February 26, 2025 • 13 mins
Could your business survive losing a key team member tomorrow? Most can't - but there's a solution that too few business owners know about.
In this episode, we're tackling a critical but often overlooked strategy that could save your business in a crisis (or in the dreaded “I quit effective immediately” situation). Plus, we'll show you how protecting your key people isn't just about avoiding disaster - it's about building stronger loyalty and retention.
Key Quote: "Key person protection isn't just insurance - it's a strategic tool that shows your team you value them enough to plan for their future. That's what builds real loyalty."
What You'll Learn:
- How to identify and protect your business's most valuable team members
- Creative ways to structure protection that actually help retain top talent
- Real examples of how small businesses are using key person strategies
- Practical steps to start protecting your business today
Want to make sure your business is ready for anything? Get our Key Person Protection Planning Guide at wealthwisdomfp.com/community. Join a community of business owners who are building resilient, sustainable businesses.
Don't wait for a crisis to start thinking about protection. Listen now to discover how smart protection strategies can strengthen your business today while securing its future!
00:00 Introduction: The Importance of Key Person Protection
00:50 Meet Your Hosts: Brandon and Amanda
01:27 The Story of Marcus and Sarah
02:09 The Vulnerability of Losing Key Employees
03:46 Three Critical Aspects of Key Person Protection
06:30 How Key Person Insurance Works
09:13 Marcus's Success Story
10:16 Conclusion: Protecting Your Business's Future
Watch on Youtube Here: https://youtu.be/rFjUyVtNg-8
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:01):
What would happen to your business if you
lost a key team member tomorrow?
Today, we're tackling the often
overlooked strategy that could save your
business in a crisis. Plus, we'll
show you how protecting your key people
can actually help you retain them.
Whether you're a solopreneur or managing
a growing team, or somewhere in between,
(00:23):
this episode reveals how to secure your
business's future by protecting your most
valuable assets, your people,
in a world where chaos seems to reign
supreme, where uncertainty lurks
around every corner, and financial
markets are now more unpredictable than
(00:44):
ever. There's one place you can turn to
to find clarity and control.
Welcome to the Wealth Wisdom Financial
Podcast. Hey, I'm Brandon. And I'm
Amanda. Join us as we dive deep in the
world of personal and business finance
to assist you in navigating through the
chaos and building the financial future
you deserve. We believe when conventional
(01:07):
financial thinking doesn't get you where
you want to go, you need wealth wisdom.
So if you're ready to take control of
your financial destiny. Tune in to the
Wealth Wisdom Financial Podcast because
in a chaotic world, your money shouldn't
be. Subscribe now and never miss an
episode. Let me tell
(01:28):
you about Marcus, a successful web
development agency owner. He has spent
years building the perfect team,
including Sarah, his lead developer, who
had an uncanny ability to solve complex
problems and maintain relationships with
their biggest clients. Sarah was
indispensable. That would be you.
(01:48):
Then one day Sarah was diagnosed with a
serious illness and had to take extended
leave. I hope that's not me. That's not
you. And Marcus's
business wasn't just losing a talented
developer, it was losing the person who
held their most important client
relationships together. Sarah was the
glue. Now, this
(02:10):
story highlights a vulnerability that
many business owners don't think about
until it's too late. We spend so much
time and money finding, hiring,
developing great team members, but how
many of us have a plan for what happens
if we lose them?Suddenly, like real
fast. Yeah, and, well, I mean, we could
lose them like because of
(02:32):
death, disability, illness, but also
because they just say, I quit and I'm
done now, right?Like, this doesn't have
to be as gruesome as you think. So here's
a sobering statistic. 60%
of businesses fail within two years of
losing a key employee
unexpectedly. Yet only
about 22% of businesses have
(02:52):
key person protection in
place. Can you imagine if you lost a key
employee unexpectedly and you end up with
an over half of a chance that you close
within the next two years?I mean, think
about your business right now. Who are
the people that generate significant
revenue or maintain key client
(03:13):
relationships?Maybe you have people that
have specialized knowledge that would be
hard to replace. Maybe you have people
who keep your operations running
smoothly. People who lead and inspire
your team. People who hold important
vendor and partner relationships.
These people are your key
people, and losing any of them could
(03:34):
create a serious crisis for your
business. But here's the good news.
There's a strategy that not only protects
your business, but it can also help you
retain these valuable team members. We're
going to break down three important
critical aspects of key person
protection. The first one might seem
obvious, financial protection. immediate
(03:55):
cash flow to help handle that transition,
resources to find and train replacements,
buffer against lost revenue, all those
things that are really important and kind
of we think of first. I lose a key
person, it's going to cost me a lot. Or
do we, sometimes we don't even think
about that. Well, right, rightBut once we
think about it, yeah. The second thing is
(04:15):
business continuity. We just said, you
lose a key person, you're 60% likely, the
next two years the business is closing.
This helps with clear succession plans,
documented processes and knowledge,
cross-training strategies, all these
kinds of things that can help the
business continue no matter who gets
lost. Yep. I think that's important in
the SOP world and and thinking
(04:36):
strategically, right?Yep. And then
finally, this is the one hardly anybody
ever thinks about. Employee retention.
Key person protection isn't just
insurance. It's a strategic
tool that shows your team you value
them enough to plan for their
future. That's what builds real
loyalty. You're using protection as a
(04:58):
benefit, an employee benefit.
You're creating golden handcuffs that
they'll stay with you for longer and you
know there's incentive to stay with you.
The longer they stay there, the more
benefit they get. And there's a lot of
loyalty that's built through that
investment. I think also you might end up
building loyalty not just with the person
that you're employing, but probably
(05:20):
their significant other. If they know the
value of what that is, they then
really are committed.
as a spouse to that business. Yeah. So
after the break, we're gonna dig into
that a little bit more and dive into how
key person insurance really works and why
it might be a missing piece in your
business protection strategy.
(05:48):
Ready to take the next step towards
securing your financial future?Whether
you're planning for retirement, saving
for your dream home, or you just want to
make your money work harder for you, the
team at Wealth Wisdom Financial are ready
to assist you. And now it's easier than
ever to see how we might give you a boost
on your financial journey. Schedule a 15
minute discovery call with one of us
(06:10):
today. And let's discuss your questions
and your financial goals together. Don't
wait any longer. Your financial freedom
awaits. Schedule your discovery call at
www.wealthwisdomfp.com/call.
(06:30):
Now, you might be thinking, isn't key
person insurance just another expense I
can't afford right now?Let's break down
why this thinking could be costly.
to you, the business owner. Yeah. So
first, let's understand how key person
insurance works. One, it's a
life and or disability insurance policy
owned by your business. The business pays
(06:52):
the premium, which is often tax
deductible, and if something happens to
that key person, the business receives
the benefit. And then those funds can be
used for covering lost revenue, hiring
temporary help, recruiting and retraining
replacements, managing debt obligations,
providing stability during the
transition, all those kinds of things.
(07:12):
But here's where it gets interesting. Key
person insurance can be structured to do
way more than just protect your business.
It becomes a powerful retention tool.
You can have split dollar arrangements
where the business and the key employees
share the benefits,This creates those
golden handcuffs that we mentioned that
encourage loyalty for them to stay with
(07:33):
you and provides retirement benefits for
that key employee later. Let's say they
stick with you for a long time, they can
actually turn this into a retirement
benefit. Another idea is executive bonus
plans like we talked about in our last
episode, where the business pays that
premium as additional compensation. The
employee owns the policy, still tax
deductible for the business, but lots of
(07:54):
benefits that the employee can be using
throughout the rest of their lives. And
then finally, you can use this for
buy-sell funding. Let's say you have a
key person who you believe one day could
buy the business from you. What a
powerful way to ensure smooth
ownership transition. Protects both the
business and the key person's family and
creates this clear exit strategy, often
(08:16):
giving that employee the funds they need
to buy the business from you and your
family. I think those are
key things that help us as
business owners to be thinking long
range, be able to figure out, because
again, I talk to business owners all the
time that their plan is to
eventually when they retire, they're just
(08:38):
going to sell the business and they
haven't thought about any of the other
pieces that could go alongside that.
Umm I I had one that'sI think 70
and literally, um,
doesn't have an exit strategy or any of
those things in place because he never
thought about it for 30 years. He's in
growth mode for 30 years or
(08:59):
more. And so by thinking and spending
that time developing the people,
having the tools in place that then
help youGo out whenever it's
time, if that's the case, Yeah. So
remember Marcus from our opening story?
After Sarah's health scare, he
implemented this key person protection
(09:20):
for all of his senior staff. He
structured it as a split dollar
arrangement where the business got
protection against an unexpected loss.
Each key person got valuable life
insurance coverage. The policies build a
cash value that could be accessed for
emergencies. The arrangement created a
retirement benefit that encouraged
retention and so on and so forth. Two
(09:40):
years later, this competitor tried to
poach his team and not one key person
left. Those golden handcuffs that he had
created through this key person
protection had become golden wings,
enabling his team to build wealth. while
they stayed committed to the business. He
was happy and they were happy, and the
business grew. The competitor, you know,
(10:01):
didn't. Again, I think it's not just
those things, but it's how he did that
with them and the culture all all
alongside the tools that he put
in place as well. Because that shows
action, not just words. Yeah. So
here's the thing to always remember. Key
person protection isn't just insurance.
(10:23):
It's a strategic tool that protects your
business from unexpected losses, creates
powerful retention incentives, and builds
wealth for both the business and the key
employees, and provides peace of mind for
everyone involved. A lot of people live
in a lot of fear a lot of the time. And
it's because they're not willing to think
about and address these things. They
(10:44):
haven't discovered that bravery. It's a
place to discover that bravery, get
things in place so you don't have to keep
living in fear. The key is to start
before you need it. Just like hiring,
culture, benefits, protection planning
works best when it's proactive,
not reactive. And here's the
thing that we're talking about in the
(11:07):
community a lot this week, the wealthism
financial community, is that
this key person protection,
it's not just about, you know, the
benefits for your business and financial
benefits and all these things,The big
thing is that it's showing your team you
value them enough to plan for their
future, in their kids' future, right?And
(11:29):
other things, whoever, right?
You value them enough to plan for their
future. And that's what's going to build
real loyalty.
So I know you're ready to protect your
business's most valuable assets, your
people. So we've created the key person
protection planning guide that walks you
through identifying your key people,
calculating appropriate coverage levels,
(11:51):
understanding different structure
options, implementation steps, all the
things that we've tried to make as easy
and as simple for you as possible. Just
go visit
wealthwisdomfp.com/community.
There you'll be able to create an account
if you don't have one, or sign in if you
do have one and find this guide and use
it to protect your business while joining
a community of business owners who are
(12:12):
building resilient, sustainable
businesses. Well, again, we'll put a link
in the show notes, but it's
wealthwisdomfp.com/community.
Now, as you could tell, Amanda's really
passionate about this stuff. She's
thought a lot about it. We've seen horror
stories and we've seen really good
success stories too. I mean, you know, in
(12:34):
in a, I don't know if I would say success
story, but but some ways that
it has really helped the
business thrive, right?And people sleep
well at night. Yeah. So thanks again for
joining us. Hit that subscribe button and
live long and profit not
just your business, but also your people.
(12:56):
We want your people to feel the
profit that you're experiencing
in their own lives. The topics presented
in this podcast for general information
only and not for the purpose of providing
legal, accounting or investment advice.
On such matters, please consult a
professional. Who knows your specific
situation?
What would happen to your business if you
lost a key team member tomorrow?
Today, we're tackling the often
overlooked strategy that could save your
business in a crisis. Plus, we'll
show you how protecting your key people
can actually help you retain them.
Whether you're a solopreneur or managing
a growing team, or somewhere in between,
(00:23):
this episode reveals how to secure your
business's future by protecting your most
valuable assets, your people,
in a world where chaos seems to reign
supreme, where uncertainty lurks
around every corner, and financial
markets are now more unpredictable than
(00:44):
ever. There's one place you can turn to
to find clarity and control.
Welcome to the Wealth Wisdom Financial
Podcast. Hey, I'm Brandon. And I'm
Amanda. Join us as we dive deep in the
world of personal and business finance
to assist you in navigating through the
chaos and building the financial future
you deserve. We believe when conventional
(01:07):
financial thinking doesn't get you where
you want to go, you need wealth wisdom.
So if you're ready to take control of
your financial destiny. Tune in to the
Wealth Wisdom Financial Podcast because
in a chaotic world, your money shouldn't
be. Subscribe now and never miss an
episode. Let me tell
(01:28):
you about Marcus, a successful web
development agency owner. He has spent
years building the perfect team,
including Sarah, his lead developer, who
had an uncanny ability to solve complex
problems and maintain relationships with
their biggest clients. Sarah was
indispensable. That would be you.
(01:48):
Then one day Sarah was diagnosed with a
serious illness and had to take extended
leave. I hope that's not me. That's not
you. And Marcus's
business wasn't just losing a talented
developer, it was losing the person who
held their most important client
relationships together. Sarah was the
glue. Now, this
(02:10):
story highlights a vulnerability that
many business owners don't think about
until it's too late. We spend so much
time and money finding, hiring,
developing great team members, but how
many of us have a plan for what happens
if we lose them?Suddenly, like real
fast. Yeah, and, well, I mean, we could
lose them like because of
(02:32):
death, disability, illness, but also
because they just say, I quit and I'm
done now, right?Like, this doesn't have
to be as gruesome as you think. So here's
a sobering statistic. 60%
of businesses fail within two years of
losing a key employee
unexpectedly. Yet only
about 22% of businesses have
(02:52):
key person protection in
place. Can you imagine if you lost a key
employee unexpectedly and you end up with
an over half of a chance that you close
within the next two years?I mean, think
about your business right now. Who are
the people that generate significant
revenue or maintain key client
(03:13):
relationships?Maybe you have people that
have specialized knowledge that would be
hard to replace. Maybe you have people
who keep your operations running
smoothly. People who lead and inspire
your team. People who hold important
vendor and partner relationships.
These people are your key
people, and losing any of them could
(03:34):
create a serious crisis for your
business. But here's the good news.
There's a strategy that not only protects
your business, but it can also help you
retain these valuable team members. We're
going to break down three important
critical aspects of key person
protection. The first one might seem
obvious, financial protection. immediate
(03:55):
cash flow to help handle that transition,
resources to find and train replacements,
buffer against lost revenue, all those
things that are really important and kind
of we think of first. I lose a key
person, it's going to cost me a lot. Or
do we, sometimes we don't even think
about that. Well, right, rightBut once we
think about it, yeah. The second thing is
(04:15):
business continuity. We just said, you
lose a key person, you're 60% likely, the
next two years the business is closing.
This helps with clear succession plans,
documented processes and knowledge,
cross-training strategies, all these
kinds of things that can help the
business continue no matter who gets
lost. Yep. I think that's important in
the SOP world and and thinking
(04:36):
strategically, right?Yep. And then
finally, this is the one hardly anybody
ever thinks about. Employee retention.
Key person protection isn't just
insurance. It's a strategic
tool that shows your team you value
them enough to plan for their
future. That's what builds real
loyalty. You're using protection as a
(04:58):
benefit, an employee benefit.
You're creating golden handcuffs that
they'll stay with you for longer and you
know there's incentive to stay with you.
The longer they stay there, the more
benefit they get. And there's a lot of
loyalty that's built through that
investment. I think also you might end up
building loyalty not just with the person
that you're employing, but probably
(05:20):
their significant other. If they know the
value of what that is, they then
really are committed.
as a spouse to that business. Yeah. So
after the break, we're gonna dig into
that a little bit more and dive into how
key person insurance really works and why
it might be a missing piece in your
business protection strategy.
(05:48):
Ready to take the next step towards
securing your financial future?Whether
you're planning for retirement, saving
for your dream home, or you just want to
make your money work harder for you, the
team at Wealth Wisdom Financial are ready
to assist you. And now it's easier than
ever to see how we might give you a boost
on your financial journey. Schedule a 15
minute discovery call with one of us
(06:10):
today. And let's discuss your questions
and your financial goals together. Don't
wait any longer. Your financial freedom
awaits. Schedule your discovery call at
www.wealthwisdomfp.com/call.
(06:30):
Now, you might be thinking, isn't key
person insurance just another expense I
can't afford right now?Let's break down
why this thinking could be costly.
to you, the business owner. Yeah. So
first, let's understand how key person
insurance works. One, it's a
life and or disability insurance policy
owned by your business. The business pays
(06:52):
the premium, which is often tax
deductible, and if something happens to
that key person, the business receives
the benefit. And then those funds can be
used for covering lost revenue, hiring
temporary help, recruiting and retraining
replacements, managing debt obligations,
providing stability during the
transition, all those kinds of things.
(07:12):
But here's where it gets interesting. Key
person insurance can be structured to do
way more than just protect your business.
It becomes a powerful retention tool.
You can have split dollar arrangements
where the business and the key employees
share the benefits,This creates those
golden handcuffs that we mentioned that
encourage loyalty for them to stay with
(07:33):
you and provides retirement benefits for
that key employee later. Let's say they
stick with you for a long time, they can
actually turn this into a retirement
benefit. Another idea is executive bonus
plans like we talked about in our last
episode, where the business pays that
premium as additional compensation. The
employee owns the policy, still tax
deductible for the business, but lots of
(07:54):
benefits that the employee can be using
throughout the rest of their lives. And
then finally, you can use this for
buy-sell funding. Let's say you have a
key person who you believe one day could
buy the business from you. What a
powerful way to ensure smooth
ownership transition. Protects both the
business and the key person's family and
creates this clear exit strategy, often
(08:16):
giving that employee the funds they need
to buy the business from you and your
family. I think those are
key things that help us as
business owners to be thinking long
range, be able to figure out, because
again, I talk to business owners all the
time that their plan is to
eventually when they retire, they're just
(08:38):
going to sell the business and they
haven't thought about any of the other
pieces that could go alongside that.
Umm I I had one that'sI think 70
and literally, um,
doesn't have an exit strategy or any of
those things in place because he never
thought about it for 30 years. He's in
growth mode for 30 years or
(08:59):
more. And so by thinking and spending
that time developing the people,
having the tools in place that then
help youGo out whenever it's
time, if that's the case, Yeah. So
remember Marcus from our opening story?
After Sarah's health scare, he
implemented this key person protection
(09:20):
for all of his senior staff. He
structured it as a split dollar
arrangement where the business got
protection against an unexpected loss.
Each key person got valuable life
insurance coverage. The policies build a
cash value that could be accessed for
emergencies. The arrangement created a
retirement benefit that encouraged
retention and so on and so forth. Two
(09:40):
years later, this competitor tried to
poach his team and not one key person
left. Those golden handcuffs that he had
created through this key person
protection had become golden wings,
enabling his team to build wealth. while
they stayed committed to the business. He
was happy and they were happy, and the
business grew. The competitor, you know,
(10:01):
didn't. Again, I think it's not just
those things, but it's how he did that
with them and the culture all all
alongside the tools that he put
in place as well. Because that shows
action, not just words. Yeah. So
here's the thing to always remember. Key
person protection isn't just insurance.
(10:23):
It's a strategic tool that protects your
business from unexpected losses, creates
powerful retention incentives, and builds
wealth for both the business and the key
employees, and provides peace of mind for
everyone involved. A lot of people live
in a lot of fear a lot of the time. And
it's because they're not willing to think
about and address these things. They
(10:44):
haven't discovered that bravery. It's a
place to discover that bravery, get
things in place so you don't have to keep
living in fear. The key is to start
before you need it. Just like hiring,
culture, benefits, protection planning
works best when it's proactive,
not reactive. And here's the
thing that we're talking about in the
(11:07):
community a lot this week, the wealthism
financial community, is that
this key person protection,
it's not just about, you know, the
benefits for your business and financial
benefits and all these things,The big
thing is that it's showing your team you
value them enough to plan for their
future, in their kids' future, right?And
(11:29):
other things, whoever, right?
You value them enough to plan for their
future. And that's what's going to build
real loyalty.
So I know you're ready to protect your
business's most valuable assets, your
people. So we've created the key person
protection planning guide that walks you
through identifying your key people,
calculating appropriate coverage levels,
(11:51):
understanding different structure
options, implementation steps, all the
things that we've tried to make as easy
and as simple for you as possible. Just
go visit
wealthwisdomfp.com/community.
There you'll be able to create an account
if you don't have one, or sign in if you
do have one and find this guide and use
it to protect your business while joining
a community of business owners who are
(12:12):
building resilient, sustainable
businesses. Well, again, we'll put a link
in the show notes, but it's
wealthwisdomfp.com/community.
Now, as you could tell, Amanda's really
passionate about this stuff. She's
thought a lot about it. We've seen horror
stories and we've seen really good
success stories too. I mean, you know, in
(12:34):
in a, I don't know if I would say success
story, but but some ways that
it has really helped the
business thrive, right?And people sleep
well at night. Yeah. So thanks again for
joining us. Hit that subscribe button and
live long and profit not
just your business, but also your people.
(12:56):
We want your people to feel the
profit that you're experiencing
in their own lives. The topics presented
in this podcast for general information
only and not for the purpose of providing
legal, accounting or investment advice.
On such matters, please consult a
professional. Who knows your specific
situation?
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