Stuck in My Own Business

May 13, 2013  | By austinwealth

Jerry (54) and Louise (56) own a successful construction business. Jerry spends most of his day bidding new jobs, managing projects and managing the 12 employees and 50 or so contracts they work with. Louise handles billing and maintains the books for the business. They both work very hard and are looking forward to the day when they can quit working and enjoy life.
We sat down with Jerry and Louise and discussed the following areas of concern:

• Jerry has two key employees and he wants to make sure that his business would survive if either of them could no longer work.
• They have no idea what their business is worth and are unsure of an appropriate exit strategy.
• They worry about what would happen to the business and to Louise if Jerry passed away prematurely.
• They feel like they pay a lot in taxes and are wondering if they are taking advantage of all the appropriate strategies to reduce their overall tax burden.
• They want to make sure that they have enough money to retire from the business and start to travel more.

When working with business owners, we have to work to make sure that their business and their business’ cash flow is helping to support their personal goals. We started with addressing some of their business concerns. After reviewing multiple options, we decided to implement a key-man strategy by using a combination of disability and life insurance to protect against the two key-employees having an unfortunate death, accident or illness. We also discussed an exit strategy and determined that the two key-employees, who were much younger than Jerry, would be perfect candidates to purchase the business from Jerry and Louise once they retired. To help accomplish this we executed a plan that would help make sure we retained the key employees and provided incentives for them to acquire ownership in the business over the next 10 years and then ultimately, acquire the remaining shares when Jerry turned 65.