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Sweet marketing music

Tanner Montague came to town from Seattle having never owned his own music venue before. He’s a musician himself, so he has a pretty good sense of good music, but he also wandered into a crowded music scene filled with concert venues large and small.But the owner of Green Room thinks he found a void in the market. It’s lacking, he says, in places serving between 200 and 500 people, a sweet spot he thinks could be a draw for both some national acts not quite big enough yet for arena gigs and local acts looking for a launching pad.“I felt that size would do well in the city to offer more options,” he says. “My goal was to A, bring another option for national acts but then, B, have a great spot for local bands to start.”Right or wrong, something seems to be working, he says. He’s got a full calendar of concerts booked out several months. How did he, as a newcomer to the market in an industry filled with competition, get the attention of the local concertgoer?

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by Andrew Tellijohn
March 2005

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Human resources

business builder human resources  

Consider three ways
to trim spending on
employee benefits

by John Marshall  

The last few years have been challenging for most small-business owners. Cash flow has been tight while fixed costs such as health insurance and rent have continued to rise.

In this environment, it is difficult to imagine adding bells and whistles to your employees’ benefits packages. You may even be considering cutting back to reduce that ever-growing monthly overhead.

Fortunately, there are three ways you can enhance your benefits package without increasing your company’s expenses.

Worker’s comp
A little known fact about worker’s compensation is that the business owners and their relatives can be excluded from coverage, thus reducing the cost considerably. Individual disability insurance that covers work and non-work related injuries, as well as sickness, can be purchased to cover those individuals for about half the cost.

Consider the example of an auto repair shop operated by a father and his three sons. They used to pay $7,000 a year for worker’s compensation insurance. By excluding them from that coverage and replacing it with individual disability insurance, they increased their coverage and saved $3,500 a year in premium expenses.

Group disability
Likewise, business owners can decrease their group disability insurance premiums by reducing the maximum monthly benefit amount to cover only their employees’ incomes. A supplemental policy can then be purchased to cover the business owners at a substantially lower cost.

For example, a large publicly traded clothing retailer had a group disability policy with a maximum monthly benefit of $15,000 in the circumstance that an employee became disabled.

By lowering the company's maximum monthly benefit to $5,000 — which covered 90 percent of the company's employees — their group premium dropped from $77,000 to $27,000.

Supplemental policies were added to cover the business owners and executives, totaling $59,000 in annual disability insurance costs for the entire company.

Individual disability insurance has more generous policy descriptions and payout provisions than either worker’s comp or group disability insurance, so the net result lowers your costs and increases your benefits.

Restricted bonuses
Business owners who give year-end or performance-based bonuses to their employees should consider setting up a restricted bonus or “golden-handcuffs” plan. Under this plan, rather than giving their employees checks to spend, business owners deposit the bonuses into accounts that their employees can manage themselves, very similar to a 401(k).

A vesting schedule is attached to the account, usually four to seven years in length. The money grows in the account tax-deferred until it is vested. If the employee leaves the company prior to vesting, the employer retains the money to help recruit a replacement and float profits. Once the account is vested, the money is the employee’s to keep.

The owner of a commercial heating and cooling business had identified one of his employees as his successor. The owner wanted to work for another seven years before selling the company to his employee. Instead of giving the employee shares of stock to gradually transfer ownership, he used a restricted bonus plan to retain complete control of his business until the sale date.

He was comforted in knowing that if his employee decided to leave prematurely, he would be able to retain the money in the bonus plan and use it to recruit another buyer or to offset the reduced profit from having to liquidate the business.

A restricted bonus plan helps to retain key employees and promotes a collaborative spirit while the company is growing. In addition, the plan results in lower turnover and retraining costs, which also adds to a company's bottom line.

Providing employees with competitive yet unique benefits is a daunting challenge, and doing so without increasing costs is even more difficult. However, by revising your business insurance plans and adding a restricted bonus plan to your benefits package, you are more likely to retain two of your company’s most valuable assets: your employees and your money.

[contact] C. John Marshall is a financial planner for Northwestern Mutual Financial Network in Edina who specializes in working with business owners: 952.698.7009; craig.marshall@nmfn.com; www.nmfn.com