- 2,152
So you want to sell Buy/Sell, part 1
The market for independent agents with little experience will best be suited within the smaller “Closely-held” businesses or basically the ole’ Ma and Pa shops. Now you have to know something about the “Buy/Sell” options, and how they may or may not apply. Every business with, multiple ownership needs to have a Buy/Sell Agreement, this is undisputed. Yet on the other hand funding these monsters is a story that novels are written about or should be written about.
So what exactly are the options?
1. Owner Cross-Purchase Agreement
2. Entity Redemption Agreement
3. Mixed Agreement
Definition of the Buy/Sell for this piece: A Buy/Sell Agreement is essentially an agreement among the owners of a business to allocate control, by means of cross purchase and sale obligations in the event of the death of one of the principals.
What purpose or reason you can offer up to facilitate the idea of a Cross-Sale Fund in the event of a death of one owner? Basic reason is simple, to set up an orderly transfer of ownership at the death of one owner, as in price and time. Yet, many would say this, that evil-stupid-airhead spouse of any one owner will be destructive! I would be real careful when choosing my words on that reason. Hopefully you don’t have to convince them of the reasons, I suggest in many cases they have a “Buy/Sell Agreement”, just no actual funding of the plan has occurred. I suggest, you to prospect to recently (in the last 3 years) created businesses. I would not attempt this on businesses less then three years of age; basically I would rather spend my time on a business that has some sort of reasonable expectation of being around in the next few years.
Now, you find yourself in a business with the potential of being a client of yours, obviously if you are planning a proposal for a Buy/Sell Fund you are dealing with a partnership or business with more then one principle or owner. Plus in all likelihood it is a General Partnership or a Corporation of one sort or another. My guess, if it has been in business for three or more years it’s likely to have other (hopefully ignorant and greedy) agents bidding for their business or maybe even an agent already doing business with them, worst case scenario but, not an obstacle that can not be overcome from my experience.
Now this is an issue most of the so called funding by other agents lack. Personally I don’t like mixing Business Funding and Personal Funding, yet this is the perfect time to get in there and do both! What is the old saying, “Kill two birds with one stone” or in this case with one prospective client.
To recap, we are now in the stage of the sale you are ready to talk to one of the principals and you really need to convince them on why they should talk to you. I also want to state that I don't believe that a Buy/Sell is the best choice to prospect a business as an initial contact. Yet some here obviously think these plans are easily sold and simple for the Agent, my personal experience is that trying to sell Buy/Sell as an initial offering to the business is rocky at best, not impossible but, not as fruitful as other products esp., for a new agent.
The market for independent agents with little experience will best be suited within the smaller “Closely-held” businesses or basically the ole’ Ma and Pa shops. Now you have to know something about the “Buy/Sell” options, and how they may or may not apply. Every business with, multiple ownership needs to have a Buy/Sell Agreement, this is undisputed. Yet on the other hand funding these monsters is a story that novels are written about or should be written about.
So what exactly are the options?
1. Owner Cross-Purchase Agreement
2. Entity Redemption Agreement
3. Mixed Agreement
Definition of the Buy/Sell for this piece: A Buy/Sell Agreement is essentially an agreement among the owners of a business to allocate control, by means of cross purchase and sale obligations in the event of the death of one of the principals.
What purpose or reason you can offer up to facilitate the idea of a Cross-Sale Fund in the event of a death of one owner? Basic reason is simple, to set up an orderly transfer of ownership at the death of one owner, as in price and time. Yet, many would say this, that evil-stupid-airhead spouse of any one owner will be destructive! I would be real careful when choosing my words on that reason. Hopefully you don’t have to convince them of the reasons, I suggest in many cases they have a “Buy/Sell Agreement”, just no actual funding of the plan has occurred. I suggest, you to prospect to recently (in the last 3 years) created businesses. I would not attempt this on businesses less then three years of age; basically I would rather spend my time on a business that has some sort of reasonable expectation of being around in the next few years.
Now, you find yourself in a business with the potential of being a client of yours, obviously if you are planning a proposal for a Buy/Sell Fund you are dealing with a partnership or business with more then one principle or owner. Plus in all likelihood it is a General Partnership or a Corporation of one sort or another. My guess, if it has been in business for three or more years it’s likely to have other (hopefully ignorant and greedy) agents bidding for their business or maybe even an agent already doing business with them, worst case scenario but, not an obstacle that can not be overcome from my experience.
When the substantial portion of an owner's estate is comprised of his interest in a closely-held business, it may be difficult for his estate to raise the cash necessary to satisfy estate tax liability and other administrative expenses.
Now this is an issue most of the so called funding by other agents lack. Personally I don’t like mixing Business Funding and Personal Funding, yet this is the perfect time to get in there and do both! What is the old saying, “Kill two birds with one stone” or in this case with one prospective client.
To recap, we are now in the stage of the sale you are ready to talk to one of the principals and you really need to convince them on why they should talk to you. I also want to state that I don't believe that a Buy/Sell is the best choice to prospect a business as an initial contact. Yet some here obviously think these plans are easily sold and simple for the Agent, my personal experience is that trying to sell Buy/Sell as an initial offering to the business is rocky at best, not impossible but, not as fruitful as other products esp., for a new agent.