Business Management for the Independent Business Owner
The Business Plan overview, I have been planning to write this blog for some time. My difficulty has been deciding where to start and where to go with this. You can relate it to which came first, the chicken or the egg? For those of us in this community, what we need to understand is Compumatrix, the chicken or the egg?
Either way, this business plan begins with Compumatrix. This is the focal point. Wherever we go from here, we will circle back home to Compumatrix.
What is your overall plan? For the majority of the people reading this, your overall plan might be a one-stop right here at Compumatrix. For many of us, we are going to use Compumatrix as a springboard to launch other business endeavors. Henry James Bayanat, our founder, made a statement years ago that he hoped we would take some of our funds and start other businesses. In a late-night conversation, while clarifying some administrative details, Henry James Bayanat instilled in me a burning desire to build a Compumatrix Village.
I cannot determine what your goals or business plans might be, but I can share some of mine with you. This will not be a complete plan of action. It is a collection of ideas that I am pulling together as a working business model. Every model has to start somewhere, and for me, that is Compumatrix.
What are the Components, a Short List
- Business Team
- Business Entities
- Life Insurance
- Investment Portfolio
As I stated, this is a shortlist! There are a lot of active pieces on this list. The number one component of this list we should all understand is Compumatrix. The next two segments on the list are “should have” parts for everyone’s business plan. Component number 4 is a gateway component for this plan. (See the section below on What is a BOLI. Then read the article titled Cash Flow Life Insurance.)
I will give you some insight into what I am thinking. This won’t give you a complete business plan. Your business plan has to be designed around your needs.
What is a BOLI
You will run across some terminology that is specific to the particular industry. For example, what is a BOLI? This stands for Bank-Owned Life Insurance. This is a specific type of life insurance product. This product was designed with the needs of the banking industry in mind. This is a Whole Life Insurance product written with certain specifications in mind. This is not your grandpa’s Life Insurance policy!
Cash Flow Life Insurance
In the late 1970s, I read an article about how the rich were using Life Insurance to protect and preserve their wealth. This allowed them to pass their wealth down to the next generation safely and with limiting tax consequences. I could not find this information again until I researched someone’s information on FaceBook.
Nelson Nash created “The Infinite Banking Concept.” Because of Nelson, many people have been introduced to the concept of cash flow life insurance. From the list of components above, this is the Life Insurance product that is referenced in this business model. As mentioned above, it is a gateway component. This product or its structure is known by many names. It is called Bank on Yourself, Becoming Your Own Bank, and recently, the And Asset.
The reason I call it the gateway component is because of some of these concepts. This is an insurance product that when designed properly, can flow money in 2 directions. The obvious direction is the money going into the policy to fund it. The not so obvious is money coming out of the policy in the form of a loan.
There is too much to explain regarding just the loan provisions alone. Explaining this product would take an entire blog, and I wouldn’t have time to write it in its entirety. Let it suffice to say this is a major component of the entire business plan.
We have a few of these policies currently. However, after studying this in great detail over the last year or two, we will be doing 1035 Exchanges with these policies to fit the criteria that I find more appealing.
There are 2 ways to withdraw money from these life insurance products without it being a taxable event. The first is to take out a loan against the cash value of the policy. The second way, and less desirable is when the insured passes and the death benefit is paid.
The Investment Vehicle
Everyone has an idea what their best-kept secret to investing is! Mine is syndicaties van onroerend goed. (real estate syndications) I just had to do that!
My business plan is to fund the Life Insurance product for maximum cash value. When the Investment is identified, a policy loan against the Life Insurance policy would be requested. These policies are used by investors to fund Real Estate, Stock Market Investing, and a variety of other investments.
What the Investment Vehicle does not matter as long as the overall plan is to grow that investment. The loans against the Life Insurance policy are very flexible. Paying it back can be optional. This is a critical design of the policy and should not be overlooked.
Business Team, Business Entities and PEO
I am putting these components in one section. Who is on your Business Team? What components are you going to look into so you have a smooth operating business plan?
Who is on your business team? I am about to get a Real Education in the business world. I have been investigating legal representatives and advisors. I have started several conversations to see what they can provide. One of your closest allies has to be your Tax Accountant. Who else do you need on your team?
I am going back to the insurance team in a minute or two. Before I do, I want to address the PEO. This stands for Professional Employment Organization. Most small businesses take care of these duties “in-house.” They may have one person that is a part-time bookkeeper or hand some of these duties over to their accounting office.
For me to sufficiently convey the need for PEO services in my business plan, I will use this statement. How big do you desire to build your business? I do not wish to build this business into a big business. However, I do not desire the men in the white coats to come and take me away! (Kid you NOT! You can go crazy!)
The other piece of this is derived from this statement. Build on your strengths, and outsource your weaknesses! In other words, don’t try to be an expert in all aspects of your business. Build a great business team, and you will have a great business.
When putting this all together, the idea of business entities will come up. This is an exhaustive study in itself. I have had 3 business entities (LLC’s) over the years but closed one down. To initiate my business plan will take structuring 3 (more) business entities. There will be an LLC that will work with Compumatrix. Then there will be a C corporation that will manage most of the operations. Finally, there will be the first working LLC. My plan includes 11-12 of these working LLC’s when finalized plus 2 Non-profit organizations. I will discuss more the function of the working LLC’s in conjunction with the discussion on insurance for the business plan.
Now, we can get back to the insurance aspect of your business plan.
Insurance for your Business Plan
An entire blog should be written for this subject. For that matter, an entire blog should be written for each insurance product. We are going to jump right past the liability insurance products, property insurance, and vehicle insurance. We are going to stay focussed on cash flowing life insurance.
I have studied information from everyone I can regarding this product. I have narrowed the field down to 3 companies that I intend to work with. This is not 3 insurance companies but 3 groups of insurers that promote this product. These guys have a handful of insurance companies they work with that allow the policy to be written to these specifications. I have had conversations with all three of these groups.
These products are very specific, and most insurance agents do not like them (less commission). They are integral to the operation of my business plan as they present a financial gateway.
As mentioned above, the working LLC works with the insurance product. Just the same as the BOLI product discussed earlier, the product we will look at is referred to as a key employee insurance product. This policy is taken out on the employee that will be hired to work for the LLC.
The C corporation will fund the LLC by buying this cash flowing life insurance or key employee insurance product. This policy is bought on the employee that will work on behalf of the LLC. A policy loan will be requested from the policy. The funds from the loan will be used to purchase investments. The investments will pay back the loan.
There is a lot that can be written here, and I debated over the last few weeks how much of this to write. At first, I was going to write an outline then write separate blogs for separate sections. This was going to prove to be difficult as the components interface with each other.
The reader needs sufficient access to enough information to allow them the opportunity and desire for further investigation. I would be foolish to believe our readers would jump into an aspect of what I am trying to convey here without performing their due diligence.
Where we start, we will end. We have now circled back around to where all of this began. Compumatrix is the chicken and the egg!