No one doubts that the small business market remains a thriving market for financial services professionals. But businesses and business owners have different needs and concerns than individuals and salaried employees.

Success in the small business market hinges on a clear understanding of those needs and concerns and the ability to motivate decision-makers to take action. This is achieved by focusing on fundamentals, solving problems, and designing tailor-made solutions.

Focus on Fundamentals. Beginners in the small business market sometimes flounder because they lack a sound approach. Some advance on the business or business owner with a packaged sales idea, such as split-dollar or buy-sell, and are dismayed when they discover that the company has already purchased or rejected the package.

Others sally forth with a shopping list of items, expecting the business prospect to identify “hot buttons” among products and services (deferred compensation, 401(k) plans, irrevocable life insurance trusts, etc.) that are likely to be unfamiliar and confusing.

By contrast, experienced, successful professionals understand that the first step to a sale is to focus on the business prospect’s fundamental needs and concerns.

Most of us do this intuitively with individuals. We understand that individual prospects have fundamental needs and concerns around food, shelter, love, security, and self-fulfillment. We are successful in sales when our products and services relate to these fundamental needs and concerns.

For example, individuals don’t buy life insurance or invest in a mutual fund because they are excited about the features of the product; they buy because the product protects someone they love or provides a sense of financial security.

Similarly, financial services professionals who succeed in the business market recognize that businesses and business owners have fundamental needs and concerns around:

-Attracting and retaining quality employees;

-Maximizing income and wealth for business owners and key executives; and

-Continuing the business following the death, disability, or retirement of the owners.

Sales are made when products and services help business prospects achieve goals in these three areas.

For example, businesses don’t implement executive bonus plans because executive bonus is a “hot” concept or offers exciting tax benefits; they implement these plans because they want to get and keep quality employees.

Problem Solving. Beginners in the small business market may struggle even when they understand the fundamental needs and concerns that are shared by all businesses.

This is because they often fail to identify specific business prospect problems within these three broad areas. Having failed to identify specific problems, they then go on to fail to design tailored solutions.

Problem solving begins with a clear understanding of the business owner’s current plan for attracting and retaining employees, benefiting owners and employees, and continuing the business. Problem solving continues with an exploration of the prospect’s goals and objectives. This goes beyond routine data gathering.

It is not enough to simply know that the owner has an existing buy-sell plan. To be successful, the financial services professional must grasp the implications of the business owner’s current situation.

For example, does the existing buy-sell agreement allow the prospect to leave shares of stock to family members active in the business without the consent of other owners? If not, does the existing plan foreclose opportunities for the prospect whose son or daughter wishes to work in the business?

Furthermore, it is not enough to simply assume that the business owner knows his goals and objectives. In most instances the goals and objectives articulated by the business owner are too broad and vague to be meaningful. This is because the owner lacks an appreciation of the full range of options available.

In this market, the financial services professional must work with the prospect to formulate reasonable, attainable, and measurable goals and objectives.

For example, when the business owner says she wishes to retain the business for a daughter, the financial services professional needs to dig deeper. Has the owner considered selling, given the industry trend toward consolidation? Would she consider selling, if the price and terms were too good to turn down? Is the daughter active in the business today? Does she have the qualifications necessary to succeed?

The experienced professional who asks these questions may discover that the owner has doubts about a child’s ability to lead and concerns about being squeezed out as industry consolidation narrows margins. Such questions expand the realm of possibilities and enable the formulation of more meaningful goals and objectives.

Once current plans and their implications are understood, they can be evaluated for how well they accomplish the owner’s newly formulated goals and objectives. Business owners are motivated to take action when faced with disparities between their current plans and desired results.

Tailor-made Solutions A final problem area for novices to the business market relates to designing creative solutions.

First, it is important to know into which “basket” of fundamental business needs and concerns routine solutions belong. For example, solutions for recruiting and retaining quality employees may include group life, disability insurance, and tax-qualified retirement plans.

Solutions for growing income and wealth for owners and executives may include non-qualified deferred compensation, key person, split-dollar, and group carve-out plans.

Solutions for business continuation may include buy-sell planning for the owner who wishes to sell, and a whole array of tax minimization strategies for the owner who wishes to retain the business. Some of these strategies include the use of Grantor Retained Annuity Trusts (GRATs), Familiy Limited Partnerships (FLPs), Charitable Remainder Trusts (CRTs), and Irrevocable Life Insurance Trusts (ILITs).

Second, those most successful in the business market go beyond providing routine solutions and strive to offer creative solutions to unique problems.

For example, a standard deferred compensation plan enhances retirement benefits for executives. But a deferred compensation plan that wraps around the employer’s existing 401(k) plan and provides for matching employer dollars may be a better fit, especially if it can be demonstrated to the business owner that corporate-owned life insurance insuring the executives allows the business to ultimately recover its outlays.

The small business market offers significant opportunity for larger sales, cross sales, and add-on sales. The keys to unlocking this lucrative market are:

-Focus on fundamentals;

-Focus on problem solving; and

-Focus on tailor-made solutions.

John P. Selas is a financial planner with Prudential Financial, Brookfield, Wis. He is a member of Prudential’s Leader’s Council and the Million Dollar Round Table. He can be reached via e-mail at John.Selas@prudential.com.


Reproduced from National Underwriter Life & Health/Financial Services Edition, October 15, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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