Lee Hayward APFS, EFP
- Chartered Financial Planner and Senior Manager at Kreston Reeves Financial Planning Services Limited
- +44 (0)330 124 1399
- Email Lee[email protected]
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Losing a key employee or business owner to illness or an unexpected death could be a devastating blow for most SMEs, yet many fail to safeguard against this.
In a recent report published by Legal & General, it was revealed that over half of business owners surveyed would use their personal cash reserves to support their company in these events, with a further quarter relying on their business’s cash reserves.
Worryingly, it appears it is frequently the smaller, or newer established businesses taking the most risk by doing this, potentially leaving personal wealth at risk.
Often, business owners are so busy with the management of their company that alternative risk mitigation against this has simply not been considered.
Business Protection can help provide stability to you and your business and can come in different forms.
Many businesses are reliant on particular members of the workforce, whether it is a company Director, or employee whose skill, knowledge, experience, contacts or leadership may be key either directly or indirectly to its success. The effect of these individuals being unable to work, perhaps due to a critical or terminal illness, or even death may be devastating. Whilst individuals with these skills can be difficult to replace, a Keyperson policy can be set-up to provide either a lump sum, or an income to the business. In these instances, this payment can go some way towards supporting the business whilst you seek a suitably skilled replacement.
The loss of a business stakeholder can be even more destabilising with the deceased’s shares potentially being passed to their family who may have very different ideas on how, or who should continue to run the business.
Shareholder, or Partnership protection would provide a lump sum to the remaining stakeholders in this event, potentially allowing them to purchase the deceased’s shares and retain control of the business.
The good news is that of those who have Business Protection, 84% were given advice by a financial adviser, or their bank. This highlights the fact that once business owners are made aware of these risks they could inadvertently be taking, they tend to see the benefits of mitigation.
Research shows, SME owners who use a financial adviser are more likely to have a business protection policy as they have a far better awareness of the risks, and continuity and/or protection policies in place to mitigate them.
To seek advice and find out how vital protection can help your business manage the potential impact of the loss of a key individual contact our Financial Planning Team on +44 (0)330 124 1399 or provide your details on our online enquiry form.
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