Being prepared

Small businesses form the backbone of the UK economy, with small and medium-sized enterprises (SMEs) thriving in almost every sector of business, be it retail, construction, financial services, IT or health. They vary considerably in size, some having as many as 250 employees, others as few as one. Running an SME can be hugely rewarding, both personally and financially, but it’s a big responsibility and it isn’t without risk. Whether you’ve been in charge of a successful business for several years, or have only recently started up your own enterprise, it’s important to understand the challenges and potential pitfalls, and to think of ways of minimizing their impact

You can insure your premises, your IT equipment, your stock, any specialist machinery and so on. Most business owners are aware of this and seek appropriate cover. However, these same companies are far less likely to insure the health, or the lives, of the key individuals who keep the operation running. Even when a firm has a business disruption plan to ensure trade continuing in the event of flood, fire or computer failure, it won’t necessarily have a similar plan to assess the impact of losing key staff through death or illness.

For example, if your business partner suddenly died, would the business have to find the money to pay back loans he, or she, had underwritten? Or if you became critically ill, would there be the funds to pay a replacement to ensure the business is still performing when you recover? The sad truth is that such an event could prove catastrophic. Insurance can help lessen the financial impact of such events in a number of ways. These include:

› The repayment of business debts

› Provision of funds to help find and recruit specialist staff

› Purchasing of shares from a deceased business partner or director’s estate