Protect yourself and protect your business

Mercer Financial Planning

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Essential protection for your business

As a successful business owner, you will be used to managing risks to your business, such as a fire at your premises, damage to vehicles or loss of stock. But what would happen if you lost one of your key people — a valuable employee, co-owner or partner? Or what would be the impact if anything happened to you?

Protection strategy It’s important to have a strategy in place that minimises the impact of your key people moving on – the very people that you rely on to ensure the success of your business. And it’s just as crucial to take steps so that control of your business remains in the right hands in the event of the death, or serious illness, of an owner.

A Business Protection strategy can provide the cash you need to replace a key employee and maintain income while you adapt to the new circumstances. It can also help pay off bank loans and ensure you retain control of your business by funding the purchase of the deceased owner’s shares. What’s more, you can guarantee that your dependents receive a fair value for your share of the business should anything happen to you.

Many companies across the UK take the time to consider employee benefits, pension schemes or staff protection, yet the business itself can be overlooked. However, the business is pivotal to everything else. Without it, none of the other components would link together.

Peace of mind

Our experts can help you develop a strategy and put appropriate plans in place to give you peace of mind, so that even if the worst does happen, your business will be protected and survive.

40% of businesses would cease trading in under a year if a key person or owner died or because critically ill.

57% of businesses don’t have Key Person insurance in place.

37% of businesses don’t have Share Protection cover in place.

Only 28% of business owners have heard of a Relevant Life plan.

89% of businesses that have Protection cover took it out after taking or seeking advice about protecting their business.

52% of businesses think they would cease trading in under a year after the death or critical illness of a key person.

Source: L&G business Protection Report 2019

Business continuity planning: the ‘people risks’

Research has highlighted that 52% of businesses think they will fold within twelve months of the death or serious illness of a key individual, and that indicates that many business owners are not adequately protecting themselves and their company against people risks.

Source: L&G business Protection Report 2019

Is your business at risk? Ask yourself: 1. Have you considered the financial impact on your

business of the death or serious illness of a key employee (including you)?

2. What plans do you have to manage financially if this did happen?

3. How much money would you need and where would you get it?

4. Is any debt adequately covered in a worst-case scenario?

Who is a ‘key person’ in your business?

Take a moment to think about who your really rely on in your business. Key people perform many different, but vital, roles and include:

• Business owners, who set the strategic direction and run the business

• People who have a major impact or influence on profit, such as a Sales or R&D Director

• Employees with specialist skills that are hard to replace

• People who hold relationships with third parties, like banks or suppliers

In fact, a key person is anyone who would put a business at risk if they were to become seriously ill or die.

The loss of a key employee’s services could result in:

• Loss of client connection and confidence

Client contact is important and loss of an employee may result in clients seeking other suppliers or being approached by competitors.

• Loss of bank or suppliers’ confidence

Lenders may require early repayment and creditors may move the goalposts with regard to business solvency.

Other things to consider

• What would happen to any loans that would need to be repaid on the death of an owner?

• What about any Director’s Loan Accounts which need to be paid back on death? Is there money available to meet this liability?

• If a valued employee were off sick for a significant period of time, would you want the burden of continuing to pay their salary?

Ultimately, you may find that money is needed to continue trading in the event of the loss of a key person, for example, to maintain profit, fund a replacement, pay off bank loans or repay Director’s Loan Accounts.

• How much money would you need and how quickly would you need it?

• Could a cash injection help secure your business’s future?

What happens now?

The first step to protecting your business and key employees is to speak to one our experts. They can help you put an appropriate strategy in place so that your business is protected, whatever the future brings.

Contact us

Telephone: 0333 400 1106Email: fp@mercer.comWeb: www.uk.mercer.com/financialplanning

© 2020 Mercer LLC. All rights reserved.

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Succession planning: do you need a ‘business will’?

Who would be pulling the strings if your business partner died?

If your business partner died suddenly, you would want to make sure that their shares ended up in the right hands – and there are no better hands than the business owners’.

Without the capital to buy the shares and an appropriate Business Will to state what should happen to them, however, you could find yourself working with whoever inherits them, or with anyone they decide to sell them to.

Either way, if they had a majority holding, it could mean an unknown boss calling the shots, which is probably something you would wish to avoid.

By putting a Business Will in place, along with appropriate protection, you’re taking the right steps towards those shares and the money ending up in the right hands.

Key questions

• If a fellow business owner died or became critically ill, would you want to retain total control of your business?

• Would you want your loved ones to receive the value of your share in the business in the event of your own death?

• It is crucial that you state in writing what you want to happen.

Why Mercer Financial Planning?

We have a dedicated team of Business Protection professionals with many years’ experience of helping business owners protect their businesses, key employees and themselves.

• We specialise in this area of financial services. We get to know your business and put in place appropriate life insurance cover, in conjunction with any required legal agreements, to ensure money is available in the right hands at the right time to help ensure the future of your business.

• For over 25 years we have been helping businesses of all sizes and industries from across the UK to manage the risks in their business. People risks are amongst the most important, and while no-one likes to think about death or serious illness, the impact of losing a key person or business partner can mean the end of some businesses. Many years of hard work can be lost in an instant.

• Working with leading insurers, we seek to find the optimum cover for you. We understand that you are busy running your business, and our experienced staff will work with to you ensure any paperwork and processes are completed as smoothly as possible.

• As a firm of Chartered Financial Planners, you can be reassured that we offer high-quality advice. We can implement solutions that complement your overall insurance and risk-management strategy.

Mercer Financial Planning is a trading name of Mercer Limited which is authorised and regulated by the Financial Conduct Authority (FCA)Not all products and services offered are regulated by the FCA.Registered address: 1 Tower Place West, Tower Place, London, EC3R 5BU. Registered in England and Wales No: 984275