When it comes to American business, often it's the largest companies that garner the most attention. It's no wonder that many people think these corporate giants are the most important enterprises in our economy. But with 28.8 million small businesses in the U.S. with fewer than 500 employees,1 are these companies operating in the shadows of their larger brethren, or do small businesses carry their own weight? Consider the facts.
America's unsung heroes
According to the most recent U.S. Small Business Administration data, small businesses employ almost half (48 percent) of all private sector employees; they pay 41.2 percent of total U.S. private payroll; they've generated 60 percent of net new jobs since the latest recession, from mid-2009 to 2013; and they represent 96 percent of high-tech industries.2
The fact is the United States depends on the health and ingenuity of these small businesses for its overall economic growth.
But as small business owners breathe new life into our economy, a number of issues keep them up at night -- namely, how to keep their operations secure and growing even in the face of the ever-changing pressures. Among their concerns are how best to:
1. Attract, retain and incent top quality talent;
2. Mitigate and manage risk;
3. Create a solid succession strategy; and
4. Meet their business obligations without sacrificing their personal financial security needs.
Overhead expense coverage can provide the benefits you need to meet business expenses such as rent, payroll, utilities, taxes and maintenance costs in the event you become disabled.
Similarly, key person insurance can help your company weather the disability or death of a key employee. It can provide the funds you need to pay debts and provide working capital while a suitable replacement is recruited and trained. In many cases, key person insurance may be required as collateral for a business loan.
Finally, property and casualty insurance can pay benefits to repair or replace buildings, equipment and data damaged or destroyed in a natural disaster; while liability insurance can provide resources to satisfy personal injury or property claims.
Passing the torch
All owners leave their businesses one day. You have the best selection of options for creating an exit strategy if you get started before that day arrives. The creation of a thoughtfully prepared and properly funded business continuation plan is a crucial part of the process -- one that:
• Sets clearly defined goals for the owners and their families,
• Establishes a fair market value for the business,
• Formalizes a written buy-sell agreement, and
• Maintains adequate life and disability insurance to fund the agreement in the event of an owner's retirement, death or disability.
Business and professional needs are intertwined
For small business owners, business and personal financial security is often interrelated. With so much of your worth tied up in your company, it's doubly important to have a plan that takes into account all of your financial security needs.
That's where an integrated approach to your business and personal concerns can help you sleep more soundly by addressing key questions, such as:
• When my kids are ready for college, will I be ready financially?
• When I decide to retire, will I have the resources to afford the lifestyle I want?
• How can my business fund my retirement?
• If I become sick or injured and can't work, what will happen to my business? To my family?
• If I die, will my family be protected financially?
The value of a trusted professional
It can be difficult to know if you've done enough to ensure a secure financial future. The expression "it's lonely at the top" is often very true for small business owners. A trusted financial representative can help.
The key is to work with someone who understands what it takes to run a successful business and that has access to a team of specialists with expertise in risk management, employee benefits and business succession planning.
Working with you and your other advisers, he or she can coordinate a team approach resulting in a thorough understanding of where you are today and a strategy to help get you where you want to be in the future.
1 SBA Office of Advocacy, Frequently Asked Questions, Updated June 2016
2 SBA Office of Advocacy, Frequently Asked Questions, Updated June 2016
Article prepared by Northwestern Mutual with the cooperation of Tony Myers. Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company (NM) (life and disability insurance, annuities, and life insurance with long-term care benefits), Milwaukee, Wisconsin, and its subsidiaries. Securities are offered through Northwestern Mutual Investment Services, LLC (NMIS), a subsidiary of NM, broker-dealer, registered investment adviser, member of FINRA and SIPC. Tony Myers is an agent of NM and registered representative of the NMIS based in Downers Grove. To contact Tony Myers, please call (630) 353-2355, email him at firstname.lastname@example.org or visit his website at http://www.tony-myers.com/.
Not all products mentioned in this article are offered through Northwestern Mutual.
• Tony Myers, CLU, ChFC, CASL, RICP, WMCP, is a wealth management adviser and business & estate planning specialist at Northwestern Mutual.