Executive Management Retention- WITHOUT Giving up EQUITY or HUGE Bonuses

Commercial Finance Partners Insurance Services has solutions to Executive Retention Issues. Contact me if you`re interested in the following: Completing the acquisition of a business is step one, and without that there`s nothing. Most of our buyers are very focused on financing, and financing alone. If you finance the business, you`re probably signing a Personal Guarantee, and possibly pledging personal assets as collateral. You are buying a system that is fully functional. But without the key employees and executive management, the business will be greatly damaged. When we ask the buyer about key management and their plan to keep those key employees their response usually includes something along the lines of: we`ll give them additional bonuses, we`re increasing their salary, and sometimes its "we`re giving them equity so they feel like an owner".... The equity play can be very complex, and usually not worth it for many reasons. One being that do you really want this person as a partner? And there can be many legal complications.... Giving bonuses and pay raise is more common. But does any of that tie the employee to the business? NO. How to solve this problem: Executive Compensation strategies using Cash Value Life Insurance.. This is commonly used at the corporate level, but not so much in small business. How does it work and why: the business pays for the premiums of a permanent life insurance on the life of the employee. The policy accumulates cash over time.. Depending on how its structured (Many Options) the business can receive a death benefit if the employee dies, to be used to replace this person and cover expenses caused by their absence. The Family can receive a death benefit. Or Both. Again, many ways to structure this. Now what about the cash being accumulated? Well, the business can own the policy and have access to the cash through policy loans. The Cash is a liquid ASSET on the business balance sheet. For this reason, working capital from the loan proceeds can sometimes be used to fund the life insurance premiums. And as a reward to the employee, after meeting a vesting period of lets say 5, 7, 10 years, til retirement etc, the business can transfer the policy to the employee. Or the employee owns the policy but cant access the cash until after they`ve met the vesting period. This gives the employee a financial incentive to stay with the business. If you have a 5-10 year exit strategy, you want those key employees to stay during that time to ensure a great exit multiple. Or if you`re selling and have a post sale financial incentive, you want those key employees stay with the business. There are many ways to structure this and tailored to your situation. We do not provide legal or tax advice, this article should not be taken as such, but we can work with your CPA, CFO, and Attorney to determine if a solution like this can work for your situation