About the Host
Ryan is an entrepreneur, podcast host of the show Life After Business and the co-owner of Solidity Financial. Having personally experienced the hazards of selling a business, he joined up with his friend Brandon Wood to educate others on the process. Through their business (Solidity Financial), they provide a platform for entrepreneurs called Growth and Exit Planning that helps in exit planning, value building and financial management.
About the Guest
Chris is Executive the Owner at MVP Service Solutions, an insurance wholesaler with deep experience and resources. He provides highly specialized insurance solutions to business owners such as employee benefits, property and casualty, personal, life insurance and much more. For over 17 years Chris has been heavily involved in industry circles and is highly involved in the Insurance Industry Associations.
If you listen, you will learn:
- Chris’s background in insurance.
- The benefits of working with Chris and MVP.
- The most common problem Chris sees with clients.
- How to decide the value of your business.
- Why you should review your policy every two years.
- What is a key man policy?
- How disability insurance works.
- How to plan for being removed from a business.
- The benefits of term policies.
- How permanent policies work.
- What is a variable policy?
- What is guaranteed universal life insurance?
- Chris’s observations from the business.
- How insurance can be a retention tool for your employees.
- When can you deduct insurance from your taxes?
- Common insurance issues that come up during estate planning.
- Chris’s advice to the audience.
Full Transcript
Announcer: Welcome to Life After Business, the podcast where your host, Ryan Tansom, brings you all the information you need to exit your company and explore what life can be like on the other side.
Ryan Tansom: Welcome back to the Life After Business podcast. This is episode 108. If you’re like everybody else, you’ve sat down in front of an insurance agent and you’ve heard everything from term insurance to permanent insurance to whole life to universal life to key man to disability to long-term care. All of these products and stuff just get jammed down our throats and we have no context of what does it mean and why. Well, that is why I’m super excited for today’s episode because Chris Steffl from MVP Service solutions on the show today. I’ve always been hesitant to have anybody from insurance and the insurance space on my show because everybody’s got their own angle of why they’re doing it and the reason I was able to have Chris on and I was comfortable with it because Chris has a very unique background and structure for his company. He is a wholesaler, so he has thousands of reps that he helps go out almost like a manufacturer wholesaler, but he doesn’t… He reps about a thousand different products in 100 different carriers and he brings his expertise and analysts to other reps, whether it’s PNC reps or other financial advisors, wealth advisors, to bring the expertise to them and the reality is that Chris has all of the different exposure of what products, in what situations have you had the good results or bad results because of the sheer quantity of deals that come through him. And the purpose of today’s interview was to give context to you, the business owner. What role does insurance play as you’re planning your different exit options, whether it’s a third party sale, your family transition, your estate plan, keeping your key employees locked in and making sure that they have the same motives of you as you do. Whether it’s the third part of their family transition. How do your key employees play a role in your plan B, even if you’re trying to plan for a third party transition? And then what are the different table stakes that are absolutely necessary to keep your business afloat should death, disability, or dispute or any of these different things happen? Because the whole goal is you took all the risk to start the business, to grow it, make sure it’s stable and make sure that everybody is marching in line with where you want to go and what are the things to think about to make sure you know where you want to go. Because all of these products and services should be falling in line with your ultimate vision. So if you don’t know your ultimate vision, then everybody’s gonna have a challenge behind the scenes. So I really hope you enjoy this episode with Chris and I hope that you come away with lots of things to think about, making sure that you know where you want to go and why and how all these different things fit into it. So without further ado, here’s Chris Steffl.
Announcer: This episode of Life After Business is sponsored by GEXP Collaborative. Their proven process gives you clarity on all of your exit options and how those options impact your financial success, timing and future happiness. Sell your company on your time frame to the buyer of your choice at the price you want.
Ryan Tansom: Morning Chris, how you doing?
Chris Steffl: I’m doing great Ryan.
Ryan Tansom: I’m glad we finally got you on the show. You and I have known each other for many years. Um, I think it was what, two or three and a half years ago when you were like, hey, how you should get into this exit planning stuff. And I’m like, okay. And uh, you and I have talked about both of our past, the family businesses and not like you had just pushed me into it, but it was one of the, was definitely one of the voices that was like you had been in the industry for a long time and you’d saw that there was, it was validating that there’s all these gaps that have been in there and all these people working in silos. But you know, for the listeners who don’t know your background, which I think is a unique one of where you came from. And then also specifically how your business operates because you’ve got a unique perspective on the industry and your expertise, but I just kind of, you know, how did you jump into the finance industry and then how did you and what’s your structure right now?
Chris Steffl: Sure. I started in the business, actually grew up in it. My father was a wholesaler for an insurance company for about 30 plus years, was both on the security side and on the insurance side. So knew I want it to be in the business, really enjoyed working with them a little bit in high school. And then in college I ended up interning with RBC Dain Rauscher doing the manage money side of it, so more from the investment side and uh, had the, went through the 9/11 period of time, which was a very interesting time to kind of start the business. I’ve learned a lot from that space and a little bit after I’d been in there for probably about two or three years, my dad actually approached me about starting a life insurance launched DI, an annuity wholesale organization. He had been wholesaling for, you know, a number of years. And what we saw was an opportunity to be able to work with advisors financial advisors, independent insurance agents, and basically providing them advanced sales techniques and helping with their business owners on the insurance side. So fast track about, uh, 17 years forward here now, got a little bit over a couple thousand plus reps that we work with in all different walks of life from the small property casualty shop up to, um, different broker dealers. So a little mix of everything. And it’s been the last three or four years have been a big change in the insurance market. A lot of it because of succession planning as businesses are, are transferring and adjusting. And the other thing too is the LTC space has changed a ton also. And you know, one of the areas that we’re focused on is the key man plan and the executive bonus. Those are two big areas. So right now our, you know, our business pretty much on a daily basis is working with investment advisors and financial advisors and insurance agents, basically, on kind of the advanced sales and the life insurance.
Ryan Tansom: What is it was really cool for the listeners here, everybody is that there’s so many people that I think that I’ve had bad experiences with insurance agents or different products that were jammed down their throat and you know, honestly like, you know, Chris, you know that it took me a long time to really get bought into kind of your approach because I’ve had my own experiences and you know, there’s a lot of it which is kind of the premise of today’s call and the interview is understanding where the right tools and mechanisms can be put into a holistic plan of where you’re going. But you know, and it took me a long time to get bought in, but with your model, you’re not going directly to the client because you’re filling maybe a little bit, maybe a layer deeper for the, for the audiences… you’re getting… You’re giving the expertise and you’re helping commercial PNC reps at all of these different agents fill in gaps in knowledge. So knowledge gaps that they currently have. Correct?
Chris Steffl: Exactly. And all the different relationships or work with different business owners on it. But the problem is, is a lot of times they’re only working on maybe four or five deals a year and what we basically come behind is we get to see it from a, you know, massive standpoint. We’re dealing with 2000 plus agents. So it’s not unusual for us to see multiple buy-sell agreements. So we get to see the good things, the bad things, what to watch for, what suggestions we can make, you know, if old plans or still going to be there down the road if we need to make adjustments.
Ryan Tansom: Well and you’re not one specific product, which I think is also a huge thing because there’s a lot of people that, you know, every, everything’s a nail because they have a hammer.
Chris Steffl: No, you’re exactly right. I mean, I think that’s the one thing is we’ve got about a hundred carriers we work with and everything fits in a specific thing and you know, a thousand plus products. So it’s really just trying to find what, what works best for that client or that situation. And really even bringing four or five different concepts to um, see what personally works for them. Because a lot of people have different views on where they’re going with their businesses and how they’re exiting, even if there’s a key person within the company that they’re concerned about, if something was to happen to them.
Ryan Tansom: So before we kind of kick into the whole life cycle of the pre, during and post exit where insurance fits in the different kinds of areas and that. We’re not going to get rid of the products or anything like that today. But what are some of the things. Let’s talk about the table stakes. You know, if you were to sit down with a business owner and you’re, you were to look and make sure that they are protected so that way they’re not going to lose their company like overnight because they haven’t gotten something set up. And I think that kind of tees into it. Like what’s the what, what are the disasters that you see when you just look at the exit plan in mind? Just going, okay, you’re an owner with tons of stuff. Buildings and employees and liabilities everywhere. What are the, what are the table stakes and what are the biggest things that you see as failures and gaps when you normally look at these things?
Chris Steffl: I think one of the biggest things we see is the buy-sell agreements not being funded. Um, you know, after being around the business for 20 plus years, we’ve had situations where partners have passed away or became disabled and it can be stressful from both sides of the family. And if you’re losing that, that key person or that key business owner and there’s not insurance in place to offset it, the business usually suffers and a lot of times we’ll call as quickly. And so that’s one of the biggest things we’re looking at is trying to make sure that if something happens from a disability standpoint or if one of the partners passed away, that there’s enough money to buy out that partner or to keep the business going. And you know, that’s where the key man can kind of come into play, not just on the owners but even on, on the employees. That’s probably the other big aspect of it. Every time we sit down with a company, one of the things I always ask is other than the owners of the company, what is the one key person, if you lost them, what would happen to the business? And it’s an amazing who they usually say you would think it’d be like a lot of times like the top sales guy or you know, somebody that specifically back in manufacturing, running the whole thing. A lot of times, you know, might be Mary in the office that’s been there for 20 years doing the economy and the owner will look at it and say if I lost her, this whole thing would just fall apart.
Ryan Tansom: They usually don’t know it, either.
Chris Steffl: Well, I mean, the funny thing is, is until you really bring it up, they don’t, they don’t see it, you know, and then you bring it up and it’s almost like, a lot of times they’ll see like the white go over their face. Like as we start talking about it, they start to think about it and they’re like, wow, if we lost that person, you know, I own the company with my parents and we’ve had it for a number of years. And you know, Ryan, if you asked me that question right now, I would put it towards Sydney, which is my mother, she does all of her books. That’s what keeps me up at night. It’s not about growing the business. It’s not about working with the reps or the salespeople that we have, it’s at the end of the day, my biggest concern is, is if we lost her and we didn’t have the right things in place, you know, the company… we’d be in pretty, pretty big trouble right off that part. So that’s the thing we’re always trying to figure out or solve for when we’re looking at this.
Ryan Tansom: Well let’s take a couple layers deep because I think there’s a lot of things that people do incorrectly with their buy-sells. And again, you have to have the attorney that’s involved in it along with the insurance rep and understanding what roles they play. So you know, from the partnership standpoint and the ownership standpoint, how do you determine how much you should be funding, what are the mechanisms to do it? And this is in not even in like, you know, we’re just talking baseline without exit in mind, but I think there’s a lot of creative ways that we can expand on this and how that ties to the ultimate plan. But you know, what are the, what are the things that you just have to have and like how do you determine what is funded and you know, in line of that too, what is the key, what is the buy-sell, and then insurance, what are the, what does it actually accounting for other than death, because I know you and I’ve had some conversation about how the key man’s different than disability versus the death versus departure, all these different things.
Chris Steffl: Sure, absolutely. So on the buy-sell, maybe from a funding standpoint, what we’re trying to do is usually if something was to happen to one of the partners to be able to cover at least their portion of it and a lot of times we’re able to get the full amount of insurance to be able to cover that amount.
Ryan Tansom: Cover the value?
Chris Steffl: Yep, Yep. Sorry. Yep. The cover, the value of the business, correct. Is what we’re usually looking for and depending on the age of the clients and how much ownership they have, sometimes we’ll limit the amount we can get. So that’s one reason we always say it should be looked at every couple of years and be added to our adjusted because obviously valuations are changing of the company and ownership changes from time-to-time. So we’re always kinda looking at that, trying to figure out what is, uh, what’s going to be the best value for the amount of insurance we need to get. Sometimes it’s just getting enough to cover it so that if something was to happen at least they would be able to get funding by the bank, possibly or by taking a loan out from there. So that’s usually on the buy sell parts of it.
Ryan Tansom: Well a lot of listeners struggle with, is they’re a huge role in the business too? Right. So like okay great. So my, let’s say my company is worth 10 million bucks and I’ve got a partner that’s 40 percent, so I’ve got 6 million bucks that should be coming my way to my family should I die. That’s like the worst case scenario. But usually they’re pulling a lot of weight to actually continue maintaining that value. So the valuation and all the other stuff to keep the business flowing is also different.
Chris Steffl: No, that’s 100 percent right. So I, the key man can kind of come into play then at that point because if we were to lose that person also, it’s not just about the valuation for the business…
Ryan Tansom: It would be the buy-sell plus the key man is what you’re saying.
Chris Steffl: Yup, exactly. Yup. So you’d be looking at adding that key man policy in which is really more about keeping the business running. So not only is it to buy off the other partner and obviously that would free up then the income that that person was taking, but also, the key man can be used to basically offset what that, that business owner was doing for that business. So you know, a lot of times what you’ll find when we go through these situations, and we have over the last 20 years is that, you know, somebody that maybe has an income of $150-200,000 a year to replace what they’re is going to cost three times that amount. So we’ve been for a number of situations where we’ve lost, you know, one of the two partners or even we had a situation where we lost the husband and the wife stepped in to take over the business and you know, they were looking at originally that it was only going to be basically his income to replace it. When everything kinda got crunched down and looked at it, it was almost three times the amount because they were three very specialized people.
Ryan Tansom: You have recruiting costs opportunity of what you’d lost from the downtime. And then you’ve got the ability to probably have three additional people. I’m assuming that wife may or may not have been making money outside of the business. So I mean, you start to crunch those numbers and it’s a lot more than people probably think.
Chris Steffl: It is. Especially those first couple of years. And that situation we’re talking about probably happened about six or seven years ago, and you know, the one thing that was done was the buy-sell was put in place, there was insurance on, on the husband. And then in addition to that, they have wrapped that I was working with. We talked them into basically a larger plan and you know, the key man plan in that situation was about two or 3 million bucks. And I still remember going back to that and the client saying, you know, I don’t know if I need the full amount. And we really hit on the fact that it’s to take a lot of manpower to, to be able to keep this thing going. And, you know, sure enough, down the road he passed away that extra two to 3 million. I mean that’s what kept the business basically afloat. And once we got past those first two or three years and we got everything back into position, the kids came into the business, we were actually able to get everything kind of back to where it was. Um, because of that. But it did take that influx. One of the biggest things that we saw, yes, immediately after he had passed away, we had a number of clients that actually ended up leaving the business. So they instantly lost probably 30 or 40 percent of their business. And um, yeah, after a year they were able to bring back almost all those customers because the customers looked at it and saw that the business was going to continue. But when… he was the main breadwinner. I mean he was the one running the business doing everything behind the scenes. And so when he was gone, you know, they instantly went to the competition. That was what I was interesting with the whole thing is that if they didn’t have that key man plan in place to kind of keep the business running, they would have never gotten through that year or two to be able to retain or bring back those, the clients that they lost. So.
Ryan Tansom: Well, there’s layers behind here. And then I want to come back to the mechanisms that are used to do this because of all the different variables of people in their health and all this stuff. And then the taxes. So before we do that, you and I had this interesting conversation about like, even if it’s not death, it’s disability, you know, explain to the listeners how a key man is potentially different from disability, and I might have this wrong, but the reality is that if you become disabled, so let’s say that let’s say that individual actually was alive but still wasn’t able to do all that stuff. So there would have been no insurance triggers, right? So there you still have the breadwinner, you still have the value of the business tied to that person, but now they’re, for some reason sitting in a hospital for years, you know, how does the key mean versus disability and keeping the business cash flowing correctly using insurance. How does that tie into this? You remember the question that was a conversation?
Chris Steffl: Yeah. And honestly statistically there’s a much better chance of, you know, from a disability standpoint early on and when we look at the DI type situations, you’ve got the key man DI. So if somebody becomes disabled, a lot of times they’ll still be on with the company both as an employee or as an owner of the business, but not producing or helping the business also. So the disability plan then pays to the company to be able to be used to hire a short term worker or kind of replace what that, that individual is doing. So key man DI is a, is a major, major product that can come into play to be able to keep that business alive, especially if that individual is going to be coming back, you know, back to work. So we see that quite a bit. The other thing too is the DI buyout. So if you’ve got multiple partners involved with the business and somebody becomes disabled, a lot of the, you know, uh, templates that are put together for buy-sell agreements basically for selling an individual after a year being disabled. And the fact is, when you look at the disability market, a lot of people do come back or recover or at least can do a good portion of their job even after a year. So when we talk about pie or DI buyout, a lot of times will recognize as we look through the agreements that that’s not what they want to accomplish. They really are looking for the fact of trying to stay on with the company as long. But a lot of times their agreements when we were push them out after a year and I think that’s the one thing that owners really look at and don’t realize that buried even their agreements basically do this. So I think that disability is a really important thing to be reviewing.
Ryan Tansom: Well, and that all ties back to your buy-sell agreement and then also in your buy-sell agreement, how you have determined that you’re valued in that business, right? Because if they’re going to get forced out, you have to have it in your agreement that this is what I’m going to be. Worst case scenario that you had, that whole situation happened, but you have to have, okay, how are we going to value the business and how are the partners going to pay me?
Chris Steffl: That’s exactly right. I mean, that’s, that’s why it’s so important as the insurance agent is working with a company that the attorney that is drafting the buy-sell, everybody’s on the same page they want to see accomplish. We can make everything work together and it’s great to have these conversations because when you go through the situation where there’s a disability, I think when they look at the language, a lot of times it’s not what they’re trying to accomplish or want to accomplish and a lot of times it’ll force, you know, force the situation they don’t want to see happen. And then obviously as you move to the next generation, it can make a big difference as you’re introducing spouses and other family members farther and farther out. You want to be able to figure out ways to possibly that that child that’s going to be inheriting the business and that has already inherited part of the business. So that’s one thing. We’re always trying to look multiple layers down of where the business is actually headed.
Ryan Tansom: I think it alludes to how screwed up this can be if you just have so many people get their insurance products, but like where are you going and what’s going to happen and a huge, huge jigsaw puzzle, you know, with the different things that are used to do the funding for the buy-sell agreements and the key man disability insurance and the DI buyouts, what are the products that you’re, that you’re seeing up and down the streets that you’re helping fill in the gaps? Is it a term life insurance? Are there wholesale price? What are the different things that are helping and what are the variables that will dictate what you should be using and why?
Chris Steffl: So the one great thing about term insurance and we see a lot of it go to term is that we’re able to get a very large number of insurance for 20 or 30 year period of time and it’s, it’s not expensive. So especially when a company is starting out are fairly new. We’ll see them leaning towards that term side of the business. As the company starts to grow and build and they start looking at eventually selling the business and where it may be headed to, that’s where we can start looking at putting in possibly permanent policies and there are some unique strategies that you can do with the insurance to be able to build a cash that are actually cash on the books and there’s also some retention programs that you can do where the company actually earned, owns the policy and then can distribute the funds at retirement. So there’s some unique strategies and products.
Ryan Tansom: And you do a very good job of all the… a lot of the insurance reps and people in the insurance world that I know they just go straight into the complicated stuff and you always do a very good job of explaining it in terms of what people understand and why. Let’s go back to the permanent insurance because what I want, what I want to do, Chris, is what you just described. There’s a lot of different layers there of the what is the permanent terms, what are the different types, what are they trying to accomplish? Right. So like a lot of these people buy wholesale products or they buy this and there’s the death benefit in the cash benefit. They have no idea why they’re doing it and they may, they probably don’t need it. So the term insurance is just a flat huge lump sum and it’s like I think I’ve got two or $3 million on myself for like 800 bucks a year. So it’s like that…
Chris Steffl: Super cheap for what it is, right? I mean for what it is.
Ryan Tansom: Especially for my age and stuff like that. But. So with the permanent insurance, I think if people, you know, there’s high commission, so a lot of reps Jan that stuff down people’s throat without looking at the big picture. So it doesn’t even solve any of the problems. But maybe can you explain what is permanent insurance and then let’s go into the different applications of that on is it on the key man? Is it on the, is it on the business? Who’s paying for it? Who gets the benefit? And then what is the ultimate goal that it’s trying to accomplish?
Chris Steffl: So permanent insurance has changed a lot over the last, I’d say the last 20 or so years. You’ve obviously have a whole life policy which has a permanent plan, is paid with them and it’s probably the oldest plans going back and then it moved into basically variable universal life which was tied to the market and index life. So those are more bearable type products, but what happened basically around 2001 or 2002, is we basically had a product that came out called a guaranteed universal life. And not to get into great depth, but what basically what it looks like is it was a permanent plan that was guaranteed for life and with the idea that it wouldn’t build much cash value, but more just what is the minimum premium I need to pay to basically guarantee those policy. Oftentimes when we’re just looking at a death benefit type situation, but we want it longer than the term, which is very important when we start talking about selling a business down the line and having insurance still in place. These products have become a lot more popular and this is where we see a lot of, a lot of products moving towards, keeps costs down and allows that permanent to be in place, you know, for a long time. And so that’s one area that we’re seeing that permanent space, a buildup. The other area is in building cash value on these products, more for retirement planning, more for the ability to build it at the company and utilize it basically as a deferred comp type plan on key people. That’s one thing we’ve seen a lot of lately is we’ve got individuals, they’re trying to keep half the business and what they’re using a cash value or the insurance for is ability for the company to build cash for that individual and be able to distribute it out at retirement. Um, and there are some tax advantages, um, of being able to do that for the individual and for the business, just depending on how you want to structure it or how you want to set it up. And that can be for the business owner and it can be for the individuals too, so there’s a little bit of a mix of all of them.
Ryan Tansom: Before we do that, so you’ve, you’ve done a very good job, our relationship of describing the, the, the couple of different levers that you can pull an insurance of a death benefit versus the cash benefit depending on what you’re trying to accomplish. Right? And how that impacts the sales reps and the commissions. Does it? Because I think, you know, let’s say for example, let’s say it was me and my old business, right? So you know, the company is as a key man. I had a key man insurance, so they had all this stuff funded with term life insurance because everybody can… Everybody was healthy. My Dad, all of our key employees, everybody was… and funded all the buy-sells and key mans, everything was funded with term because it was just easy. And so therefore the death benefit is accomplished in a lot of these things. So then you. Does this make sense as I’m kind of teeing this up because then it goes into, as you get into the permanent, you know, what are you trying to accomplish? Because the death benefit and the cash benefit are variables that can be pulled, pushed up or down that will impact the commission, but also the, the, the purpose of the actual mechanism.
Chris Steffl: I think one of the biggest things that you see cash value is deciding which way you’re going to go with it. So when we’re talking about permanent, the goal is we want to have insurance for longer than that term period of time. So if I’m talking to you and I’m looking at it long-term, the term was great early on for you, but as you grow your businesses and as you’ve moved forward, you’re gonna want to have insurance there for estate planning down the road. And so the question then becomes is are we going to just use the death benefit just for death benefit alone and that’s where you could find a product that doesn’t build any cash value that is going to be guaranteed for life or if you’re looking at it and saying, I’m looking for another mechanism that I’m able to build cash value on and I can eventually use from a retirement standpoint and at the same time grow the death benefit, there are products out there that you’re able to fund. I think that’s the one thing from an industry standpoint that we’re always trying to push on big time if you’re going to do that strategy, the second one where we’re building it with the idea that we want to build cash value or take it out later on or if we’re going to use it from a key man plan where we’re going to build it and the employee is going to get that later for retirement, by minimizing the death benefit and maximizing the cash value right up to the IRS guidelines, we’re able to really maximize those policies to create the most cash and be able to distribute more cash down the line. And those are keys. I mean those are keys to making these things perform well. If you do it as we sometimes say down the middle or we’re buying a big death benefit and we’re just kind of partially putting money in, they never perform as well as what we want them to do at down the line. And I think that’s where they’ve maybe gotten a negative. Um, there’s been a bigger parked cars on for a number of years is just there missed salt that way.
Ryan Tansom: There’s a higher commission if there’s a higher death benefit, correct?
Chris Steffl: Correct. Yep, that’s correct.
Ryan Tansom: Which is fine if you need it, but I think if you think about the big picture of keeping the business afloat and then also trying to drive towards a transition or transaction, then these mechanisms can be extremely useful, especially if you’re using it in a specific way for specific reasons. So if you have all your terms, so you’ve got a lot of death benefit, you have the benefit of having more death benefit, but then you’re growing cash and you’re tying it to a specific outcome. So that’s what I want to… I want to dive into the key man and how you use this in the deferred comp. So you know, you got the 401Ks that the benefit that the qualified benefits a lot of people have, but then there’s always these individuals who, you know, you and I think you and I have talked about in the traction sensors, the integrators, who are the COOs or the presidents or the GMs and the executive level. These people are challenging to keep because they’re expensive. You want to lock them in. But the reality is a lot of entrepreneurs like just give them equity and just give him cash. Well, that doesn’t tie their motives to your outcome, which might be family transition or an actual transaction. Can you describe kind of the first broad brush stroke of what is a key man deferred comp and how does insurance play into that?
Chris Steffl: Sure, absolutely. Yeah. There’s a couple of different structures and ways to set it up, but one of the big ones that we see is the company wants to be able to loan and control the money with the, with the employee. They want the ability to build the cash value off, uh, within the policy and distribute it later on. But if that employee was to leave, they wouldn’t be able to get those assets. So one of the ways that is unique with the insurance world, and this can be through executive bonus plan through supplement executive, executive retirement or split dollar, is you’re able to basically put money into a policy for that employee. They get to see the funds that, you know, it’s growing, it’s building for them, it’s a number that will eventually be distributed to them at retirement or it’s up to the employer. They can even do it through a vesting schedule. So you know, every six years they can have access to the money and there’s some unique ways to set that up. But what’s unique, I think especially for these type of plans, is that they don’t have to do it for everybody in the company. They can specifically target certain people and they can decide how much they want to put in. So you can have four employees, one employee may not be offered it at all, one employee might be offered, you know, where they’re going to put $5,000 a year away for it. Another one might be $2,000, you can set it up and structured however you want and there are companies, insurance companies will actually manage this behind the scenes depending on what they want to set up or structure and so especially when we’re looking at, you know, even ESOPs down the line there is the ability to build this cash value that can be used for, you know, different structures and different sales down the line or just from a retirement standpoint. So it’s another, it’s another way to keep that employee. It’s another way to entice them to stay with you. And at the same time it’s a way for the employer to control those assets too. So there’s a lot of different ways to structure it, but that’s one thing we’re seeing a ton. We’re getting asked constantly, you know, I’ve got this key employee, the competition’s coming after him right now. They’re trying to take him to their company. What’s the best way for us to retain it without putting up a really difficult type structure in place.
Ryan Tansom: You and I have talked about this a lot. Let’s just give you an example. We kind of run through it like if you were to kind of give some scenarios, let’s say you got a COO or integrator or presidents who is making 200 grand and you’re trying to keep that person, you don’t want to give them a ton of equity and so I want this person because let’s say my outcome is I want, I’m striving for a third party transaction might be a private equity recapitalization or it might be a strategic sale. You know, the, the, the plan B or B and C might be, I might eventually want to sell to this person if I don’t get my ultimate goal, but I don’t want to give them much equity, but I want to be able to have that person because the value of your company is greater if you had these people locked in so that that’s where the whole stay bonus comes into play. I want this person to make a bunch more money to have to lock them in, but then to mail that no matter what outcome I have, I’m gonna have to get them involved in the transaction, so I want them to stay for probably the immediately, but then six, 12, and 18 months after that, how do I address that person? And then who has the benefit of it? Is it them? Is it us? How, why, why would it be beneficial to do that versus cash?
Chris Steffl: So basically the way you would want to probably structure that situation is that you would want to control those assets as a company and being able to let that employee or the COO know that they’re eventually going to get those assets either to be used for the purchase of the business or uh, for retirement planning. So what would happen then is accompany what one scenario. What they can do is take, let’s say $10,000 a year and utilize that to buy a life policy. So we’re going to solve for the minimum death benefit on that policy and we’re going to put that in basically the maximum on a cash value that we can. And that’s going to be tied to an index or into a variable type product. So it’s going to be building a cash value within that. That money is actually owned by the business. It’s looked at as cash on the books. The company can actually, you know, go in and take that money or utilize it. But obviously they’ve got the obligation to pay it for that employee down the road. And so the idea is, is that money grows within that policy, through the insurance policy. Um, in some cases they can say to the deduction, depending on the how it’s set up or structured at the time of distribution or if it’s structured a different way at the time of putting that together, um, but that money grows in there. And so that employee then uses that or sees that money growing, um, down the line that can be used for the purchase of the business, um, or it can be used from a distribution standpoint at that point. And that’s when the taxes then come into play. Now if a death benefit does occur, it could be a split dollar type situation where both the employee’s beneficiaries would receive part of the death benefit and the company would receive part of the death benefit. Um, in some cases it can just be the company, you can structure it however you want.
Chris Steffl: And I think that’s the one thing with these is it becomes very flexible on what we actually want to accomplish and there’s not a great amount of cost to actually manage and put these things together. Um, what’s great is a number of the insurance companies have actually come out to say they’ll actually manage it and do it for a very small fee per year. So that’s usually the flow of the money on how to structure or set it up. Um, you can also do it where it’s just an executive bonus. We had a company here just recently that’s like, you know, we want to do this every year, but we want them to have full control of money right off the bat. So in that case, the policy was actually owned by the executive and then they were just doing the $10,000 bonus every year. So this was actually done on a board. Um, were there were actually saying we’re just going to get the money out. In that case, obviously the company didn’t have control the assets but they were funding a plan for that individual that was growing for basically an insurance plan.
Ryan Tansom: Well and I want to go back to the taxes on some of this stuff, like how the taxes flow to it. But for some actual numbers, like let’s say, let’s say it’s a 200,000 COO that we’re tying in, what are some real numbers that people would use? Again, hypothetically, let’s call it a $10,000,000 business, what are some real numbers that they would use and what would it, what are some real numbers? Let’s say it’s a seven year ordeal, right? So a gross, and again you don’t have a calculator, a piece of paper in front of you, but like what is it like, is it 50 grand that they were putting in? What are the benefits… can the business write it off and like how does that all, how does the money all flow? And then again that there the layer on top of that which you don’t have to get into is the actual terms and conditions of when and how they get that. And the structure, but we can talk about in a sec, but what, what does numbers that you would see and how would the company handle that?
Chris Steffl: It all depends on how much they want to put away and the size of the company. I mean, we’ve had some situations where we’ve had up to $50,000 a year being put away into the plan. We’ve had all the way down to… We just did a construction company here recently where they were putting $2,000 away per year, um, it really, I think a lot of times comes down to what is, what’s a number that is gonna keep that employer there. What’s going to prevent from the competition, trying to take them away. That’s really what it comes down to. You know, if you’ve got somebody making $200,000 a year and they’re putting away $5,000 a year over a five year period of time, that’s probably not going to keep them there. They’re probably going to… starting bonus, you know. But if it’s a substantial amount of money and kind of one of the rules of thumb that we’ve seen over the years is it that number equals their income in six to seven years that’s been put away, there’s a very good chance it’s gonna be tough for them to move. That’s just one thing we’ve seen from an industry standpoint. So I mean if they make $100,000 a year and after six years they’ve got close to 100 grand put away in this, it really reduces the chance with them. I’m walking away from it. That just seems to always be the number we’ve seen over time on that.
Ryan Tansom: I think the benefit from the business owner too is instead of just giving them cash, which is not tied to long-term incentives or your goals. And I think this was kind of comes into like how you can wrap this tool into your intentions as a business owner because so first of all, I guess from the cost of it, so if the business is putting it in there, is it, are they able to deduct some of that? Um, because again, you’re mitigating payroll taxes and all these other things from just giving bonuses and actually the net net of it to the, to the employee versus the, to the owner in the company. I think, don’t, you know, when you look at both sides of the equation, it’s got to shake out good for everybody. Does that make sense? That question?
Chris Steffl: Absolutely. The situation where I’m talking about where the company actually what happens is when they actually do the distribution at the time of retirement or depending on if they’re going to distribute it out to be used to purchase the company, that’s when the deduction, the large deduction can be had at that point. Um, if the employee owns the business and basically bonus or structure going up from there, obviously that’s just the deduction from the bonus that you’re able to get. So it depends on how you structure it, but there are some very advanced techniques that you can use from a split dollar standpoint where in essence there can be deductions on both sides of it depending on how it’s structured or setup. And, um, and that’s you know, each one can be done a little bit differently on control. But the way to kind of always the rule of thumb to look at is that the employer or the company owns the money and it’s theirs to own, they’re not able to take the deduction. If they give it out, then they are able to take a deduction at the beginning.
Ryan Tansom: Yeah. When it comes off the books, right?
Chris Steffl: Yep, exactly. And so now what’s unique though is when the product is growing, remember the insurance is growing deferred over time, so you may have contributed $50,000 into the plan, but now it’s worth 200 and some thousand. Well, when you distribute the money at that point, you’re able to realize that based on that. So there’s definitely over time of growing and building those assets at distribution, there are larger, you know, strategies that you can look at from a business standpoint. At the same time too is if the business does need the money or need to access it or collateralize against it, there are opportunities because it is money on the books for them. But there is an obligation to the employees.
Ryan Tansom: You can use that as an asset to take loans against and stuff like that to buy more inventory.
Chris Steffl: Absolutely. That’s a huge thing. I mean that’s one area. One company we worked with, um, you know, we did probably, I think there was almost 15 or 20 individuals that ended up doing basically what we’re talking about there and it was a substantial amount of money, you know, they were contributing, uh, around eight to 10,000 per person per year and so that ends up being a fairly large number after about six or seven years that’s on the books that they’re able to take loans against when they needed it.
Ryan Tansom: Here’s an interesting, and it’s way technical for some people, but like, you know, a lot of banks have covenance on like how much, how many assets you have to have on the books and what you can borrow against. So there’s a lot of people in the copier industry that they’ll keep shit inventory on the books because they don’t want to write it off because it restricts their borrowing capacity. So seriously there’s all these shenanigans and it also impacts the company too. But anyways, like total total a rabbit hole here. But, uh, going back is the, I think that the structure, you keep going, talking about the structure. I think this is where you and I, the the attorney like this, the people and the team working on the outcome is so important because a lot of people… you said anything can be done because if the company owns it, so the vesting schedule and ideally you’d want to have, let’s say it’s 250 grand that’s in this comp plan, now you know how you tie that to the outcome of, okay, you know what I’m. I think I’m going to end up selling a portion or all of my company in five years. Well, they get 50 grand at closing, another x amount over six months to help with the integration and what you’re doing is you’re literally able to dictate everything you want around that and I think it’s so important to to line that up with what you want. How many times have you seen it where it’s just you look at this and there’s no thought behind what’s actually out there?
Chris Steffl: Well I think, Ryan, you bring up a good point. One of the biggest things we see, and I’m sure you’ve seen it over the years too, is you’ve got this key person that wants to eventually buy the business. They’re not putting the money away, they’re not, you know, getting that initial down payment. They may not have the borrowing power to be able to do it, so in essence you’re creating this fund for them that they can eventually use to buy the business. So even though it’s money on your books with the idea that you’re going to eventually distribute it to that key person, it’s really with the idea that you’re going to distribute it for them to be able to then buy the business, or initially start with a down payment on it. It’s, it’s really a neat structure that if you start to recognize somebody early on being potential person that could be buying the business, it’s a way for you to basically fund them or help them find themselves to be able to buy it.
Ryan Tansom: Well, I think the coolest part is like a lot of the entrepreneurs that, you know, as we try to grow the value of the company, you have to put in the executive team. They’re all expensive. They all want equity, so if you can put something like this in place, I think the ideal outcome would be is, okay, here’s the deal is I’m gonna eventually have to transition into my company. I’m either going to sell it to a third party, I’m going to sell it to a private equity firm or sell it to my employees or my management team and we’re going to figure that all out. But if you immediately put these in place, that helps probably with the recruiting, but then also you can. Let’s say you grow a quarter million dollars or half a million bucks. You can tie that to a third party sale. So what happens is all these owners think that they. They get freaked out that their executives are going to leave when they find out they’re going to sell, but if you already paid part of the the the asset that you’ve been building to them too, you have to transition this and you’re going to have to be there for a year if that’s the route we go. But you always have a plan B where you’ve got one, two, three people that have essentially built the funds as your plan B to buy you out.
Chris Steffl: That’s a great way to look at it. And I think you bring up a good point. When they do look to sell, everybody starts to bail and this does definitely give some sticky fingers to keeping them in there. If you’ve got some funds built up, I mean before they bail or jump, they really have to think through it with the amount of money that’s there that they could lose.
Ryan Tansom: So moving onto, let’s say we’re at a family business. Now this gets even a little bit more complicated. I know for the time, you know, we don’t have to go into a whole long saga about this because it’s family business, but I think in estate planning, a lot of people kind of have some maybe some level of experience of how the insurance works in the estate plan, et Cetera. But when you tie in a family business, it’s really complicated because you know, you and I have been working on clients together where you have one individual that’s kicking butt in the business, one person that’s just an employee and then you have to… There’s so many businesses that don’t decouple the actual wages versus the family estate. So can you just give us a couple highlighted overviews of how do you normalize an estate for fit for kids when you’re, when you’re trying to decouple this stuff, you follow what I’m asking?
Chris Steffl: I think the big thing is when you’ve got kids involved who are not fully involved with the business or maybe not involved with the business whatsoever, you know, one of the things that is unique with some of the insurance strategies that are out there is it’s a way to kind of separate or pull off those individuals from the business. So you know, I think… is this what you’re asking?
Ryan Tansom: I probably wasn’t exactly clear. Let’s go back to my own situation. So if I was running my business and I’ve got a brother and a sister, I’m like, okay, wait a second. So I’m going to increase this company like crazy because I want it, but all of a sudden my siblings are going to benefit. Screw them, and so what happens, what happens with mom and dad and when they die and how does the, how does the value of the company that I built you know doubled the value the business, how does that work with my siblings? And there’s so much conflict that goes on because you haven’t laid out how you normalize what everybody gets. It allowed me to then get what I was trying. I reaped the rewards of building the value and then they still got part of the estate. Does that, is that clear?
Chris Steffl: I see what you’re saying. So the business has grown. Are they involved with the business?
Ryan Tansom: They’re not involved in the business or one might be like, you know, let’s say it’s a warehouse worker, but I’m, you know, I’m the president, so what happens is even though I’m getting paid for the president’s salary and a sibling might be paid for the warehouse worker, I doubled the value of the business, but then they get a third of it when I, when mom and dad die, which is just crap. Right?
Chris Steffl: And I think… that’s one thing, we’re sitting down with a family and trying to figure out where they’re at. I mean, if we can establish before that business grows, when the parents pass away, um, what the value of that is and how they can separate it out and one of the things we see a ton. If you’ve got three kids and one is not involved with it, we’re going to just do an insurance policy on the parents for this individual and that’s what the value is. That’s their part of the part of the estate. So it basically in essence buys them off and whatever you’ve grown the business to, because now it’s now yours, it allows the parents to say at that point that individual no longer has any inheritance of the business and is basically getting paid off on the insurance. That’s probably the family farms and family businesses, especially with three kids, um, is always the one that seems to be the biggest mess. And especially family farms. Family farms are based on value of land. So at best, it’s really difficult to figure out the valuation of the business to pay the kids that aren’t involved with it. Because the only way to do that is to liquidate the land for the most part, which is never a good thing. I mean, that’s where we see a lot of family farms fall apart. So where we see the insurance really come in strong on that is that they look at it and say, right now the family farm is worth 10 million dollars. And uh, there’s three kids involved with it. So what we’re going to do is there’s only one get involved with the business right now. The other two have no interest and they’ve stated it. I mean, they’ve made it very clear they don’t want to have any interest in the business. And so at that point the parents say, okay, and let’s say, Ryan, you’re the kid working the farm. Ryan, we’re going to give you the business 100 percent. You know, we’ll work through the transition over to use. It’s going to become your business and whatever. You grow it too. It’s your animal at that point. If you lose it, you got nothing, if you do well then that’s yours. But with the other kids then the way it’s set up, you know, they get $3,000,000 each at death and that basically separates them from the business at that point. That’s usually what we see done. It’s very simple and clean. I mean obviously it doesn’t always work that easy. But if the kids are not involved with the business and then what, you know, the big thing like you’re talking about is well, what if you turned it into you know , a $30,000,000 farm or a $40,000,000 farm. What at the end of the day, so the way you’ve kind of separated it with the insurance and the cost is obviously very, very cheap. What we’re trying to do, and it’s great. And your situation, um, of running the farm because now you don’t have to worry about trying to figure out how to pay off the siblings down the line.
Ryan Tansom: Well, it’s super clean and I think going back into a kind of a combo of what we’ve been talking about Chris is that’s at death. You know, mom or dad dies and then you know, the siblings are paid off, um, to give me the farm or the business, but let’s say for the business purposes, let’s say, well, it’s 10 years where I’m now the CEO and I’m driving the value of that business. There’s some ways to take your, your key insurance policies or even other insurance policies to essentially start building the value for the other siblings outside of that, so that way you know, the, the son or myself or the key employee can buy into the business. So that way, again, you know, at the time of death you’re not having to pay out. Does that make sense? There’s this, this laddering period where you’re actually growing the value of business while the parents are alive, but your, your siblings are getting equalized along the way.
Chris Steffl: Yep, you can definitely do that through the structures we were talking before through the key man. One way is by building those assets, for those individuals, either for them, allowing them to buy into the value more or a way of buying them out. It’s a way of building it out and then at the same time, if death occurs, paying them off at that, at that time too, and just making it simple for whatever ownership share they may have smaller bay.
Ryan Tansom: So as we’re kind of wrapping up or getting close to the time as, as the transaction happens, we kind of talked about how key insurance or key man insurance policies work for the stay bonuses, etc. But you know, you have to get a lot of different exit options from third party sales to family transfers to ESPOs, management buyouts, you know, what are some of the roles that you’ve seen insurance play in the actual deal structure of the transaction. Um, is there unique things that you see that has been happening or what are some of the things that are pretty common out there?
Chris Steffl: Well I think the thing is when we’re looking at these structures, being able to build a cash. I mean, I think that’s one of the biggest things is being able to utilize that to buy out. Um, and then obviously um, disability or long-term planning even with some of these combination life LTC plans, um, as that comes into play, those are, those are all things that can kind of help assist on these. I think one of the things you brought up is the third party too. You know, one of the things we see is if it’s a third party that’s not associated with a family that’s starting to buy the business, always the concern is as a transfer the business over to that individual, if something was to happen to that individual buying that business and the full transition hasn’t taken place yet and the fact that they’ve got to replace… how do you buy that person out or utilize the insurance for that? So depending on the structure, insurance can mitigate the risk that if something was to happen to those individuals that are buying it. And then the same thing around, you know, as they’re buying it, if the main owner passed away and still had an integral part of business, being able to help that transition or allow that to happen quicker.
Chris Steffl: If I was buying a business and that individual is still running the business and they were contributing a lot over the next five or six years. One of my biggest concerns, what is that if that person died in the file was over the next five years, how do I accelerate that if something was to happen to him? And that’s where the insurance can be a huge. What happened then is basically almost like a buy-sell agreement that individual passed away. The money would be used by the family off and the whole business would transfer to me right away, which would then allow me to basically replace that owner and really, you know him as a key person, um, of the business. So there’s, you know, there’s a lot of ways to mitigate the risk. There’s a lot of ways to utilize the insurance from a cash standpoint, um, individuals to utilize that to offset the business insurance is, it really comes down to you can really customize exactly what you’re trying to accomplish and what your concerns are. And there’s a lot of different ways to build or grow that. So working with attorney and usually working with us to try to figure out exactly what they’re trying to accomplish and what their concerns are. You know, the family dynamics are massive. You know there may be a spouse that you know, their biggest concern is is that if they transfer it to no children and if that child was the pass away or become disabled, their concerned is they don’t want the spouse to be running the business or be every family is unique and what’s unique with the insurances, we can customize it. Figuring out exactly how to satisfy, you know, those needs at that point.
Ryan Tansom: I think what’s really interesting is as you and I have worked on deals together and as I look at all these growth and exit plans that we’ve worked on is knowing the outcome where you’re trying to go and obviously the redundant plans. If you do all this stuff ahead of time then first of all, first of all mitigating your risk should anything happen. You’re locking things together, but you’re. Let’s say it’s a third party transition. I mean the cost and the expenses that you paid along the way literally will- you will get the return because your business is going to be worth more. Because if I’m a buyer, I’m going to pay more because of how you’ve locked everybody in, how you set everything up and if you like the example you just gave from an ownership perspective, if you’ve already done all this stuff, work ahead of time, you’re the owner, the new owner, the purchasers are going to pay you more because you have what you’ve done. So I think it’s so important in understanding where you’re gonna go so you can, it’s like a blueprint of a building. You can back into all the different products and services and you know as a wrapping up, Chris, what, what is the… When you, when you see the biggest mistakes of not having that big outcome of how, like is there something that you want to highlight that we’ve talked about or like how does it just… No one does that, but it’s looking at the big picture, right? What, how, like what are the big things that people just need to be wary of as they’re going through whether they, whether they currently have it right now or they’re in the middle of making this decision?
Chris Steffl: The biggest thing is, is that most people buy policies early on in life when we’re thinking about this, but then they never update it or look at it or make sure that it’s going to follow the plan that they’re looking at down the line. I think one of the biggest things I’ve come across with companies is that they’re fabulous at building the businesses, they’ve done a great job from their business, but when we really start to tear apart the insurance that’s out there, a lot of it is not going to do what they think it’s going to do. And um, and they haven’t… they really is… it doesn’t need to be extremely difficult, either. You know, I think that’s the thing is we talked about a lot of different, you know, ideas and techniques that we can use with insurance, but the fact is most of the time, this can be looked at pretty simply on what we’re trying to accomplish and do. And we can usually hit the mark somewhat. I think that’s the one thing is everybody’s trying to make sure it’s like to a tee perfect. And I think the biggest thing is get something done. And just keep working it every year. Um, you know, I, I can’t tell you how many different plans we’ve come across over the last even year here where we come in and I mean, it hasn’t been looked at for 15 years. You know, they’ve got insurance plans that are supposed to cover a state tax issues that are going to fall apart in their eighties. No, they haven’t talked about long-term care planning, which is, you know, probably one of the largest expenses we’re seeing right now for um, individuals in their seventies and eighties. I mean the numbers are massive on this. So I think the biggest thing is just reviewing, looking at it and um, you know, coming up with a plan and it doesn’t have to be set in stone, but at least start with something.
Ryan Tansom: I actually have a lot of sympathy for all these advisor because, what makes it difficult as the owner doesn’t know what they want and why. So how are you supposed to like, you know, as a, I go back to the house because as a general, as, as like let’s say you’re an electrician, how are you supposed to give advice if there’s no blueprint, it’s like ridiculous. So they need to know where they’re going, what their exit options are, why they’re going towards something because then you could easily back into a bunch of different scenarios and give them the pros and cons. But if you’re in there asking questions and they don’t know how to answer them, then that becomes hard.
Chris Steffl: That’s exactly right. A lot of it is even the family politics and even the politics between partners. A lot of times it comes down to we almost become a counselor for them, you know, and giving suggestions and giving ideas where they want ahead and what they want to do. But you’re exactly right. I mean most of the time the questions that are asked are you know they’ve never thought about it or they’ve avoided it. That’s actually probably more than what we see is just be avoiding, you know what I’m saying? I’ll deal with it down the road. And so I think that’s where we come in to say let’s really talk through this and figure out what, what could be the downfalls, what could be the problems or issues and let’s try to figure out a way to solve those situations for you.
Ryan Tansom: So if there’s one thing… we kind of just did it… but if there’s one last little thing that you want to leave the listeners with, what would it be?
Chris Steffl: Review your policies on a consistent standpoint. A lot of them aren’t going to get to the point that you, you would think they may to. And I think the thing is, is we review every year as your business grows if you’ve got enough in place.
Ryan Tansom: Life changes, business changes..
Chris Steffl: Any change in life you should be looking at this stuff. Business stuff especially because it can make all the difference in the world on where your legacy goes and if the business can stay alive or not with both the, you know, the family members and with just for the employees too.
Ryan Tansom: If the listeners want to get in touch with you, what’s the best way?
Chris Steffl: I can give my cell phone here. six, one, two, six, zero, zero, 73. Um, or shoot me an email at cs at mvpservicesolutions.com.
Ryan Tansom: Chris, thanks for coming on the show, man.
Chris Steffl: Thanks a lot. I appreciate it. Have a good one.
Takeaways
Ryan Tansom: I really hope you enjoyed that episode with Chris because if there’s one big takeaway that you need to come out with is what do you want? What are the different exit options that you want to prioritize and what is your plan B? If it’s a third party, how are you keeping your company stable with all the different insurance products? Should anything happen? How were you locking your key employees in and aligning everybody’s motives to where you want to go while also aligning them with your plan B?
All of these different products and services can be architected the exact way that you want them to if you know what you want. And as you start to realize once you know where you’re going, then you can have these different tools and mechanisms fall into place, but you also need to have everybody at the table, which is why we do what we do at GEXP because you have to have the attorney who’s drafting all the agreements in line with where you want to go. You have to have the CPA who’s running tax calculations for the business and the employees, making sure that all of that is accounted for. You have to have the wealth managers for the key employees, the family, understanding how does this impact the family balance sheet now and in the future, understanding how these different things impact the value of your business in light of your transition plan, and everybody’s got to be collaborating in order to optimize the outcome. Otherwise, you’re going to have gaps and holes all over the place. So I really hope you enjoyed the episode with Chris. If you want more information, go onto our website, GEXPCollaborative.com. Otherwise, feel free to go into itunes. Give me a rating. Otherwise I will see you next week.