Trends & Insights

  • Understanding Your Business Lifecycle

    It’s fair to expect that your financial needs and priorities change throughout your life. In your 20s, for example, you probably weren’t doing any estate planning—more relevant concerns may have been paying off student loans or saving for your first home.

    Your business is very much the same. Like people, businesses move through natural lifecycles, and your financial planning should reflect the stage your business is in.

    Common stages of a business lifecycle

    So what are the common stages of a business lifecycle?

    New businesses

    New businesses have been operating for 1-3 years and are still becoming established in the market. They generally have substantial debt, with less than $500,000 in annual revenue, and any profits are funneled right back into the company.

    In these unpredictable early years, it’s key to ensure that your business—and the people who are critical to its success—are financially protected.

    For the business

    For business owners & executives

    Growing businesses

    Growing businesses have passed the 3-year mark. Their revenue streams and client base have gained some traction. Their expenses and reinvestment in the company are still substantial, but lessening—they may find themselves needing less debt financing.

    Once your business has some momentum, it’s especially important to focus on attracting (and retaining) top talent—and positioning yourself and your key employees for long-term financial security.

    For the business

    For business owners & executives

    Established businesses

    Established businesses have been in operation for 10 years or more. Their revenue and cash flow are consistent. They have an established client base and management team, with fully operationalized relationship management and a clear business continuity plan.

    When operations are running smoothly, it can be tempting to just stick with what’s working. But in an ever-changing economic landscape, it’s important to stay engaged and on top of financial contingencies.

    For the business

    For business owners & executives

    Transitioning

    Transitioning businesses are established in the market, with a strong management team, a solid client base, and consistent cash flow—but they’re shifting to new leadership or ownership. They’re looking retain cash flow and sustain relationships through the transition.

    In times of change, a strategic approach to your financial management is paramount, both to ensure a smooth transition for the business and to protect the best interests of the people involved.

    For the business

    For business owners & executives

    Wherever your business is in its lifecycle, Principal® can help with an informal business evaluation, buy-sell review, and expert guidance for your business planning and protection needs.

    As an industry-leading group benefits provider, Principal also offers complimentary administrative services throughout the life your program.

    Contact your advisor for more information and to start planning for your business’ lifecycle.

  • Could Everyday Expenses Close Your Doors?

    You work hard to attract and keep your customers. Your door is always open, and the idea of telling them to do business elsewhere probably never crossed your mind.

    But it could come to that, if you ever become too sick or hurt to work. Could your business survive without you and your revenue for a month? Six months? Even longer? How would you pay office expenses like rent, salaries, utilities, and loan payments?

    In a recent study, business owners ranked business protection as their number-one priority, even over medical insurance.

    An overhead expense (OE) insurance policy is a key component of a comprehensive business protection plan.

    Put simply, this coverage is designed to help cover everyday business expenses in the event that a covered owner becomes too sick or hurt to work.

    You can tailor coverage to meet your business’ special needs and receive expense reimbursement to help pay the immediate costs of keeping the business open until you can return to work.

    Ultimately, OE insurance helps ensure that unpaid expenses won’t force you to close your doors, in the event of a disability. And that’s the peace of mind you need to grow your business confidently.

    Principal Life offers a full suite of individual disability insurance products, as well as Owner & Executive Solutions to help you protect what you’ve worked so hard to build.

    Talk to your advisor to find out more.

  • Replacing the Irreplaceable: Protection for the Disability of Key Employees

    What would you do if a crucial member of your team became too sick or hurt to work? What would happen to your business? To your customer relationships? To your remaining employees?

    Key Person Replacement Insurance helps to offset the financial burden of losing a key contributor, by providing funds to help recruit a train a suitable replacement. Paid for and owned by the business, this disability insurance policy pays benefits to the employer if the employee becomes totally disabled.

    • Benefits can be used at the discretion of the business and cannot be assigned to the key employee.
    • The insured key employee is still fully eligible for Individual Income Protection (Disability Insurance) from Principal Life Insurance Company.

    There are other benefits to such a policy, too.

    • When there are 2 or more business owners, the policy can be combined with Disability Buy-Out Insurance to secure short- and long-term protection.
    • The policy can help demonstrate financial stability to creditors and clients, even if it is never used.

    Claiming policy benefits

    To meet the definition of “total disability”, the insured must be unable to perform the substantial and material duties of his/her Key Person Occupation and not be working in any other occupation with comparable duties and/or earnings for the business.

    Once the definition is met, the business receives either a lump-sum payment or a combination of lump-sum and monthly payments (depending on how the policy is structured).

    Why Principal?

    Key Person Replacement Insurance from Principal Life comes with important built-in benefits:

    • Guaranteed premiums
      • Once the policy is set up, the premium cannot change, and the policy can only be canceled under extenuating circumstances (such as the death of the employee or unpaid premiums).
    • Flexible payment methods
      • When setting up the policy, the business can choose how benefits will be paid.
    • Waiver of premium
      • Premiums are waived for the duration of the disability once the elimination period is satisfied, and any premiums paid during the elimination period are refunded.
    • Interrupted elimination period
      • Principal Life will combine different periods of disability to help reach the policy’s elimination period.

    Talk to your advisor to secure protection for your business today.

  • The Gap in Protection You Can’t Afford to Miss

    Behind any successful businesses is a strong team of highly invested, committed people, without whom the business wouldn’t succeed in the same way. Are you picturing any of your own team members?

    Now imagine something happened to one of those key people in your business. What would be the true cost of replacing that person’s expertise, knowledge, and level of insight? Though you can’t prevent every negative possibility, you can help protect your business.

    Key person insurance is a simple, efficient way to provide your business with the funds necessary to handle the loss of a key employee and recruit and train a replacement.

    In a nutshell, it’s a life insurance policy on the key employee, paid for by the business. As the policy’s owner and beneficiary, the business receives the proceeds (generally income tax-free) upon the death of the key employee. Proceeds may include:

    • Immediate cash after the death of a key employee
    • Cost-effective liquidity for operational costs after the loss
    • Conversion of policy cash values into an asset on the business’s balance sheet
    • Access to policy cash values during the life of the policy that may be used for various business needs, including informally financing executive benefit programs
    • Significant death benefits in some cases, including low-cost term or permanent policies

    Key person insurance is simple to implement and maintain, and it offers other potential benefits as well. Policies can even be used to fund a retention bonus plan as part of your employee retention efforts for the most valuable members of your team.

    Ready to take the leap and secure key person coverage? Take care to consider which type of insurance and funding method is right for your business, and talk to your advisor to secure protection for your business today.

  • Protecting Your Business

    Small business owners identify business protection as their No. 1 goal, but only 30 percent of them have adequate coverage in place to support their objectives. Use these tools and resources to learn more about possible gaps your business might have and how The Principal may be able to help.

    How priorities align with practices

    Find out how business owners are prioritizing – particularly when trying to balance the needs of their businesses with their own retirement and personal financial goals.

    Business Owner Market Study: Priorities vs. Plans (PDF)

    Estate planning

    Someday, the business you've worked hard for could become your legacy. But leaving important decisions until a time of transition could create unnecessary stress and financial strain—far from ideal conditions for coming to a favorable arrangement.

    Solidifying an exit or succession plan and wealth transfer strategy helps ensures that your business and your estate will transition as smoothly as possible when the time comes.

Differentiate your company

Financial Tips for Businesses provides free tools and resources to help enhance your benefits program.

Fiduciary Regulation FAQs

We're here to help you navigate the changes ahead from the Department of Labor's fiduciary regulation. That's why we've answered some frequently asked questions about the regulation.