Last month I had to drive down to London. I don't like driving
at the best of times but the rain, spray and heavy traffic
on the M1 made conditions difficult. Radio 2 kept me company
and the heater kept me warm. Then I hit that queue - six miles
solid and I was soon an hour behind schedule.
They were still clearing up the accident when I got there.
It was nasty. A lorry and what was left of two cars. Made
me think, after all that could have been me. Yep, my life
insurance is up to date and my Will was renewed only last
month. The family would be well cared for and the mortgage
repaid. Had I missed anything?
The business. What would happen to that? We have two directors,
7 employees, an overdraft and lots of insurance. Public Liability,
professional indemnity, vehicles and stock are all insured.
We even have legal protection insurance. Had I missed anything?
I got to thinking.
Thank goodness it wasn't George in that accident. A great
guy and he's been with us five years. He's our top salesman.
There again what if it had been my co-director who also owns
50% of the business? What would be the repercussions on the
business?
Sales down, profits down, bank phoning all too politely
to ask about the Directors guarantee on the overdraft. Then
I'd have to try and buy his shares. I wouldn't want someone
else to get hold of those. At some stage I'd have to recruit
someone of his calibre to continue the company going forward
- that wouldn't be easy! And recruiting top people doesn't come cheap. That's
more time and more money. The personal problems ……
the repercussions …….. the extra work ………
the extra stress ……..
Oh heck, I don't want to think about it all. Quickly, switch
over to Radio 1 .
Does all this ring alarm bells with you? 95.2% of UK businesses
employ less than 10 people and these are precisely the organisations
most at risk from the impact of severe illness or death of
a key person. The risks of a key person being stuck down with
a long term illness or death are real. 1 in 5 men suffer a
critical illness before their normal retirement age. Then
there's the M1. The fact that it hasn't happened so far might
just mean your business has just been lucky.
Now to those actuarial boffins in insurance companies, risk
and luck are flip sides of the same coin. And they can provide
insurance cover for most risks. After all they too want to
increase sales. But they're scratching their heads about Keyman
Insurance. Most of Britain's 4.1million small businesses should
have it but few do. What can it do? It can be structured to:
Provide an income stream to the company whilst the key person
is incapacitated (compensation for the lost contribution from
the Keyman)
Provide a lump sum to the business in the event of death (pay
off the overdraft or simply bolster cash flow?)
Provide money for remaining shareholders to buy the shares
from the original shareholder or their estate
You'll need to talk to a Financial Adviser about these issues
but they are all insurable. Can your business afford to take
a risk it doesn't need to?
