What if…? Be prepared for the unexpected

One the many courses I’ve been on was about time management. It was interesting but, evidently, not particularly helpful. A question asked stood out: “What is the difference between urgent and important?” Anyway it turns out that urgent is what something important becomes when you fail to deal with it in time.

As a result, many family businesses have a lot of urgent issues. One that can become really urgent is that of the sudden demise or incapacity of the team member who is most responsible for your profits.

Picture your business running beautifully, orders are coming in at just the rate that they can be filled and invoices are being paid well in time to meet expenses. Most of this is due to ‘Jamie’ who is the best sales executive you’ve ever had. He has contacts built up over years of experience and manages to secure the most phenomenal orders; he just has a great way about him. On top of that everyone at the office loves him, his paperwork is great and he really fits into to your family business well. He’s better than the rest of your sales team put together. More than that, you’ve worked out that he’s responsible for over 60% of your £2,500,000 annual profit.

That’s why you pay him so well. You need to keep him. It’s important that you keep him. You just hope nothing happens to him.
One day you get a phone call that Jamie has tragically been killed in a car accident on the way to work. The whole business is in shock. Of course, your first thoughts are for his family and friends. Their loss is enormous.

Then it dawns on you about your loss. Jamie was responsible for £1,500,000 of your profit this year. What’s going to happen now? All of your projections for next year include Jamie’s business. Without his contacts and orders where will the business be, not just now but in the year to come? How are you to survive this as a firm? Layoffs? Bank loans? Cut backs? How long could this take to recover? It’s urgent we find a solution and fast.

Jamie was a key person in your business. Part of your capital – human capital. We are all happy to insure plant and machinery against loss, theft or breakdown – it’s important. However, few of us think of the importance of insuring our human capital against their loss.
Having your business take out a Key Person Plan to cover the loss of profits and cost of employing a new person to replace Jamie, or your key employee, could make the difference between your family business surviving or going under.
It’s easy and relatively inexpensive (especially compared to the alternative) and could be tax effective, which you should discuss with your accountant. It’s important to do early, before the situation becomes urgent.

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