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Business Planning - The key to
Protecting What You have Built
By Tina Schultz of Investors Group
You’ve worked hard to make your business a success. There may have been
times when you gambled on a business strategy and won...but, for the most
part, you stuck to the meticulous business plan that has been your blueprint
for growth and achievement. Now, it’s time for a new plan...
What would happen to your business if you were taken away from it, even
temporarily? Would it survive? If you’re like most small business owners,
the odds are that your years of careful nurturing and building could come
tumbling down without your energetic hands on the reins - because you are
your business.
- You’re a professional. A dentist, for example, and you get hit with a
sudden, extended illness. You’re entire practice will stop but salaries,
operating costs and other fixed expenses won’t. How will you pay them until
you’re back in the game?
- You’re not only the owner of your small business, you’re also the primary
salesperson, accountant and everything else... and you’re in a car accident
that leaves you injured and unable to work for months. Your entire business
will stop - but the bills won’t and the income that supported your family
will temporarily disappear. Do you have a contingency plan in place?
There’s no need to gamble with your future financial health when you can
take some essential steps right now to protect what you’ve built. It’s
called “business continuation planning” and it’s the process of identifying
issues that could put your business at risk as well as adopting strategies
to help mitigate or eliminate those risks.
Protect Your Most Important Asset...Yourself - As a business owner,
you understand the need to protect against risks to your capital assets -
that’s why you have fire, theft and other forms of insurance. But one of the
major yet often overlooked risks faced by nearly every business is the
temporary loss of vital human capital - a business owner due to a disability
as the result of an accident or an extended illness; perhaps even a
life-threatening critical illness.
The risk is more likely than you think:
- About 1 in 7 people can expect to be disabled for five years or
more before retirement;
- 43% of all 40-year olds will suffer a disability for at least 90
days prior to age 65;
- 58% of those who suffer a disability at age 45 are still
disabled after five years;
- one out of every 10 workers between ages 25 and 65 will experience an
accident or illness that keeps them out of work for three months or longer.
But with the right business continuation plan, you’ll protect your business
and your income by:
- Supporting continued business performance, profitability and productivity;
- Assuring that business debts can be serviced;
- Retaining employees who will continue to view the business as viable;
- Having the resources to fund recruitment;
- Maintaining good supplier relationships;
- Preserving your customer/client base.
Insuring Effective Risk Management - The risks posed by the
temporary loss of a primary business owner can be economically managed with
critical illness and disability insurance - the cornerstones of an effective
business continuation plan.
- Disability insurance allows an owner to fund the payment of ongoing
essential office expenses such as salaries of employees, rent, utilities and
property taxes (Office Overhead Expense Disability Insurance) and
replacement of personal income to pay family expenses during the period of
the disability with tax-free dollars (Personal Disability Insurance).
- Critical illness insurance pays a one-time lump sum to help cover losses
created by the owner’s absence. When the insured person is diagnosed with a
critical illness or condition as de-fined in the policy, the benefit is paid
- and how it is used is totally up to the recipient. It can be a vital
injection of cash to pay recurring business expenses or to make payments on
loans or to suppliers.
The Other Keys to Continuation - Personal protection is key to
every business continuation plan. Here are some other plan elements to
consider:
- Key person life insurance ensures there will be a timely injection of
tax-free capital should your business suffer the loss of a top producer or
other essential employee.
- Buy-sell life insurance can fund the purchase of your financial interest
in the business by a surviving business partner(s) or shareholder(s).
- Disability and/or critical illness buy-out insurance provides a lump sum,
tax-free payment to fund the purchase of your financial interest in the
business by the other partner(s) or shareholder(s) in the event of a
long-term disability.
- Potential creditor protection by use of personally owned segregated
investment funds.
You spent a lot of time developing and implementing your successful business
plan. It wasn’t easy and it continues to evolve as your business grows and
prospers. Your business continuation plan demands the same attention to
detail. Talk to your financial advisor to be sure your goals and needs are
matched to the right insurance products for your situation.
Protect what you’ve built with a business continuation plan tailored to your
business - it’s vital to your continued success, come what may.
Tina Schultz is a Investors Group Consultant.
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