1. Buy Sell Presented by Michelle Palmer
Regional Chief Underwriter, Principal Financial Group

2. Buy-Sell Information needed (Varies by face amount):
Fair market value and how the amount was determined
List of owners, ownership percentage and coverage in force/applied for
Buy-Sell Agreement

3. Buy-Sell Information needed (Varies by face amount):
Confidential Financial Statement (AA631)
Business Financial Statements or tax returns (2-3 years)
Business Valuation

4. Buy-Sell Guidelines Percentage ownership X fair market value
Cross purchase – partners are the owners and beneficiaries
Entity purchase – business is the owner and beneficiary

5. Buy-Sell Example #1 3 business partners applying for $5 million each
Each partner is 1/3 owner
Recently purchased a building for $7.5 million that they are renting out with plans to purchase more buildings in the future
Thoughts?

6. Buy-Sell Example #2 42 year old applying for $7 million
Salary $450k and 1/3 owner of the business
2015 book value (Equity) = $9.2 million
Average earnings past 3 years $2.6 million

7. Buy-Sell Example #2 What is the approximate value of the business?
1-5x average earnings ($2.6 million x3 = $7.8M) + equity ($9.2 million) *(well established business possibly 5x = $13 million + $9.2 million)
Approximate business value = $7.8 million (3x earnings) + $9.2 million (Equity) = $17 million
Value of 1/3 ownership = $17 million / 3 = $5.7 million (* well established business possibly as high as $7.4 million)