Why Planning Ahead is Crucial to The Future of Your Business
Many small business owners don’t think twice about insuring their business premises or stock, but fail to protect against the loss of their most important asset. Philip Elliott, Managing Director of Philip Elliott Associates, specialists in debt recovery, credit control and business support; explains why the right insurance is key to safeguarding the future of his business.
I started Philip Elliott Associates in the early 2000s and Robyn Baxter joined in 2015, becoming our Legal Director in 2018. As directors, we both have discrete responsibilities in legal, financial and marketing, but also work closely together on client briefs and, if either of us is away, the workload effectively doubles.
It is manageable in the short term but, and particularly as the business has grown rapidly in recent years, we both recognise that a prolonged absence of either one of us would represent a risk to the company’s stability. But the death of either of us would threaten its very existence.
This reflection prompted us to look into Key Person insurance – effectively, a life insurance (and disability) policy paid for by the company to insure the lives of its most valuable employees. In the event of a death, the company is the beneficiary; the money goes into the company and can be used to cover for temporary staff to take up the work of the person who has died, lost profits, or any other purpose deemed appropriate by the directors/owners.
We had worked with Russell Scanlan for many years to provide cover for other areas of the business, so we turned to them for advice. With their help we found exactly the right level and type of cover to meet our needs. For a monthly premium, we are safeguarding the company against the loss of its most valuable assets: Robyn and me!
As time goes on, additional policies could be taken out, when we employ new key staff, as the business grows.
Businesses, especially smaller SMEs with a handful of staff, start-ups, or operations with perhaps just two or three people, may not see Key Person insurance as a priority. After all, there are many other calls on one’s income as a business, including other forms of insurance, as well as regular bills and salaries.
One can easily see why a Facebook or a Virgin might need such cover as the loss of a Zuckerberg or a Branson would be a blow to the company share price, let alone its operation. But is it worth the outlay for a much smaller enterprise?
Well, for us, yes, because it’s a question of peace of mind. As our business grows, the loss of either one of us would badly dent our ability to function and to generate income, putting us in the position of dealing with the financial fall-out at a time of personal trauma.