Would your business survive the loss of a key person?
As a business owner, your primary focus is probably on the day to day running of your business and its profitability. However, have you considered whether your business would survive the loss of a key person and how you can protect your company from the financial impact?
Who are the key people in your business?
Obviously, as the owner of the business, you will be one of the key personnel you should be thinking about, but you may also want to consider your partners, fellow directors, team managers or anyone who is instrumental to the running of our company.
People who would either be challenging to replace, where their loss would have a negative financial impact or who form the very essence of your brand.
Have an idea who they might be in your business? Good. Now imagine they don’t come to work tomorrow, and you now have to move forward without them working for you ever again. What would be the impact?
Illness, death or just leaving the business
There are several reasons you could lose a crucial member of your team. You may have plenty of notice. For example, if they resign to move on to other work opportunities, then there is usually a notice period to adhere to.
However, if a more serious event were to occur, you may have very little or no prior notice at all. If someone unexpectedly dies or becomes seriously ill, you could find yourselves in a position where you have had no time to prepare for the loss of that individual whether it be for the long or short term.
What’s the impact?
If you as the business owner dies, what happens to your business? Do your family inherit it? How are your shares dealt with? Who is going to take over the company? Can it even continue without you at the helm? If you are a sole trader, your business may cease to operate when you pass away.
If another key person unexpectedly dies, what is the impact then?
How much will it cost to recruit and retrain a new person? Is there a succession plan within your company where another member of the team is already primed to step up in this scenario?
Will financial loans be recalled, and will the company need to find funds to buy up shares from the deceased’s estate?
If a critical member of your company becomes seriously ill, how will you cover the additional cost of covering their role and potentially continuing to pay a proportion of their salary in sick leave?
How will your other employees cope with the loss of such a key person? Will they be concerned and consider moving on from the company, causing you a more challenging logistics issue?
If any of those issues are a concern to you, then consider providing business and key person protection for your company. There are several options that can provide financial security to your company should the unexpected happen, and our Life Centred Business Planners can help you find the right solution for your business’s needs.
Contact us today to find out how we can help give you and your shareholders peace of mind that your business can weather any storm. Creating a brighter future for your company.
In addition to business protection, consider what other measures you can put in place:
Notice periods – What is the notice period for key members of staff? Review your employment contracts and ensure that you have built in sufficient time frames that reflect the nature of their role.
Succession plan – Does your business have a clear succession plan for all key roles? Priming individuals to step up to a more senior role when required.
Staff training – What staff training are you currently implementing so that several people can carry out each function in your business? If you have tasks where only one person knows the process, you could be creating unnecessary risks.
Business Will – Do you have a business Will in place that clearly states what will happen in the event of your death? Implementing a business will means that you will have control over who runs your business after you die and other key issues.
If you found this information useful, you may also want to check out the following:
- Do you need a business will?
- Building a succession plan for success
- Why you need stakeholder and business loan protection!
MRA help individuals, businesses and families achieve the best quality of life they can with the resources they have. MRA specialise in corporate solutions, cash-flow analysis, taxation, debt management, savings and investments, lifestyle planning and much more.
Business Consultants based in East Sussex we service clients across the South East, Sussex and Kent, including smaller towns such as Ashford, Battle, Bexhill, Bodiam, Brighton & Hove, Cranbrook, Crowborough, Eastbourne, Hailsham, Hastings, Heathfield, Herstmonceux, Lewes, Mayfield, Newhaven, Rye, Seaford, Sevenoaks, Tenterden, Tonbridge and Tunbridge Wells.