The principle of “focusing on the core” is equally important in driving financial planning for business people as it is for personal planning.
The business can be an extension of the family, with massive amounts of time, effort and money invested over the years to bring it to where it is currently.
In all probability you will have looked at the questions:
What happens if fire destroys my business?
What happens if someone sues me?
However, businesses frequently rely on their owners for drive, energy and expertise. Business owners tend to be dynamic individuals who think nothing of their own mortality. To get the business to where it is they have taken risks and survived; they feel that nothing can get in the way of them.
Our approach to financial planning for business people is to acknowledge their worth to the business and look at a structured Risk Management plan.
Risk Management is the process of determining how various risks will be handled. The available options are;
Avoid the risk.
Try to reduce the risk.
Assume financial responsibility for the risk.
Transfer the risk to someone else.
Transferring the risk to an insurer is the most common and effective way to protect against catastrophic loss.
The fundamental rationale behind all forms of insurance is to determine what risks can be transferred (i.e. insured) on a cost effective basis.
For this reason we bring into the equation three additional questions;
What happens if a key employee dies?
What happens if I become disabled?
What happens when I die? That takes in what happens to my business when I die? and what happens to my business ownership and control when I die?