​It won't happen to sME...will it? by Bryce Paling

Many smaller businesses are gambling their future by having no insurance against sickness or death of key staff.

Owning our own business is surely about feeling empowered, increasing personal wealth, and having an element of control over our own destiny. Being a director/shareholder, partner or a sole trader can be a great place to be with the right professional advisers supporting you.

Whilst creating wealth is one thing, holding on to our wealth can be another. It is understandable that as business owners we concentrate on growing our businesses but do we stop to consider whether our business or family would be at risk if we, or any of our key employees were to die or become seriously incapacitated and unable to work?

The loss of a key person could leave our business without vital skills and knowledge, making our business vulnerable to the following:

·         Sales could fall

·         Loans may be called in

·         Suppliers may demand immediate payment

·         Customers could go elsewhere

·         Recruitment costs (including paying for a temporary replacement) are likely to be high

Serious illness not uncommon

Given that a serious illness, such as cancer or a heart attack, affects one in four women and one in five men before retirement age, potential scenarios like these are not uncommon.

Protecting profit

The sudden loss of a key employee can leave a business without vital skills or knowledge. Replacing lost profits, covering expensive recruitment costs, or paying penalties due to the non-delivery of goods and services is costly.

Paying off debt

Many businesses borrow money to start up or expand, and the ability to repay a loan could be impacted by the loss of a key person. Additionally, directors may loan the company money (known as a ‘director’s loan account’) via undrawn salary, dividends, or actual loaned money. This would need to be repaid if the director died or took early retirement (because of a serious illness).

Sole traders

Consideration should be given to sole traders who are personally liable for business debt. If a sole trader dies unexpectedly, any debt would be inherited by their next of kin.

Professional financial advice

Having the correct protection and ensuring this is regularly reviewed and updated to reflect business changes is a particularly onerous and daunting task for time-hungry entrepreneurs.

It is one which is best left to a wealth management specialist to help protect the business from a wide range of risks and ensure business owners meet their aims while concentrating on managing their company.

We can carry out an assessment that will help you to quickly understand whether a financial risk exists and, if so, how to provide effective, tax-efficient protection against such risk. 

To receive a complimentary guide covering wealth management, retirement planning or Inheritance Tax planning, contact Bryce Paling on 01403 824192 or email bryce.paling@sjpp.co.uk

- Bryce S Paling MBA DipPFS

  Director of BP Wealth Management Ltd