Often our business is our most valuable asset; it generates the revenue to achieve our goals and to acquire the assets we have today and those we want in the future.
While it is impossible to be in business and avoid risk, it is certainly possible to mitigate the risks.
Business insurance does basically one thing; it provides money for the business just when it is needed, should an insured event occur.
Business insurance is one vital part of a business risk management plan, and it isn’t the only thing that needs to be considered. Business insurance provides the funding, but it is also necessary to look at all the steps that can be taken to reduce the risk of being in business.
In smaller businesses often 100% of the income is lost if the owner is unable to work which can cause liquidity problems and the business to fail. Business owners also have a responsibility to ensure the business remains solvent and the risk management plan is integral to that.
Your business risk management plan could do any, or all the following: In addition to providing you with strategies for reducing your business risks, your plan can, in the event of a key person, owner or working shareholder dying or becoming disabled:
- Provide money to meet your on-going business expenses.
- Fund a replacement person to fulfil the role of the person no longer able to work in the business.
- Provide the business with a lump sum of money to replace lost profits and fund cash flow.
- Provide the business with the funds to repay debts.
- Provide the business with the money to remove personal guarantees.
- Pay the wages or salary of the disabled person for the rest of their working life; therefore, taking this burden off the company.
- Provide the money to enable the surviving shareholders to purchase the shares from the estate of the deceased shareholder; thus, providing certainty of the business’s future.
- Providing the funds for an orderly wind up of the company if that is the desired outcome.
- Ensuring certainty over the future ownership of the company using a compulsory Buy/Sell Agreement. This requires the Estate of the diseased shareholder to sell the shares in the company to the surviving shareholder(s) at a pre-agreed price, or at a pre-agreed valuation method. This means to do not find you have unexpected and unwanted shareholders in your business.
Provided authority to someone you trust to ensure your business remains in operation without the key person.
If you are new to business, so have been in business for less than three years, the business risk you face is often greater than for an established business, yet your options for managing this risk are more limited. However, there are steps you can take to protect your business, yourself, and your family from the risks of being in business. Talk to us today about your special needs and build a secure future.