Protect Your Business and Your Family from Yourself

According to the latest data from the Bureau of the Census, there are roughly 5.9 million businesses in the U.S. Virtually all of these can be considered “small.”  Only 18,469 (or less than one-third of one percent) have more than 500 employees.  Even getting to several dozen employees is a feat worth of recognition:  over 89 percent of businesses have 20 employees or fewer on their payroll.  Despite the diversity in industries, resources, location ,and stage of growth, “the 89 percent” have one thing in common: you.

When the indispensable disappears

By you, I mean an owner who is an indispensable part of the business.  What would happen to your business if you suddenly disappeared for a day? How about a month?  And what if you never came back?  Could your business continue where you left off, or it would simply collapse and disappear into the annals of failed ventures?

Most owners are so busy trying to grow their businesses that they don’t even consider what would happen to that same business if they were to die or become suddenly and permanently incapacitated.  Those that are brave enough to entertain the discussion of their untimely demise do so using the conditional “if I die” instead of the certain “when I die.”  For everyone, it’s “when.”

Significant impact on family business

The odds are quite good that as a business owner, most or all of your wealth is tied to your business.

The odds are also that your family may not have sufficient life insurance to stay protected.  If they are counting on your stake in the business to provide for them, that may not be realistic if the value of the business dies with you.

Depending on the study cited, it’s estimated that most small business owners typically have anywhere from 60 percent to 100 percent of their net worth tied up in their business.  The exit strategy is typically a partial or complete sale of the business at some unknown point in the future.

According to a recent study by LIMRA, a leading market research company focused on the finance sector, only 44 percent of U.S. households currently have life insurance. That’s a 50-year low.  One-third of affluent families admit they don’t have sufficient life insurance to cover their needs and maintain their family’s lifestyle if the main income provider were to die.

The impact of not planning for your death has significant repercussions.

Take action to protect your personal and business interests

It’s time to protect your business and your family from yourself.

1.  Revisit the terms of your personal life insurance policy and make sure it’s up to date.  Are the beneficiaries correct?  Is the value of the policy sufficient to maintain your family’s current lifestyle until the youngest child graduates college?  Are big-ticket items like college tuition and mortgage balance payoff included?

2.  Shop around.  Term insurance rates have become increasingly affordable in recent years.  Additionally, more sophisticated insurance products can also serve as tools for more complex estate planning requirements.

3.  Have your business purchase a “key person insurance policy.” Commonly known as “Key man” insurance policy (they really should update that…), these policies are purchased by your company, the premiums are paid for by the company, and the beneficiary is the company.  This has several important uses.  First, it provides the company with a financial cushion to survive the death of its owner.  If there are partners, then it is very important to also have a “buy-sell” agreement.  This agreement states that upon the death of a partner, the business has the right to buy out the deceased partner’s equity.  The proceeds of the key man policy are used to fund the acquisition of the ownership stake.

4.  Prepare a secure file offsite with all of your passwords, account information, and file access information.  With most key information locked away behind password-protected software, it’s critical that someone knows how to access your e-mail and file directory. You can keep this information with your attorney.

5.  Have a contingency plan in place for your operations. Spend a day every six months making sure it is up to date and that key people are aware of what should take place when you die or are incapacitated.

6.  Delegate! Stop being the only “key person” in your company.  Give others a sense of ownership by making them responsible for important areas of your company’s operations.  This is good advice, even if you don’t go anywhere for a long time.

By Mike Periu
Mike Periu is a leading national voice for empowerment through financial education.
Mike is a proven entrepreneur and business leader with extensive expertise in corporate and personal finance and work experience that encompasses international business, marketing, finance and management. He has started 3 companies in the past 10 years and is now dedicated to helping other entrepreneurs achieve their full potential.
Mike Periu reaches over 10 million people every week with his message of self-empowerment through financial dicipline and entrepreneurship. He has established a solid and continually growing multimedia platform focused on small business owners and entrepreneurs.

Source:  http://www.openforum.com/idea-hub/topics/money/article/protect-your-business-and-your-family-from-yourself-mike-periu?cid=em-smartbrief

A Chilly Seasonal Business Idea

Last February, the Chicago area received roughly 21 inches in 22 hours, the third worst snowfall for a 24 hour period on record (February 1-2, 2011) .  Two days of school, business and road closings, not to mention the major problems caused by some 80,000 power outages.   Two days later, I could still see 4 and 5 foot drifts against the patio doors.

Why not develop a business plan from this? All medium to major metro areas contain shopping centers, hotels, restaurants, schools, and municipalities that often sub-contract some of their snow removal.  I’ve spoken to exactly such an entrepreneur and he indicates that he is able to charge major hotel chains upwards of $40,000 per season, snow or not.  There will be serious contract issues and some very long hours during heavy snow, but if with a couple of employees on staff, the coverage and income potential is very high.  I know of some firms that have turned this into a million dollar seasonal business.  Also to consider are insurance costs: Cars and buildings struck by your equipment will need repair or replacement, but a good insurance broker will be able to offer many options, including high-deductible umbrella coverage policies and similar.

The secret is to build a good base, start small, create a positive reputation for yourself, and expand as possible or desired.  A reliable employee base is also key: Drivers that do not show up or are not able to do the job, are not good for a business, especially a start-up.  Have feedback forms available for the clients and ensure the contract language states specifically how much snow requires removal, timing and placement of the piles.  Also ask if the customer wishes to have salt or sand spread as well.  This may provide a nice add-on business.

Remember the golden rules of entrepreneurship: Find a problem, develop a solution, and generate profit while creating a win-win for all parties involved.

Oh, and bring lots of steaming hot coffee in your truck:  Many long nights are possible.  On the plus side, once April rolls around, the next six to eight months are your time.

By Dion D. Shaw

Dion Shaw is the founder and owner of Homepreneurs

Homepreneurs.  New Day.  New Opportunities.

Insurance Suggestions for Small Business

The United States is a very litigious  society; someone is to blame and at fault for something.   While we won’t take up the responsibility debate on this blog, we will focus on reality and small business needs, home-based or not.  Simply, many businesses require some level of basic insurance to cover potential liability.

Depending on the legal business structure, you may be personally liable for any claims of damage, defective product, breakage, loss of client revenue, etc.  Examples include computer consultants that should probably carry errors and omissions (E&O)  insurance.  This is an insurance form that protects the insured against liability for committing an error or omission in performance of professional duties. Generally, such policies are designed to cover financial losses rather than liability for bodily injury and property damage.*

A second general common business insurance policy is broad form comprehensive general liability (BFCGL) endorsement. This insurance is a comprehensive endorsement to be attached to pre-1986 editions of the standard general liability policy that provided coverage enhancements including blanket contractual liability; personal injury and advertising liability; premises medical payments; host liquor liability; fire legal liability on real property; broad form property damage liability, including completed operations; incidental medical malpractice; nonowned watercraft liability; limited worldwide coverage; additional persons insured (employees); extended bodily injury coverage; and automatic coverage for newly acquired organizations.*

Insurance policies are vital if:

A) You have personal assets you might lose in a legal judgment

B) The business legal structure is a Sole Proprietorship or S-Corp where no corporate protection exists

Consider carefully your business risks and whether you can sleep at night without adequate coverage and possibly losing a great deal of money to a zealous litigator and client.

Disclaimer:

The author(s) of this article, Homepreneurs, and affiliated entities are not certified insurance agents and claim no expertise or authority in the insurance industry.  Readers of this article are strongly encouraged to contact an appropriate insurance broker, agent, or appropriate entity to review individual circumstances.  This article is solely an opinion of the author(s) who holds no liability for insurance options chosen by an individual, individuals, or organizations.

* Insurance definitions copied from the glossary at http://www.irmi.com/online/default.aspx

Home Business Ideas that Pay Well

Some wonderful ideas come from other sources:  Here are some work at home suggestions from my cousin – Duane – in California.  Duane has run several successful businesses including ones based primarily from home.   Most of his ideas require a state license; do a little homework first.  None require a college degree or large start up cost.

For any individual in the insurance industry already licensed or willing to get licensed in their state of residence, selling “Health Insurance” is very lucrative.  Most health companies permit a licensed agent to sell directly from their homes; no office required.  The same is true for Long Term Care Insurance; though a bit more complicated than Fire/Casualty & Life Insurance sales, LTC policies have much larger one-time commissions.

Many Fire & Casualty sales people add one or both of these products to their portfolio towards the end of their careers.  Reasons include the  “No Office Required” factor and the residual income generated (paid on every renewal) for the life of the policy.

Another appealing and potentially lucrative home profession involves Professional Trustee/Estate Administration.  Though state certification is required, no college degree or classes are needed for the certification.  This is a great profession for someone with a background in real estate, financial planning, insurance, accounting or any combination thereof.  In California, most Trustees charge – depending on their experience – around $150 per hour or a percentage of the gross value of the estate per annum.

Thank you cousin, for these very interesting and helpful suggestions!