As a business owner, what do you value the most? If you’re thinking financial information, important documents, equipment and office space – that would be the “hardware” of your business. Often overlooked is your other valuable asset – yourself and the key people you rely on to run your business – consider them as the “software” of your business. It is vital to sustain and grow your business; however as a business owner you need to have the foresight to protect your “hardware” and “software”, as well as factor in the possibility of RISK.
Many business owners make the fatal mistake of neglecting to protect their business from unexpected risks, such as:
- Business Succession
- Unlimited Liability
- Conflicts between shareholders/partners
- Credit Facilities
- Retirement Planning
- Loss of Key Personnel
- Estate Planning
Let’s look at an example: Following the sudden demise of the 38 year old owner Mr. Yang, the Swatow Restaurant group with 18 outlets in Singapore was hit by devastating factors such as hidden creditors and lease disputes, making the sale of its chain nearly impossible. In the end, the buyer would have to settle the debts amounting to more than $6million and allocate a token 5-digit sum to the widow of Mr. Yang.
What are the kind of tools/plans can be used to mitigate business risks?
- Identify the Keyman in the company
- Describe how the Keyman contributes to your company
- How will the company be affected upon the demise of the Keyman
- Estimate the loss of profit arising from the demise of the Keyman
- Identify the Guarantor
- Describe the effect of the Guarantor’s death to the company and family
- What is the cash flow that needs to be generated
- Determine the sum assured required to protect the Guarantor
- Identify the Owner(s)
- Describe the effect of the Owner(s) death on the continuation of the company
- Assess the value of the company
- Determine the sum assured required to provide fair value to the estate
- Identify the Key Employee
- Describe how the Key Employee contributes to the profitability of the company
- What are the benefits of retaining the Key Employee
- Determine the deferred gratuity required to retain the Key Employee
Every business is unique in its needs; there is no one-size-fits-all solution. Speak to one of our planners, and allow them to provide you with a comprehensive look at how you can protect your business assets and your key talents.
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