You Have Options

What if you could create an arrangement to provide Beware of

tax-free income to an employee during retirement, yet Business Financial
restrict their access to that income for several years?
What if you could develop other arrangements that
Hazards
Part 5
permitted the company to control the assets used to
retain key contributors? Loss of Talent, Business Relationships, or
What if you could arrange to only pay a benefit to an Leadership: Would Profits Suffer if You Lost
employee if they stayed with the company or accom- Essential Members of Your Business Team?
plished a task?
What if a strategy provided an infusion of cash were Critical Contributors to the Business
an employee or owner to die or become disabled? In many companies, there are people whose contri-
What if the company protection strategy also im- butions are vital to profitability and success. They may
proved the performance of company cash assets and provide technical expertise, drive sales, control costs,
grew tax-free? leverage key customer relationships, or manage em-
ployees. The sudden departure or loss of one of these
Let’s Talk individuals can lead to decreased revenue, increased
There are several powerful strategies that can help costs, lost customer relationships, and major financial
you accomplish these, and many other, business plan- complications.
ning goals. Let’s sit down and talk and you can decide if What would happen if your competitor recruited away
any of these strategies might be of interest to you. your top contributor? Or what if your business partner
unexpectedly passed away in car accident? Would sales
Ardal Powell, MA, PhD slump or company credit be harmed? Who would per-
New York Life/NYLife Securities form their function? Would that change what you wanted
460 Temple Hill Rd to focus on? Limit growth plans? Suddenly pull you out
of retirement? Would other employees follow them out?
New Windsor, NY 12553
(845) 202-9722
apowell03@ft.newyorklife.com
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Consult your own professional advisors before implementing any planning strategies. © 2018 New York Life
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Advanced Planning Group

Some companies may not have had analyzed the fi-
nancial impact on the business of losing key contribu-
tors (owners or employees).
Let’s look at a hypothetical example.
Could loss of talented and valuable
contributors to your business cause
substantial and unnecessary financial
harm to your business?
Elite Construction, Inc. is a highly regarded regional
commercial design and construction firm. Elite has three
managers who provide invaluable oversight of company
operations, business development, and corporate fi-
nance. It is estimated that these three managers directly
influence over 50% of company profitability ($3 million
annual profits). Elite has local competitors who are active-
ly seeking greater market share.
If competitors recruited away Elite’s top talent, man-
agers became dissatisfied, or if something happened and
one of them passed away or became disabled, Elite could
suddenly lose business relationships, operating efficien-
cies, skilled services, and profits.
Let’s Look at the Numbers
Let’s look at how loss of critical contributors
(managers, top employees, executives, or owners)
could impact Elite’s business.
$3.5 million (Elite Construction’s annual profits)
x 50% (estimated profitability contributed by top
talent)
$1.75 million (lost profitability without key con-
tributors)
Even if profits only decreased by 25%, that is still
a reduction of $875,000 per year!
The cost of not having proper retention and com-
pany protection plans in place for executives,
managers, and owners can be enormous.
If key individuals leave to join a competitor, or to
start their own competing venture, the loss of
market share or key customer relationships could
lead to even more disastrous results for Elite’s
business.
In other words, without effective planning to pro-
vide strong incentives for retaining the right people
and without properly protecting the business, signifi-
cant financial harm can result when a critical contribu-
tor is lost to competitors, death, disability, or personal
dissatisfaction. It can be much more costly to lose an
employee than to plan to retain them.