Business Insurance SSSC #5

The Financial Advisor Guide to Business Insurance Principles

Self-Study Course # 6

BUSINESS INSURANCE PRINCIPLES

OVERVIEWIt really doesnt matter if your clients own a large or small business, they need you to help them solve all the problems where insurance could offer the solution.

To work for themselves, to be their own boss, to run their own business--for many workers these phrases describe the entrepreneurial dream. In recent decades thousands of individuals have set off to pursue that dream. Indeed, an increase in the number of small businesses has created much of the growth of new jobs in the Canadian economy.

Becoming a successful entrepreneur, however, is not an easy task. It requires skill, motivation, hard work, and good luck. It also requires information in large measure. The would-be business person stands on the brink of a new future with a thousand questions that need answers. The time you take to insure your business is just as important as the time you took to build it.

Insurance is one of the biggest precautions your clients and prospects should take to protect their business. Regardless of the size of the business, they are susceptible to all the same hazards as a homeowner, such as storm damage, liability, theft or even death, disability or retirement.

Taking Care of Personal and Business Needs Your clients and prospects have invested time and hard work into their business. Thats why its important that they periodically evaluate any financial plan, including their life insurance to ensure that their personal and business goals are still being met as the needs of their family and business change over time.

You must understand that all business owners have different needs. To help you better understand their planning needs and to provide strategies that may be helpful for their situation, we have categorized their needs into three categories.

Phase I - Start UpIf youre business clients are just starting out, they are probably concerned with issues that involve cash flow as well as strategies to help protect their family and business.

Phase II - Growth & MaturityIf the business is already growing strong and maturing, you can help them begin to focus on retirement planning and maintaining flexibility to access money if necessary.

Phase III - Succession PlanningIf they are ready to retire and pass their business onto the next generation, you can offer life insurance products that can be an important part of their estate and business plans.

In addition, through the course of your relationship with them, you can help them understand how life insurance can be an important part of an estate plan, setting up a trust, and securing their retirement by using the many tools that are available to you.

Continuing the Family Business Do they have a business continuation plan? Typically, successful family and closely held businesses follow a business plan aimed at maximizing profits. But, to maximize the value of their businesses for their own benefit and their heirs, business owners will need more. A business continuation plan may complete the equation.

Why Does the Business Owner Need Business Continuation Planning? Three common characteristics of closely held businesses make business continuation planning essential.

First, many closely held businesses lack successor management.

If a chosen successor isn't there to open the doors, stock the shelves and direct operations, the business may fail.

Finding a buyer and getting a fair price for the business may be difficult, especially following the owner's disability or death. Unlike publicly traded companies, a marketplace for buyers and sellers of closely held businesses doesn't usually exist.

Finally, if you do not hold a majority of controlling interest, you or your heirs should expect a reduction in your anticipated sales price. Buyers are often unwilling to pay fair market value for a minority interest that lacks management control.

Assuring the Preservation of the Business

So what's the bottom line? Unless they plan for the eventual disposition of their business interests, the value may be diluted, not maximized.

Business planning is a complex undertaking, generally requiring the efforts of more than one professional. The first step is putting together your team. Here are the key members you should include.

Estate and Business Planning LawyersChoose a lawyer who specializes in estate planning and business continuation. The choice could mean the difference between successfully achieving goals and failure.

Insurance ProfessionalAn insurance professional can assist in determining the best type of policy and coverage that will be needed to meet any goals.

Certified General Accountant A CGA can assist the business owner(s) in complex business valuations.

Financial Planner The financial planner may be the life agent or accountant or another member of the team with broad knowledge and special training in financial planning. He/she can coordinate the efforts of the team.

What Can You Expect from this Course?

Upon completion of this course, you will be more knowledgeable in the organization and operation of businesses. You will be able to distinguish the differences between the four types of business structures, with the emphasis on the advantages and disadvantages of each legal entity.

You will explore the effects of death, disability and retirement on each business situation. You will have a working knowledge of financial statements and how to use the ratios to help establish an insurance need.

Every person, and every organization - whether living or non-living - is exposed to risks, which can result in losses. The main function of insurance is to minimize or to eliminate the effects of risks on individuals and organizations, to act as a transfer mechanism whereby responsibility for losses from risks which occur are transferred to insurers, and by which risks are managed. An insurance company is a business too, and like any other business it needs to be run well and profitably.

INTRODUCTION

Whenever a business owner dies or is seriously disabled, there are many questions that must be answered. There are questions about the future of the individual family, their business, its valued employees as well as their creditors.

In a recent study, it was found that over two-thirds of businesses did not have any life insurance of any kind. Many of these same organizations were unaware of the business uses of life insurance.

When the remaining one-third was looked at, it was found that many were underinsured or has very limited coverage for the other contingencies of disability and retirement.

Two goals of the agent/broker when dealing with Business Insurance

When an Advisor / Agent / Broker takes a look at business situations, it is wise to look not only at the owner, but also to the other employees of the company. With this said, there are two main functions of an agents / brokers work with the business owner.

1. An Advisor / Agent / Broker must take the time to uncover and then

discuss any problems or dangers that may be uncovered in the interview

process. When any areas of concern are discovered, the Advisor/ Agent / Broker

MUST take the time to discuss them in depth.

2. Secondly, the Advisor / Agent / Broker MUST convince the business owner

that the problem has to be solved without hesitation, and then try to help

solve it.

THE FIVE MYTHS OF SALES PROSPECTING

Myth #1 - Prospecting is sales

This is the number one mistake made by small business owners and sales reps. Prospecting is a separate function from sales. Just as marketing is distinct from sales but closely linked. Prospecting is simply discarding all the unqualified leads and retaining the "gold". The job of prospecting is to find qualified leads that may buy your product.

Myth #2 - Prospecting is a numbers game

The old school of prospecting for business relies on contacting large numbers of cold contacts. However, quality supersedes quantity. You must find prospects that have a propensity and possible motive to buy your suggestions and recommendations.

Myth #3 - Scripts are for kids

Many sales people insist on prospecting without any script. Scripting provides the framework of a successful prospecting campaign. It allows you to test what key benefits and qualifying questions work. The script must be personalized so the presentation does not sound "canned".

Myth #4 - Prospecting takes time

It only takes a few minutes to determine if the lead wants your benefits and can afford your company's product or service. Don't waste time on people unmotivated or unable to buy. Remember to focus on the "gold".

Myth #5 - Close them on the appointment

Far too many sales reps focus on setting the appointment. "Would Friday morning or afternoon, be better for you?" And then only 20% of appointments show up. What went wrong?

Prospects will sometimes find it easier to agree to an appointment rather than saying they are not interested. If a prospect is remotely interested, then offer a much subtler approach...send them an information package. This allows you to build interest and turn the lead from warm to hot.

Sales prospecting done right can have a huge impact on your sales revenue. It does not take an armour suit and great courage to deal with the fear of rejection during prospecting. Just keep an open mind to challenge the old sales approaches and the myths