By Noah B. Rosenfarb, 3rd Generation CPA, www.Wealthrive.com
For Judy Blitz, running a $40 million extended warranty business in Miami was a dream come true—until it wasn’t. Her company was thriving, netting $20 million annually, but her business partner’s abrasive management style turned the daily grind into something far less enjoyable. Mike Wallace, Judy’s 35% partner, was a genius at operations. He scaled systems, tightened processes, and drove revenue. But he treated people like parts—replaceable and secondary to profit.
The tipping point came when Marichel, a customer service rep of nine years, took an unexpected leave. Her husband had been diagnosed with a brain tumor. As the family’s sole breadwinner, she was devastated. Mike insisted she take unpaid leave—or leave for good. “Her strain shouldn’t be my pain,” he said.
Judy, who held the majority stake, disagreed. She covered Marichel’s pay and hired a temp to backfill her $900-a-week role. Mike exploded, but Judy held firm. It wasn’t just empathy—it was strategic. Marichel was more than an employee. She was institutional knowledge, customer loyalty, and a cultural pillar. Losing her would be a blow.
At 60, Judy had her eye on a different kind of future: sailing the Caribbean with her husband on their 58-foot schooner. But Mike and her nephew Alfredo, the company’s COO, made stepping back a minefield. Both were competent—but cold. Judy knew that her steady presence was keeping the team intact. Without him, turnover was likely. Morale would dip. And her dream of passing the business on to her children—who weren’t quite ready to take over—would fade.
Investors had approached her, but Judy wasn’t ready to sell. She loved the business. She just didn’t want to live in it anymore. What she needed was a way to keep her people in place and motivated, without tying herself to the office.
A friend in the tech world introduced Judy to two financial advisors, Noah and Peter. Over coffee, Judy explained her vision: passive ownership, limited involvement, and long-term security for the team. She floated the idea of giving away 20% of the business to top staff, hoping equity might lock them in.
Noah gently pumped the brakes. Minority ownership in a private firm, he explained, was fraught with legal risks, tax complications, and valuation headaches. That kind of generosity, if not structured right, could cause more problems than it solved.
Peter offered an alternative: a Section 162 Executive Bonus Plan. Instead of equity, Judy would fund deferred compensation for key employees using life insurance. The plan was tax-deductible, creditor-protected, and allowed Judy to handpick who received it. The hook? Employees would only receive the funds if they stayed with the company long-term. Leave early, and the money vanished.
The idea made immediate sense. It was incentive without entitlement. Loyalty with a leash. Judy’s business could continue without her having to personally glue it together.
Still, implementation had its bumps. Alfredo, expecting a windfall if Judy sold, initially resisted. Feeling blindsided, he called the plan a “power play.” Judy, rattled, left Peter a voicemail: “There is a disaster.” But Peter intervened, meeting Alfredo for lunch and laying it out plainly: there wasn’t a sale—it was a safeguard. Alfredo himself would get a $300,000 annual bonus under the plan. Suddenly, Alfredo was all in.
In total, Judy offered the plan to nine team members: Alfredo, the CFO, CTO, HR head, two middle managers, and four top sales reps. Each was told privately: “You’re one of our best. We’re giving you a long-term bonus to recognize your value—but it’s confidential.” The plan’s structure was simple. Stay, and the money is yours. Leave, and you lose it.
There were no leaks, no blowback, no declines. The message was clear and the reward substantial. And just like that, the heart of the business was locked in place.
With her people secured, Judy finally stepped back. She didn’t sell. She didn’t burn out. She simply shifted into a new gear—sailing the Caribbean with her husband, checking in occasionally, knowing her company was stable, profitable, and in loyal hands.
Judy’s story isn’t unique in its pressures, but it is in its resolution. In an industry where succession is often improvised and talent retention feels impossible, she managed to craft a plan that served both. She didn’t just preserve her company—she preserved her freedom.
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