Small business owners have seen their companies change overnight due to the coronavirus. In our #OpenForBusiness series, we're highlighting Northwestern Mutual clients who have been forced to get creative in order to adapt to these unprecedented times and keep their businesses running. We hope you'll get inspiration from their stories and help support them whenever possible.
Business: Xalon Salon
Owners: Kris Bergly and Marie Rudolph
Location: St. Cloud, Minnesota
Xalon Salon is an up-and-coming business that was a St. Cloud Times “Best Hair Salon” finalist just months after opening (and for two consecutive years after). We offer the full range of beauty care in our modern, yet rustic digs in the bustling Division Place Shopping Center in Minnesota. But just as our business was getting into a groove, the measures to contain the coronavirus forced us to close our doors indefinitely.
Fortunately, I had a permanent life insurance policy that had accumulated cash value* for a rainy day, just like this.
WE WERE JUST HITTING OUR STRIDE
I worked for Regis Corporation in Minneapolis (the largest hair stylist company) for more than 20 years and was the chief operating officer. But about 10 years ago I left to pursue my own ventures. I, along with my business partner Marie Rudolph, opened Xalon Salon in St. Cloud a little more than 5 years ago. To be clear, I couldn’t have started this business without Marie and the stylists who joined her here.
The business started with a $500,000 loan, and back then I used my cash value life insurance as collateral to get approved for it. Now, after five years, we're just months from paying off that entire loan. What’s more, although we’ve been through ups and downs here in those five years, we were really starting to hit our stride as a business. Then the closures were announced.
WE COULDN'T LET THE BUSINESS FAIL
The money stopped coming in, but the bills didn’t stop. I didn’t want to close, because I was literally four months away from finally starting to see cash from a business started five years ago. You don’t want to walk away from that. So how could I keep this afloat? I’d given myself a little cushion, but I also had to keep paying my bills and supporting the family.
I ACCESS THE CASH VALUE IN LIFE INSURANCE
During my time at Regis I got set up with a permanent life insurance policy with Northwestern Mutual, and it wasn’t front of mind. But as I was exploring my options to stay afloat, my advisor Mark Van Wagenen mentioned the cash value in this policy, and that I could take out a loan. And that’s exactly what I did. We were able to access the money in like 2 or 3 days, and I can also decide how and when to pay back this loan back. It’s been incredibly helpful right now.
I COVERED HEALTH COSTS FOR EMPLOYEES
That cash value was a godsend. It helped me cover health insurance costs for our 22 employees. Stylists and their book of clients are indispensable in the salon business. If you lose them, you lose the business. I wanted to do everything I could to help keep them with us.
WE'RE READY FOR THE RUSH
While a lot has changed, people can still book online appointments with us if they’re in the greater St. Cloud area or buy a gift card for a friend. Fortunately, this is a predictable business (most of the time). The one thing going for us while we’re closed is that there’s a lot of demand building up — or growing, more accurately. When our doors open it’s going to be a flood, which is going to be great.
We just don’t know when that’s going to be.
Kris Bergly is a client of Northwestern Mutual; he works with Wealth Management Advisor Mark Van Wagenen.
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* Using a policy’s accumulated value for the purposes described above usually requires several years of premium payments to build up sufficient accumulated value. Further, utilizing the accumulated value through policy loans, surrenders, or cash withdrawals will reduce the death benefit, may necessitate a greater outlay of premium than anticipated, and/or result in an unexpected taxable event.