Hi Steven,

The March/April 2011 issue of CFMA Building Profits contains an article on "The CFM's Role in Business Succession Planning" that I think you will find useful to begin your company's succession planning process.

If you don't have your issue handy, you can go to CFMA BP Online (click the button on the top of www.cfma.org) and select the March/April issue from the "Back Issues" tab.

If I can be of further assistance, please let me know.

Best of luck,

Kristy Domboski
Managing Editor | CFMA
Construction Financial Management Association
P: 609.945.2427 | F: 609.452.0417 | www.cfma.org
helping you build bigger profits

Steven:

Two if the best resources available are your bonding company and your CPA firm. Neither will tell you how to accomplish succession planning, but they will likely be able to point you to the resources that can assist you.

Sureties are particularly concerned with the "what if" scenarios that accompany closely-held construction companies. They've seen the best of plans as well as the worst. Check with them first.

Two people on the "not to call" list are business brokers and attorneys. While they may possess great ideas, their suggested strategies for sucession planning are drivern by motive.

Good luck!

I would suggest "Deciding to Sell Your Business The Key to Wealth and Freedom" by Ned Minor, a principal in the law firm Minor & Brown in Denver.  In their web site I found you can request a free copy from Ned- go to this page and look for link part way down:

http://minorbrown.com/our-services/deciding-to-sell-your-business.html

I know Ned- he's a great guy who would also welcome you contacting him.

Steven, our firm serves the construction industry and assist with business succession plans.  If you need some assistance or direction, please do not hesitate to call at 770-287-7800.

Hi Steven,

You should call Glenn Gelman, of Glenn Gelman and Associates. www.gmgcpa.com . He is an expert in succession planning, especially with ESOP's which could have significant tax advantages for your company. He's helped numerous clients of mine. If nothing else, he could point you in the right direction in terms of getting information to get started on the process. His number is (714) 667-2600. Please let him know I referred you. Good luck and congrats!

This is a very interesting discussion.  I assume you are considering a group captive not a single parent captive approach.  There are many things to consider before joining or forming a Captive.  On the one hand is the sage advice from Groucho Marks, "I'd never join any club that would have me as a member!".  And on the other hand are some great experiences as noted in some of these comments.The following is an over simplification... Being insured by a group captive is no different than being insured by a commercial insurance company except; you are a partial owner able to reap rewards or suffer financial loss (weigh your willingness to pay some of your as well as a portion of other losses), you have to buy into ownership first (costs vary), your ability to buy "cheap" insurance on the open market is restricted (check financial handcuffs), if you pay too much in any year you are entitled to a future dividend which tends to be more generous than a non-owned insuror would pay.  If you are sizable cash flow may be more restricted vs. commercial insurance options and security in the form of letters of credit are almost always required.There are advantages and disadvantages to the makeup of the group you join.  Some contractors prefer to be in a captive with only like contractors (homogeneous) as a means of understanding the risks while others like the diversity created by a mixed (Heterogeneous) group which may help spread the financial risk should an issue pop up that is shared by all members.I think the age of the captive and size are also important factors to consider.  There is joint and several liability in a group captive.Check the quality and quantity of reinsurance, this helps on the J&S liability issue. Look at who will be handling claims and what services (like safety) will be provided.  Another important consideration is who has formed the captive and for what purpose.  Some are formed by claims handling companies as a way to ensure a steady flow of business, some by agents / brokers who want to offer something unique to their customers.  Insurance companies and associations also form captives with obvious intent.As important as it is to remember that you are an insurance company owner, you are also a member of an exclusive "club".  Captives meet regularly in some nice places to discuss the operations of the captive.  These are not all work and no play events.  Some captive members and their spouses come to see these trips as a great perk while others detest the drain on their time.Good luck!

I share the opinion that we are contractors and not insurance companies.  However, these other testimonials challenge my thinking in that regard.

One issue with a captive that also comes to mind is that of claims arising years down the line.  I believe it is possible to buy-out the first dollar coverage at some point so that you will not have to be concerned about claims arising due to exposures in older policy periods.

Has anyone had experience with this?

Thanks.

Do you have a representatives name with contact informaiton you might share?  Thank you for your feedback.  David

We have been part of Archway for over 5 years and have been very pleased with the results.

David, we are drywall, plaster...contractor.  We joined captive in 1999, but entered with workers comp only.  The next year we entered fully adding gl and auto.  We were one of the first members of a captive that has grown to almost 100 members.  Our experience with them has been great.  We have saved money on premiums, have greatly benefited from their loss control programs.  We are receiving yearly dividend checks from the positive investments and don't regret our move at all.  I can give you more specific information if you would like.

David, I would be happy to discuss with you.  Our company Way Holding, Ltd. is a commerical mechanical construction and service co.  We have been part of a captive since 1991 and it has saved us 1000's of dollars over traditional insurance.  In addition after a period of time and a good safety record, it provides dividends back to the owner of the company as opposed to the money going into the pockets of the insurance co.  Our captive is called "Raffles" and is managed by a company named Captive Resources.  There are 291 members of varying revenue sizes , most are of a generally blue collar type of industry.  Feel free to call me to discuss:

Bryan Duncan

Controller - Way Holding, Ltd. 713-512-9925  bduncan@wayholding.com

David we too are a mechanical contractor and we joined our captive in 2005.  The financial benefits have been enormous both in costs we have saved and costs we have prevented. In my 25 years we have never had more control over claims.  My only regret is that we did not do it sooner. 

My cautions are to pick the right captive, the proper structure for your organization and be sure you have a broker who truly understands captives. 

If you would like to have a conversation, I am more than willing to tell you more offline @716-614-7473.

We are also considering a captive program on the next renewal.  Our business in railroad construction.

In past companies I was always concerned that that the other participants were in the same area of construction.  At that time I was with a general contractor that did not perform any of the work.  I have since learned that being in a different area can be good because your risk are spread out over different areas.

Good luck in you decision.  Luther

Hello David,  A few years ago we also considered a Captive Insurance Program.  Our company also has a very good loss experience and feels that traditional insurance market premiums are not reflective of our experience.  The captives are a very attractive option but after much consideration, it came down to this question:

Do we want to be in the contracting busines or the insurance business?  We decided to continue in the contracting business and stay with traditional insurance.

Good luck with your decision.