Plan Ahead to Avoid Giant Cockroaches

In the 1997 movie, Men in Black, Agent K (played by Tommy Lee Jones) and Agent J (played by Will Smith) saved the universe from an intergalactic terrorist (which looked a lot like a giant cockroach).  During an early exchange with J, K states:

“1,500 years ago, everybody knew that the Earth was the center of the universe. 500 years ago, everybody knew that the Earth was flat. And 15 minutes ago, you knew that humans were alone on this planet. Imagine what you’ll know tomorrow.”

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Imagine what you’ll know tomorrow.  If only business owners could answer that question today things would be much simpler for them. 

You don’t know, what you don’t know…

Knowledge of the future would make virtually every decision they have to make easier.  Markets, pricing, staffing, technology, etc. would all be easier.

Unfortunately, reliable oracles are incredibly hard to find.

Business owners have to make decisions with less than perfect information knowing their decisions could impact scores of people.  They have to anticipate things that they may not want to think about, including personal set-backs.

For example, most people do not want to think about becoming disabled. However, just over 1 in 4 of today’s 20 year-olds will become disabled before they retire1.  Disability does not distinguish between business owners, employees, or the unemployed.

Disability income insurance can help protect income but does not help the business owner transition the company to new ownership.

Plan for your future

It is said that the worst time to sell your company is when you have to.  If you have to sell quickly you may not be able to get full value.  In addition, if you are a significant part of the company value (for example you personally generate a large part of the company revenue) your absence may greatly decrease any expected proceeds.

These uncertainties are why many business owners develop succession plans well before they anticipate needing them.  An Employee Stock Ownership Plan (ESOP) may be part of the plan for some.  An ESOP allows the business owner to transition ownership over time.  The owner can transition some ownership now, the rest at a future date (which if something like a disability happens provides the needed structure).  The ESOP offers a flexible approach for ownership transfer.

This blog will continue to look at ESOPs over the coming year.  I would encourage you to learn more to see if the plans fit with your organization and your goals.  And the more you plan ahead, the more you can avoid the giant cockroaches in your life.

In addition to blogging here, I also tweet regularly about topics of interest to ESOPs. Click to follow me on Twitter-  @jlripperger  .

Click here to follow my ESOP blog

1Social Security Administration, Fact Sheet, March 18, 2011

Affiliation Disclosures

No investment strategy, such as asset allocation or diversification, can guarantee a profit or protect against loss in periods of declining values. Company stock is not a pooled investment. Stock may experience greater volatility and should not be directly compared to investment options that have a more diversified investment mix. It is not intended to serve as a complete investment program by itself.
 
Insurance products and plan administrative services are provided by Principal Life Insurance Company a member of the Principal Financial Group® (The Principal®), Des Moines, IA 50392.
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