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Starting the Buy/Sell Conversation

Help your business-owner clients get their long-term plans in order.

By Glenn E. Stevick Jr., CLU, ChFC, LUTCF

There are tens of thousands of small-business owners who have not thought seriously about the need for a buy/sell agreement. Or, if they have considered it, they have not properly implemented or funded their plan. Others, with a plan and funding in place, have not updated it for growth and inflation.

To spark a discussion with a business owner concerning setting up a buy/sell agreement, you may consider starting with this question, “What do you want to happen to your business when you die or retire?” It’s powerful and gets right to the heart of a crucial issue that all successful business owners will eventually face. Most business owners have only a vague idea about what they want to happen to their businesses, and they have no formalized plans to make it happen.

Don’t be afraid to start for fear of going beyond your knowledge level.

Keep, sell or liquidate
There are only three alternatives available to business owners regarding the disposition of a business at the death or retirement of one of the owners. The first is to keep it. This generally means keeping that ownership portion in the family and passing it on at the owner’s death through a will to the other family members. In the case of retirement, it would usually mean giving away or selling ownership.

The second alternative is to sell it. This means selling the business as a going concern. Most often the business would be sold to the remaining owners, as opposed to outsiders.

The third option is to liquidate it. Liquidate means to sell the assets after shutting down the business.

If the business owner does not know what to do with the business, or does not know the options, you will have to spell them out. If you feel unqualified to discuss the options, just tell your prospects that you want to discuss them at a later date. Then come back with someone who can help you. Or, study the options and go back with some information written out for your prospects. You can stop almost anywhere in the course of your discussion, tell the prospect that you would like to come back later, and then do whatever is necessary to prepare for the second meeting.

Quick Tip:
“Mr. Business Owner, what do you want to happen to your business when you die or retire?” … By committing this initial question to memory, you will have an effective business-insurance approach with you at all times.

Make the transition
To make this transition with your prospect, you might say, “Mr. Prospect, I would like to pursue this with you more fully at a later date. What I have in mind is asking my business specialist to join us next time. How does that sound to you?” Or, “I would like to give you some information that spells out the options available to business owners in planning for contingencies such as death and retirement, and then discuss these options with you.”

Explore the options
Another stopping point might be after you tell your prospect the three main options of keep, sell or liquidate. You can discuss the options for a few minutes and then stop the interview. Or, you can go further into the interview by asking some questions from your company’s business-insurance factfinder. Then, at some point, stop the interview as discussed above and come back later.

Another alternative, following your prospect’s response about what he wants to happen to the business at death or retirement, is to ask, “Have you made any legal and financial arrangements to carry out your desires in this regard?” If he answers no, then your response can be, “Let me come back later and give you some specific information about what is normally done in situations like this.”

Remember, you can stop at any point that you feel you are about to get in over your head. Don’t be afraid to start for fear of going beyond your knowledge level. There’s always an option to gracefully end the interview, gather your resources and come back at a later date.

Glenn E. Stevick Jr., CLU, ChFC, LUTCF, a member of Tri-County AIFA (Pa.), is an LUTC author and editor, and assistant professor of insurance at The American College. Contact him at glenn.stevick@TheAmerican


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