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The Advantage Newsletter

The Advantage Newsletter

March 2019


This month we discuss succession planning, buy-sell agreements, and key person coverage.

Have you built a successful business? Have you protected your business to ensure you and your family are taken care of if the unexpected arises? At ISU Cunnington & Associates our goal is to be your competitive advantage through a unique combination of risk management, safety resources, compliance guidance, and carrier access. To meet this goal, we are dedicated to discussing simple and actionable ideas that protect you and your business. In this month’s Advantage Newsletter, we address succession planning, buy-sell agreements, and key person coverage.



Succession planning is one of the most important topics for successful business owners. What happens when the owner passes unexpectedly? What happens if they become disabled? Or what is the process for them to retire? We find these questions are sometimes not addressed or plans are put in place but never reviewed again. Apart from drafting a buy-sell agreement, there are several financial and psychological factors that must be taken into account. We can provide you a simple list of questions to incorporate into your business planning discussions.


Most people have heard of a buy-sell agreement, but what is it? It is a contract under which each business owner agrees to offer their interest for sale to the business, the other owners, or both on the occurrence of certain events such as the owner’s retirement, receipt of an outside offer to buy, or death. The agreement may require the other parties to buy the offered interest or merely give them an option to buy. Buy-sell agreements can protect your interest in the business and offer the roadmap for you or family members when the time comes to sell your interest. We can help you review existing agreements or help take you through the process to get an agreement started.


A detailed planning discussion will help you uncover potential gaps like key person risk. Key person risk is the death of an individual whose qualifications and skillset are important to a business. Their absence would almost always generate considerable losses and costs to the business. As an example, some customers or clients with whom the deceased had a close relationship may not stay with the business, or they may be retained only after expenditures of substantial amounts of effort and money. When the death of a key person is unexpected or sudden, it also creates the significant expense of evaluating and ascertaining the status of works in progress, pending negotiations, and incomplete projects, as well as preparing other individuals within the business to assume responsibility. There also may be significant costs and commissions associated with searching for, finding, and hiring a successor. In the most dramatic situation, the death of a key person may create a void that cannot be competently filled, and the business may fail entirely, leaving life insurance as the only means of replacing the other investors’ capital. If you believe there is key person risk in your company or you are not sure we can help you uncover and address these potential risks.


Did you know that 62% of business owners have never had their business valued? In addition, many business owners assume their business value is “book value” or a multiple of revenue which may not be a fair reflection of market value. A great place to start is with an understanding of the true value of your business. The value of your business along with understanding your needs and goals will be the foundation for your planning. At ISU Cunnington & Associates we work to simplify these conversations. With the help of our strategic partners we will provide a complimentary informal business valuation to get the process started.  

If you would like to review or discuss any of the topcis above, please contact us at 208-672-6180.