What would happen to your business if you became sick , disabled…How do you provide for your family’s financial needs or plan for retirement while also growing your business? Again, all critical questions to ask yourself and to address in a financial security plan.
We’ve looked at the multiple dimensions of your financial security needs; from a business owner’s perspective and from a personal needs perspective. It’s often times difficult to separate one from the other and often times, as the saying goes: everything’s tied for first. That’s where working with a professional can help you determine which need to address first and why. Considering the stage of development of your business, it’ll help you identify the steps to take to protect it.
The four stages of business development are: start-up, growth, maturity and transfer. Let’s look more closely at the needs of each stage.
Here, cash is king! The start-up phase of a business is the usually the most exciting, but also the leanest financially. However, the four basic needs are evident even at this early age of development. Don’t overlook them.
Now we’re on a roll! Expanding, hiring, never enough time! During a growth stage of your business and you could experience several over the life of your business, it’s a good time to review your financial security needs and determine if you’re comfortable with the plans and programs you have in place for both you and your business.
Now we’re on cruise control! At the maturity stage, your business is not only successful, but most likely financially prosperous. You can afford the icing on the cake and provide more benefits to those employees who helped you grow your business and also reward yourself by making sure that you’re personal financial needs and goals are being met and/or funded. If you’re thinking it’s time to retire and exit the business, you’re also thinking about your exit strategy and succession planning.
At this phase, we face some hard choices – both economically and emotionally. How will we successfully realize the value of what we’ve built for ourselves, our family, our key employees and maybe even our community?
A competent advisor wants to know your business and personal goals in order for them to collaborate with you on addressing your financial security needs Every business and industry has unique issues and challenges which means your financial needs and issues are unique. Beware of anyone who uses a one size, one product approach for addressing your business and/or personal needs
Do you have one?
If you have an advisor, do you trust and value his or her advice? Does your advisor understand your goals; your business; your unique issues? At the end of the day, the best advisor is one that just listens and then acts as your quarterback and brings appropriate resources and experts to the table for you.
No one advisor, on their own, can possibly do an appropriate job of attending to and properly addressing the many various and complex issues facing today's business owner. Which is why, when selecting and working with an advisor, business owners should be sure that the advisor has access to, is affiliated with and can bring to the table, other licensed professionals who specialize in each of these uniquely challenging areas of concern.
The Northwestern Mutual Financial Network is a network of financial specialists schooled in the various disciplines of financial security. These specialists are the advisor’s and business owner’s team of experts. And of course, with your direction, we’ll collaborate with your other business and personal advisors like your CPA, attorney or banker.
Before I close, let’s quickly review the topics we’ve covered: At what stage is your business? How often are you monitoring the four, key financial areas of your business? Have you put strategies in place to protect the four asset classes? And finally, do you have a competent, trusted advisor that you consider to be a member of your team? Does he or she have a team of other specialized advisors they can bring to the table?
