What happens to your business if something happens to you?
Last updated on 28th June, 2018 at 03:30 pm
Imagine that your business partner dies or becomes disabled and can no longer work. Do you have a clear plan of how the business will operate? Who’ll take over their share and how will this affect the business?
The reality of this situation is more common than many business owners would like to think, and is just one of the many reasons why you should take the time to do financial planning for you and your business.
Jannie Rossouw, head of Sanlam’s Business Market, says many business owners fail to see the importance of financial planning in their businesses simply because they don’t dwell on what they don’t know.
“A business owner typically focuses on the nitty gritty of the business, because this is where your interest and passion lies. Yet, taking a simple step back may help you realise you need to take care of your personal finances beyond the day-to-day running of the business. Failure to do so could impact the continuity of your business and the value proposition which you present to your employees.
“In practical terms, a business that doesn’t have a clear plan of how it will operate should one of the key partners die or become disabled, faces immense risk. This kind of scenario can spell the end of the road for a business and can destroy the value which the partners have created over many years.”
Plus, when a business owner dies without a Will or with a Will that isn’t up to date, it can cause immense trauma to the family and the business.
Get started on your financial plan – here are your steps
- Appoint a qualified financial planner. Click here to book an appointment with one.
- Get the basics in place. This involves paying attention to the drafting of your Will and an estate plan, and getting sufficient life cover to enable the execution of your Will and provide for your dependents.
- Ensure that your healthcare and retirement planning are in place. Thereafter, business basics like short-term insurance, buy-and-sell agreements, key person insurance and basic employee benefits should follow.
“Critically, once this is in place, a business owner should institute a regular audit of your personal and business financial plans to ensure that they remain relevant and up to date. It doesn’t help to implement a once-off financial plan without regular reviews and without the peace of mind that buy-and-sell agreements continue to reflect the business’ value. Similarly, imagine the consequences of a lack of review of sureties so that these are not cancelled when no longer needed!”
Rossouw, however, adds that a business owner’s financial needs extend beyond providing for your family when you’re no longer around. “A business owner who invests blood, sweat and tears into their business yet fails to consider the value of employees is likely to lose valuable people to competitors who may offer them more competitive packages. So apart from covering the risk of losing key employees to illness and injury, also consider investing in their future by catering for their retirement planning and other general financial planning needs.”
You may be interested in reading: Five financial blunders that can set you back
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