Expect the Unexpected: Plan ahead to protect your business
As a new business owner most of your time will be taken up with the day-to-day running of your company, but it is important to consider worst case scenarios and plan for them in order to protect yourself and the business you’ve invested so much in.
Initially you may believe that some of the following points do not relate to you, however, as you become more engrossed in business activities, the basics can be easily forgotten.
Regardless of the industry, when an unexpected event takes place and disrupts day-to-day operations, your business needs to recover as quickly as possible and the key stakeholders, such as employees, customers, other shareholders and even your family need to be looked after.
Here, we look at some of the key issues to consider.
Financial planning and budgeting
When starting a new business, it is particularly important to have a structured plan and budget in place, especially if the business has limited financial resources.
You will often hear the phrase, “cash is king” and this is especially true when starting a new business. The initial outlay can be expensive and depending on the industry the first returns may be some months down the road. Therefore budgeting and forecasting are key to ensure that your business can continue to trade while cash is in short supply.
Only by constantly reviewing and updating your finances, can you fully understand the business and therefore prevent, or at least predict, any shortfall in funds.
If you are going into business with others, you should consider putting a shareholders’ agreement in place to protect both the operation and your own investment in the company. Business partners should also give thought to alternative ways in which the company can be structured, in order to minimise delays and ensure that the company can continue to operate, even if the worst should happen.
Key man insurance
A big threat to small businesses is losing key members of staff to long-term illness or death. Key man insurance protects your company against loss of profits and any other disruptions to business continuity resulting from critical illness or the death of a key employee. In a small business this is usually the owner or perhaps a couple of key employees.
Protect your income
To suddenly have no income, but still have bills to pay and a family to care for is a frightening thought to consider, but there are ways to protect your income.
Income protection insurance will replace some of your salary if you have an accident or serious illness that stops you working for some time. If you are self-employed or have a job which does not come with sickness pay or protection scheme benefits, then this type of policy can really benefit you.
Critical illness cover provides a lump sum payment if you become seriously ill or permanently disabled (it usually does not cover accident or injury). The pay out can help clear mortgages and other financial obligations and pay for any changes you may need to make to your lifestyle or in adapting your living environment.
A life assurance policy will ensure that your family is financially secure and can continue to maintain their standard of living in the event of your death. The proceeds can also be passed to the remaining shareholders to ensure that there is enough money to purchase the shares from the deceased’s estate.
If you would like advice on protecting your income, keyman and shareholders’ insurance our Wealth Management team can help.
Make a will
To ensure continuity and that your wishes are adhered to upon death it is really important that you complete a will. If a sole director or shareholder of a company dies without leaving a will, the risk of uncertainty surrounding the company’s operation increases as there is nobody legally authorised to make financial or business decisions on behalf of the company. Ultimately, depending on the industry, this can lead to the cessation of the business and therefore the loss of jobs for all employees as well as the loss of income for your family.Generally, the feeling is a will is just for personal matters, however, when a business is involved it is generally good practice to seek legal advice. The professionals can advise on inheritance tax and trusts, and ensure the will is valid. If you want your business to continue in your absence, then a succession plan is also essential.
We can put you in touch with local solicitors in your area who can assist with all aspects of will writing.
Creating a disaster recovery plan
A disaster recovery plan is a written document that details how you will protect and recover your business IT infrastructure in the event of a disaster. A disaster such as a flood, fire or cyber attack can cripple your operations. The basic idea of the plan is to restore the affected business processes as quickly as possible, whether by bringing disrupted services back online or by switching to an alternative system. One of the most important issues to consider is how you store your data and keep it secure.
Mitchell Charlesworth are working with our clients currently, transferring their accounting software to secure, cloud based packages. Therefore, there is no need for your accounts team to take a daily back up and ensure the downloaded information is stored off site every evening.
To discuss this article further please contact Mike Buxton or a member of our Wealth Management team.