Through succession planning, business owners formally document their preferred exit options in case of death, or, if they are still in business – terminal illness.
This succession plan generally includes:
- Multiple exit strategies,
- The events that would cause you or your business partner to exit the business,
- A strategy of what this exit would look like, and
- The strategy to take on new business partners.
We often hear that business owners don’t particularly feel the need for business insurances because they’re in business with family, or quite simply – they don’t want to deal with it. However, taking the time to create and implement a succession plan gives invaluable peace of mind that your hard work is protected in case of the unexpected.
It’s also important to consider how you store and share your important documents.
To help you get started, here are the three common types of business insurances:
Business expenses
Expenses such as rent, power and staff wages need to be paid irrelevant of whether you’re generating income or not. Business expenses insurance provides ongoing payments for those costs. This helps to ensure the business can meet ongoing expenses and offers the opportunity to withdraw from the business without financial pressure.
Key person
If there is a key person in your business (and this will most likely be you) that generates significant income or has a specialised skill set that would be hard to replace, you should consider insuring them. Consider the impact to the business if they were unable to work. Key person insurance provides a lump sum to the business to cover the lost income.
Buy sell cover
If your business has multiple owners and one of them leaves due to death or disability, buy sell cover will provide a lump sum payment to pay out the leaving business partner or spouse. This type of insurance provides an exit strategy that satisfies everyone.
Talking about succession planning can be uncomfortable, but it’s incredibly important. The importance of having a financial planner who you trust with this cannot be understated.
Ready to set your business up with a succession plan?
Get in touch to arrange a free, no-obligation, meeting with the Carbon Insurance Brokers team and find out your options.
