1. Big Challenges for Growing Businesses Name, title, designation(s) The Principal Financial Group  Date

2. BIG CHALLENGES FOR GROWING BUSINESSES While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is intended to provide general information about the subject matter covered and is provided with the understanding that none of the member companies of The Principal ® are rendering legal, accounting, or tax advice. It is not a marketed opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements. Insurance products from the Principal Financial Group ® (The Principal ® ) are issued by Principal National Life Insurance Company (except in New York) and Principal Life Insurance Company. Securities and advisory products offered through Princor Financial Services Corporation, 800/247-1737, member SIPC. Principal National, Principal Life and Princor ® are members of the Principal Financial Group, Des Moines, IA 50392. No part of this presentation may be reproduced or used in any form or by any means, electronic or mechanical, including photocopying or recording, or by any information storage and retrieval system, without prior written permission from the Principal Financial Group ®. Copyright © 2015 Principal Financial Services, Inc. BB10543-02 I 02/2015 |t1501230413

3. BIG CHALLENGES FOR GROWING BUSINESSES While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is intended to provide general information about the subject matter covered and is provided with the understanding that none of the member companies of The Principal ® are rendering legal, accounting, or tax advice. It is not a marketed opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements. Insurance products from the Principal Financial Group ® (The Principal ® ) are issued by Principal National Life Insurance Company (except in New York) and Principal Life Insurance Company. Securities and advisory products offered through Princor Financial Services Corporation, 800/247-1737, member SIPC. Principal National, Principal Life and Princor ® are members of the Principal Financial Group, Des Moines, IA 50392. is not an affiliate of any member company of the Principal Financial Group ®. No part of this presentation may be reproduced or used in any form or by any means, electronic or mechanical, including photocopying or recording, or by any information storage and retrieval system, without prior written permission from the Principal Financial Group ®. Copyright © 2015 Principal Financial Services, Inc. BB10543-02 I 02/2015 |t1501230413

4. BUSINESS, OWNER AND EXECUTIVE SOLUTIONS BIG CHALLENGES FOR GROWING BUSINESSES

5.  Business succession planning  Recruiting, retaining, rewarding and retiring key employees  Converting profits to wealth CHALLENGES FOR THE BUSINESS OWNER BIG CHALLENGES FOR GROWING BUSINESSES

6. CHALLENGE 1: BUSINESS SUCCESSION PLANS Implementing a well-crafted and funded buy-sell agreement and/or various other exit planning strategies are the foundation of a healthy business. BIG CHALLENGES FOR GROWING BUSINESSES

7. What happens if:  The relationship between owners sours?  An owner dies?  An owner becomes disabled? And keep in mind these 5 additional “triggers.” CHALLENGE 1: AGREEMENTS BETWEEN OWNERS Source: “Marriage and divorce: patterns by gender, race, and educational attainment,” Bureau of Labor Statistics, October 2013.

8. Common pitfalls:  No formal agreement  Poorly structured agreement  No funding  Antiquated agreements CHALLENGE 1: AGREEMENTS BETWEEN OWNERS BIG CHALLENGES FOR GROWING BUSINESSES

9. Questions to consider:  Are all possible “triggers” included?  Is business valuation clear, specific, appropriate, continuous?  Is a “mandatory buy-out” required upon death and/or disability? What about retirement?  Is “disability” defined and consistent? CHALLENGE 1: AGREEMENTS BETWEEN OWNERS BIG CHALLENGES FOR GROWING BUSINESSES

10. Common triggering events:  Death  Disability  Bankruptcy/Insolvency  Divorce  Termination of Employment (voluntary and involuntary)  Retirement BUY-SELL AGREEMENTS BIG CHALLENGES FOR GROWING BUSINESSES

11.  Clarity  Timing  A financial bridge CHALLENGE 1: AGREEMENTS BETWEEN OWNERS BIG CHALLENGES FOR GROWING BUSINESSES

12. SOLUTION 1: BUY-SELL REVIEW OR BUSINESS CONTINUATION PLAN  Request a complimentary buy- sell review  Implement a business continuation plan $40-70K > $70K $25K BIG CHALLENGES FOR GROWING BUSINESSES

13. Who is the difference maker in your company?  Immediately change operations, customer relations, profitability  Significant recovery time CHALLENGE 2: HIRING, RETAINING AND INCENTING KEY EMPLOYEES BIG CHALLENGES FOR GROWING BUSINESSES

14. Hiring the difference maker  Compete with compensation and benefits  Consider customized benefits  Align commitment with vesting CHALLENGE 2: HIRING, RETAINING AND INCENTING KEY EMPLOYEES BIG CHALLENGES FOR GROWING BUSINESSES

15. Retaining and incenting the difference maker  Love what they do  Tie performance to reward  Futures in-sync CHALLENGE 2: HIRING, RETAINING AND INCENTING KEY EMPLOYEES BIG CHALLENGES FOR GROWING BUSINESSES

16. Retaining and incenting the difference maker  Money is a tool  Significance and durability  Reward commitment by “growing” the bonus CHALLENGE 2: HIRING, RETAINING AND INCENTING KEY EMPLOYEES BIG CHALLENGES FOR GROWING BUSINESSES

17. CHALLENGE 2: HIRING, RETAINING AND INCENTING KEY EMPLOYEES Executive Bonus Plans  Nonqualified executive benefit plans  Flexible vesting  Tax advantages  Market, or company- based growth $40-70K > $70K $25K BIG CHALLENGES FOR GROWING BUSINESSES

18. CHALLENGE 3: CONVERTING PROFITS TO WEALTH YOUR PATH TO FINANCIAL SECURITY Why are you in the business?

19. A business owner’s financial priorities  Financial protection  Income protection  Wealth preservation CHALLENGE 3: CONVERTING PROFITS TO WEALTH BIG CHALLENGES FOR GROWING BUSINESSES

20. SOLUTION 3: CONVERTING PROFITS TO WEALTH BIG CHALLENGES FOR GROWING BUSINESSES

21. SOLUTION 3: CONVERTING PROFITS TO WEALTH 100 80 60 40 20 0 91% 70% 62% 35% DEATH DISABILITY RETIREMENT 12% 23% Mandatory buy-out events Source: Review of 720 buy-sell reviews by the Principal Financial Group®, Jan. 1, 2011 to July 31, 2014 But many aren’t sure they’ve taken THE NECESSARY STEPS to make that a reality? Percentages of business owner agreements that cover the top three transition events and those that include them as mandatory triggers* Most business owners we talk to tell us their business IS their retirement…

22. Summary  Implement & fund a buy-sell agreement  Implementing plans to help hire, retain and incent key employees  Effectively converting business profits to personal wealth OVERCOMING KEY CHALLENGES BIG CHALLENGES FOR GROWING BUSINESSES

23. Q&A Questions? BIG CHALLENGES FOR GROWING BUSINESSES

24. THANK YOU Presenter name Contact info - phone Contact info – email Contact info - website BB10543-02 I 02/2015 |t1501230413