Whilst putting a personal will in place for you and your family is a common thing to do, business owners may not have put much thought into implementing a will for their business; more commonly known as succession planning.
Succession planning allows business owners to formally document preferred exit options in the case of death or terminal illness, whilst they are still in the business. A business succession plan typically includes different 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.
Often, business owners don’t feel the need for business insurances and common hesitation we hear is that “I’m in business with my family” or “I don’t want to deal with that.” However, taking the time to put a succession plan in place can give you peace of mind that your hard work is protected in case the unexpected happens. This is very important in the case of involuntary exits.
There are three common types of business insurances:
- Key person – If there’s a key person in your business (and you are most likely a key person) that generates a substantial amount of income or has a specialist skillset that would be hard to replace, then you should be thinking about insuring them. What would the impact on your business be if this person become unable to work, key person insurance provides a lump sum to the business to cover lost income the key person would have generated.
- Business expenses – There are costs in a business that need to be paid irrelevant of whether or not you are generating income. Business expenses insurance provides ongoing payments for those costs, such as rent, power, wages etc in case the unexpected happens and you’re unable to generate income for the business. This ensures the business can meet ongoing expenses and offers to opportunity to withdraw from the business without financial pressure.
- Buy sell cover –If there are multiple owners in your business and one of the business owners leaves due death or disability, buy sell cover provides a lump sum payment to pay out the leaving business partner or spouse. Buy sell cover provides an exit strategy that satisfies all parties.
Whilst it’s uncomfortable, it’s essential to talk to a financial advisor. You’ve worked hard to build your business so make sure in any case, the outcome is in your favour. We have a team of financial planners in Perth, Melbourne and Adelaide – contact us today to get your cover in place.
Andreas Kettemann is an authorised representative of Synchron (ABN: 33 007 207 650), AFS Licence No. 243313. All invoicing for the financial planning services will be done through Synchron as the dealer group.