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A solid succession plan can help address several key risk areas to help your business continue long-term.
Talk to a Penn Mutual financial professional about your succession plan today.
Frank Conner started his construction business in 1960 with the goal to turn it over to his two sons when he retired. Joe and Thomas took over their father’s construction business 10 years ago. The majority of their business was focused in the housing market. A few years ago, the business was doing extremely well, experiencing double digit growth. The brothers reinvested their profits by purchasing much needed heavy equipment, including a new dump truck and backhoe. They also purchased new property and built a new office and garage. Now that the housing market has slowed, they have let go of many of their workers, running a skeleton crew. Recently, they were able to pick up some local township contracts. But they are still barely making the monthly payroll and business expenses.
Joe is in the middle of a divorce. Joe needs to sell half of his 50% interest in the business to Thomas to help settle his divorce. But since all his money is tied up in the business and his personal real estate, Thomas doesn’t have enough cash. The Conner brothers considered selling some equipment, but most of the new equipment is still financed so they don’t own it to sell it, and the older equipment will be lucky to get pennies on the dollar.
Luckily, Joe and Thomas worked with their Penn Mutual financial professional, Linda, shortly after they took over Conner Construction. The planning included setting up a buy-sell agreement funded with Life Insurance. Joe discussed his dilemma with Linda, who reminded him that he can access cash value from his life insurance policy. Since Joe and Thomas purchased whole life policies to fund their buy-sell agreement, they built cash value that can be borrowed against for emergency cash needs like a divorce settlement. This option enables Joe to keep his half of the business intact while providing much-needed cash.
Accessing cash values may result in surrender fees and charges, may require additional premium payments to maintain coverage, and will reduce the death benefit and policy values.
Good planning is good business, and the foundation of a good plan often is permanent life insurance, which can provide financial protection from many different risks. Your Penn Mutual financial professional can help you develop a solid succession plan that may include life insurance.