How protected is your business? 4 important questions to ask yourself as a business owner

Ask any business owner about what could threaten their company’s stability, and it’s likely you will receive very similar answers across the board.

Indeed, if you built your business from the ground up, you have probably spent some time thinking about the risks that could put your company in a precarious situation. Covid-19 came as a shock to many companies, and in the event of another personal or national emergency, being prepared to ride out the storm is essential.

Fortunately, working with a financial planner who understands your needs as a business owner can help you sleep better at night. Despite this, as of 2021, only 40% of businesses sought financial advice, according to the Legal & General ‘State of the Nation’ report. 

If you’re unsure about how well your business would cope with an unexpected event, read on to find out four questions all business owners should ask themselves, plus how a financial planner can help you answer them. 

1. What would happen if a key person became ill or passed away?

According to the Legal & General report, 94% of business owners recognise that they have at least one “key person” in their company.

This could be you, a member of your senior management team, or someone in your family. Anyone who is directly responsible for ensuring the smooth running of the business could be considered a key person.

If a key person passed away or became critically ill, there could be significant financial ramifications for your business, including:

  • Losing that person’s clients
  • A dip in revenue due to the skills and labour gap 
  • Grief having an impact on the remaining key people
  • A downswing in share value after the business experiences a significant shock.

Fortunately, key person cover can make all the difference in situations like these. As a form of life cover, which can also incorporate critical illness cover if you choose, key person insurance may pay a lump sum to your business when a person named in the policy dies or becomes ill.

This capital could be used to cover any shortfall your company experiences after the death of a key person.

2. Do I have clear, practical succession plans in place?

The Legal & General research found that 52% of participants said that the death of an owner is the top risk to the future of their business. As such, the importance of estate planning for business owners cannot be understated.

All individuals with assets to pass down should think about their estate plans, and if you’re a business owner, your corporate legacy is something that should be included in these plans at the earliest opportunity.

If you’ve not yet made succession plans, some things to consider are:

  • Your intentions for the business after you’re gone. This could be to sell the business or pass ownership to a family member.
  • Whether you’ve prepared your beneficiaries to honour your intentions. If you plan for a specific family member to inherit the company, have you discussed this with them? If you wish for a sale to take place, do your beneficiaries know how this process works?
  • How your business will withstand the stress of this transition. Without key person cover, an emergency fund, and a clear succession plan, your business could suffer financially after your death.

Talking to a financial planner about business succession planning can help you prepare sufficiently. 

3. Is my corporate debt protected?

If you or another key person were to pass away or become critically ill, this could lead to financial difficulties for your business. One knock-on effect of this challenge could be an inability to pay back business debt on time. 

Being unable to pay your debt could mean that your business eventually enters insolvency. Luckily, though, you can take steps to protect your debt in the event of a death or serious illness by taking out business loan cover.

In a similar way to key person cover, business loan insurance may pay a lump sum after the death or illness of a business owner. These funds can be used to pay off outstanding debts, shoring up your company against financial precarity even in a difficult time.

If you’re unsure of the type of business loan protection you might need, speak with a financial planner for further guidance.

4. Could my business survive another event like Covid-19?

Covid-19 had a grave impact on many businesses. Figures published by the Department for Business, Enterprise, Energy and Industrial Strategy in 2021, published by This is Money, showed that nearly 400,000 UK businesses closed in 2020 alone. 

Indeed, lockdown meant that many businesses had to close their doors, particularly small firms that operated in the retail and hospitality sectors.

Although another COVID-19 lockdown is unlikely at this point, these circumstances could offer food for thought about what might happen if your business was hit by another event outside of its control.

While there is no one-size-fits-all piece of protection that could prevent your business from going under during an event like COVID-19, it’s worth exploring the options we’ve mentioned above, as well as discussing this eventuality with a financial planner.

I can help you:

  • Review your personal and corporate financial situation
  • Prioritise building your emergency fund, so your business has a buffer against the unexpected
  • Put together a bespoke package of business protection to suit your unique needs
  • Work through any financial challenges that arise over the coming years.

Together, we can put plans in place to shield your business from the unexpected.

Get in touch

Protecting your business against unexpected future events can give you ample peace of mind. If you wish to discuss corporate cover or any other matter mentioned in this blog, get in touch.

Email me at a.douglass@grosvenorconsultancy.co.uk or call my office on 01793 766 123. Alternatively, call my mobile on 07525 177 046. 

While I offer high standards of service and will work with you to ensure any plan is right for you, I’m also a busy mum, so work Mondays and Tuesdays only.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Note that financial protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse. Cover is subject to terms and conditions and may have exclusions.

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