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Geoffrey J. Thompson

Thompson is a diverse businessman with expertise in finance and investing, particularly in the fields of retirement and wealth management. The best place to catch him is on his daily blog, found at geoffreyjthompson.wordpress.com
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Leaders Corner

on 11 December 2017

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Transcript of Geoffrey J. Thompson

Geoffrey Thompson
lives in Chicago, Illinois
Accelera Innovations - CEO
Synergistic Life Solutions - CEO
Doyen Elements International - CEO

How to Protect Business Against Loss of Key Employees

For business owners who have worked endless hours, sacrificed years of time, and fought to take their business to the level of success, losing the value of the business due to the death or disability of a key employee or owner can be devastating to not only family members, but to the employees as well. Protecting a business with a successful business with a business protection plan is key.

If this unexpected even happens, funds may be needed for the following:

To replace lost profits
To identify, hire, and train a replacement
To provide a financial reserve during the adjustment period following the key employee’s death
To provide benefits to the deceased employee’s family
To fund the purchase of a deceased owner’s interest in the business

Business Loans
Often, businesses take out loans to build up assets, pay off debt, or expand. Business loans can fall into default when the sudden death or disability of an owner or key employee keeps the business from being able to function financially. When there is outstanding business debt and an owner dies unexpectedly, advance planning can help to minimize any negative financial impact on the business, the owner’s family, and any other owners.
Business Overhead Expense

For a business owner who becomes temporarily disabled, the overhead expenses of the business continue.

If this happens, there are three alternatives in regard to the business:

The business can be sold, if there is a buyer willing to pay the purchase price.
The business can be liquidated for pennies on the dollar.
The business can be kept in operation until the owner’s return.

The Odds of Disability Affecting a Business

According to the Commissioners Individual Disability Table A,
used by many state insurance departments, the odds of a business owner becoming disabled increases with the number of owners at a particular business. Interestingly, the chance of disability decreases with age. For example:

Age 30 – The chance of becoming disabled increases with the number of business owners from 54% with one owner to 98% with five owners.
Age 35 – The chance of becoming disabled increases with the number of business owners from 50% with one owner to 97% with five owners.

Age 40 – The chance of becoming disabled increases with the number of business owners from 45% with one owner to 95% with five owners.
Age 45 – The chance of becoming disabled increases with the number of business owners from 40% with the one owner to 92% with five owners.
Age 50 – The chance of becoming disabled increases with the number of business owners from 33% with one owner to 86% with five owners.
Age 55 – The chance of becoming disabled increases with the number of business owners from 25% with one owner to 76% with five owners.

A disability lasting for more than 90 days is likely to continue for:

Age 30 – 2.2 years
Age 35 – 2.5 years
Age 40 – 2.7 years
Age 45 – 2.9 years
Age 50 – 2.8 years
Age 55 – 2.5 years
Full transcript