Change is inevitable both in life and in business.
We prepare for life’s changes by saving money, buying insurance, and so on. Owning a business is no different, in fact it is even more important for the small business owner to protect themselves from change so they can continue to bring value to their clients.
While there are many different seasons for a business and various strategies to cope with changes, one extremely important factor that affects a business’s ability to weather any storm is adequate cashflow.
For example, one common trend is the expansion and contraction cycles of the economy. Right now, we are seeing high inflation and although we are not technically in a recession, many of us are feeling the pinch. Having adequate cashflow can ease struggles like this.
Y0u are probably asking, “what does this have to do with insurance?”. Insurance is designed to protect, and one of the best ways to protect against the ups and downs of cash flow is to create your own bank. This can be done with cash value life insurance.
There are several types of cash value life insurance and although each product is slightly different to support different needs, they are all based on the same principle. All cash value life insurance policies throw extra money in the form of elevated premiums into investments or investment indices. This in turn yields returns based on the stock market.
The best programs are indexed off the market, meaning that when the economy soars you participate in the growth, when it contracts your accrued money does not diminish. This strategy has been used by some families over the last several decades to build generational wealth.
In the hands of a business owner this strategy can build a very robust emergency savings plan for smoothing out the ups and downs in the economy as well as be instrumental in weathering big changes in the business environment such as the recent COVID19 pandemic. Additionally, because it is life insurance, it can be used in the event of the death or disability of the owner or a key employ as well as ensuring equity in dissolving a business partnership.
To set up an effective program, it is important to consult with an insurance professional. You should also consult with a business continuation specialist to get a more in-depth analysis of how to keep your business going through the variety of changes that we all encounter. For starters check out this article by Patty Bonsera.
If you do not have a good insurance professional on speed dial and want more information, reach out to my office at 719-247-0008.