How the Business Life Cycle
Affects Planning Needs
Chances are you were not doing estate planning at age 20. That need just didn’t exist or wasn’t a priority at that time
in your life. The same logic applies to your business planning. Where your business is in its “life cycle” has a great
impact on when you should address the various needs of your business, the owner(s) and key employees.
NEW
GROWING
ESTABLISHED
IN TRANSITION
Tailored business solutions
The Business, Owner and Executive Solutions platform from the Principal Financial Group® has solutions to help
support the needs of businesses in any phase. We will work with you to identify and prioritize your needs, and then
implement customized solutions to help you maximize the efficiency and effectiveness of your business. Our solutions
include comprehensive support – the expertise, the products and the administrative services – from planning
through implementation.
Identify which stage your business is in by looking at the company traits below. Then, take a look at the planning
needs worthy of your consideration right now, as well as down the road.
NEW BUSINESSES (1-3 years in business)
Company traits
• Trying to become established in the market
• Generally have substantial debt
• Putting profits back into the company
• Revenue generally less than $500,000/year
BUSINESS PLANNING NEEDS AND SOLUTIONS
For the business
For owner(s)/key employees
• Life insurance to cover debt/buildings
• Individual life and disability insurance
• Key person (life and disability) insurance on owner(s)
– The Principal® can help you calculate the amount of
coverage for your needs
• Buy-sell agreement implementation and funding1
• Exploration of a group benefits package
1
E stablishing the value of a new company can be difficult; visit
with The Principal® for alternatives
GROWING BUSINESSES (3+ years in business)
Company traits
• Potentially still establishing business in the market
• Revenue stream is growing
• Expenses and reinvestment in the company may
base is building; relationship management and
• Client
remain substantial
key person retention needs may be more significant
• Need for debt financing may be decreasing
BUSINESS PLANNING NEEDS AND SOLUTIONS
For the business
For owner(s)/key employees
• Key person (life & disability) insurance on owner(s)
and key employee(s) – The Principal can help
®
you calculate the amount of coverage for
• Key person retention plan
– Principal Executive Bonus PlusSM
–Principal® Select Reward Plan
your needs
– Principal SERP SelectSM
• Buy-sell agreement and funding review
– Nonqualified deferred compensation plan
• Informal business valuation
• Finance buy-sell agreement for death/disability/
voluntary exit (at this stage, consider convertible
– Executive carve-out disability protection
• Business owner retirement planning
– Bonus plans for all entity types – Principal Executive
term insurance)
Bonus Plus, Principal S Owner PlusSM, Principal LLC
• Overhead expense disability insurance
•Implement a group benefits package using a
combination of employer-paid and employee-paid
life, short-term disability, long-term disability, dental
BonusSM
– Nonqualified deferred compensation plan
– DI Retirement Security
or vision insurance
WHY THE PRINCIPAL?
Complimentary business planning services
The Principal offers two valuable services to help you secure a solid
financial future for your business.
• Informal business valuation – uses five commonly used valuation
methods that satisfies financial requirements during life insurance
underwriting process
• Buy-sell review – provides summary of any issues and
recommendations regarding your existing buy-sell agreement
ESTABLISHED BUSINESSES (10+ years in business)
Company traits
• Established in the market
• Business continuity plan in place
• Established management team
• Consistent revenue
• Consistent cash flow
•Established client base and relationship management
BUSINESS PLANNING NEEDS AND SOLUTIONS
For the business
For owner(s)/key employees
•Updated informal business valuation to address
•Key person retention plan review and addition of any
changing needs:
new members
–Financing for death/disability/voluntary exit from
business
–Principal Executive Bonus Plus
–Principal Select Reward Plan
–Consider a buy-sell agreement review to determine
if funding is adequate
–Principal SERP Select
–Nonqualified deferred compensation plan
•Key person (life and disability) insurance on any new
owner(s) and/or key employee(s) – The Principal can
help you calculate the amount of coverage for your
–Executive carve-out disability protection
• Solid transfer strategy
–Nonqualified deferred compensation plan
needs
• Overhead expense disability insurance
–Employee stock ownership plan (ESOP)
•Expanded group benefits package
• Business owner retirement planning
–Bonus plans for all entity types – Principal Executive
Bonus Plus, Principal S Owner Plus, Principal LLC
Bonus
–DI Retirement Security
•Estate planning if family is in the business (if business
value exceeds $5 million)
• Inheritance equalization planning
WHY THE PRINCIPAL?
Exceptional administrative services at no charge2
throughout the life of your program
Business Market Administration
services:
Group benefits and individual
• Dedicated staff
• Program-level reporting
• List billing
• Online access
•Ongoing support and consultation
• Dedicated staff
•Reporting
•List billing
•Online access3
•Ongoing support
2
3
disability support services:
dministrative services for deferred compensation plans available for a fee
A
with asset/liability tracking and reporting.
Not available for individual disability insurance
TRANSITIONING BUSINESSES
Company traits
• Established in the market
• Consistent cash flow; looking to retain cash flow in
owner’s absence
• Strong management team in place
• Established client base and relationship management
BUSINESS PLANNING NEEDS AND SOLUTIONS
For the business
For owner(s)/key employees
•Transition planning (paramount)
• Key person retention plan review and addition of any
–Existing buy-sell agreement review and/or
establishment of new buy-sell agreement (and
proper funding vehicles) with new owners
–ESOP
new members
– Principal Executive Bonus Plus or Stay Bonus if sole
owners
– Principal Select Reward Plan
• Key person (life and disability) insurance on new
owner(s) and/or key employee(s) – The Principal can
help you calculate the amount of coverage for your
needs
•Overhead expense disability insurance (for new
ownership)
•Continued expansion of group benefits package
– Principal SERP Select
– Nonqualified deferred compensation plan
– Executive carve-out disability protection
• Utilization of business value for owner retirement
needs
•Survivor benefits/income
•Estate planning if family is in the business (if business
value exceeds $5 million)
•Inheritance equalization planning
WE’LL GIVE YOU AN EDGE®
Principal National Life Insurance Company and Principal Life Insurance Company, Des Moines, Iowa 50392-0001, www.principal.com.
Insurance products issued by Principal National Life Insurance Company (except in NY) and Principal Life Insurance Company. Plan administrative
services offered by Principal Life. Securities offered through Principal Securities, Inc., 800-247-1737, member SIPC. Principal National, Principal Life,
and Principal Securities are members of the Principal Financial Group®, Des Moines, IA 50392.
Disability insurance has limitations and exclusions. For costs and complete details of coverage, contact your Principal Life financial representative.
The subject matter in this communication is provided with the understanding that Principal® is not rendering legal, accounting, or tax advice. You should
consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements
Not FDIC or NCUA insured
May lose value • Not a deposit • No bank or credit union guarantee
Not insured by any Federal government agency
BB11226-01 | 06/2016 | t16060703a6