An estimated 90-95% of all businesses in the United States are family-owned businesses, said John Gephart, second vice president, Union Central Life Insurance Company, at the LIMRA Advanced Sales conference here.
“Everyone wants to sell to family business owners; they’ve got an awful lot of money,” he said.
Gephart estimates that family businesses make more than $1 trillion in purchases every year, and that number is growing by $100 billion a year. “Out of that $100 billion a year, there’s got to be some in there for life insurance.”
So how do agents tap into that market? Gephart explained that agents need to get an understanding of the attitudes of the family business owner. “These are typically very aggressive types.”
The family business owner can be defined as an entrepreneur, he said, and agents should consider all the characteristics of the entrepreneur to understand the traits of the family business owner.
“Because of fierce competition, they are very inward. They are reluctant to share information,” he said.
This unwillingness to share the intimate details of their business finances is a detriment to the entire financial planning process, he said.
Gephart noted that since most entrepreneurs work hours extending far beyond normal business hours, “it’s a real challenge when trying to schedule time to meet them.”
Once a planner does get a meeting, business continuation discussions may open up other family issues not apparent on the surface.
“If a business owner has 3 kids and only one of them can take over the business, that’s a lose-lose situation,” he said.
These family business owners often run into a situation of having to show some type of favoritism among children. Some may feel guilty about disinheriting a child who is obviously not suited to run the business.
“When people are in this type of situation, they tend to avoid it and do nothing,” he said. “Our challenge, as planners, is to recognize this.”
Gephart noted that only one-third of family-owned businesses survive to the next generation, and only 15% reach the third generation.
“Why is this? Not because of a change in markets, technology, or customers, but because of little or no planning,” said Gephart. “The obligation we have is to help these businesses continue.”
Gephart outlined the style model of family business owners, as depicted by Russ Prince and Karen File in their book, Marketing to Family Business Owners–A Toolkit for Life Insurance Professionals, a National Underwriter Company publication.
The largest group of family business owners, he said, is the Loving Parent group. This type gets pleasure from involving the family in the building of the business, he said. “The business is truly an extension of the family unit.”
The next group Gephart described is known as Autocrats. These are the “affluent individuals who want control.”
Gephart described the third largest segment of owners as Empire Builders. “These are the people that want their name in perpetuity. They are infatuated with the notion of immortality.”
Gephart noted that agents who understand all the different psychographic segments of affluent family business owners, as described by Prince and File, can better market to them using concepts and words aligned with the business owners’ attitudes and motivation.
“The bottom line is, whatever concept you’re preparing, identify the style of the owner and then package that concept within those parameters,” said Gephart.
Reproduced from National Underwriter Life & Health/Financial Services Edition, November 26, 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.