Being the boss might give you greater freedom and earning potential but it also means you have more responsibilities and need to plan for all eventualities. Most New Zealand businesses appreciate the need to manage the risks they face every day. If you’re in business, chances are you insure your premises, vehicles, equipment and stock against fire, flood and theft. But have you stopped to think what would happen if you were to lose one or more of your most valuable assets – the people who make your business work, including you? Protecting against the loss of business partners, shareholders and key staff is an important function of any business insurance policy.

Consider the risks a business faces that can be insured against:

1. Business Ownership: Losing a shareholder or business partner

   Why should something as simple as a broken leg or an illness ruin what you are working so hard to build? The loss of a shareholding director or business partner can have a dramatic impact on a business. Would your business survive if one of the owners were to die prematurely, suffer a critical illness or become totally and permanently disabled?
   
   Who would take their place – not only in performing their day-to-day role, but also in deciding how your business is run? Appropriate share purchase protection, coupled with a suitable agreement such as a buy-sell agreement, ensures your business can continue should one of your business partners become seriously ill, injured or worse - die.

2. Key People: Losing your most valuable assets.

   If something happens to a key person, what would happen to your business? When you’ve worked closely with someone for many years building a business, it’s easy to take for granted the essential and valuable part they play and to assume they’ll always be there. However, sometimes the unthinkable can happen without warning.
   
   Appropriate protection guards your business against the loss of a key person and the revenue they generate. Most businesses rely on key people, without whom the business would struggle or even have to close.

3. Business Debt: Meeting loan repayments

   Have you considered your ability to pay back debt if something happened to a shareholder? If you, your business partner or a key person were to become ill, be injured or die, could your business continue? What would become of the assets associated with any loans taken out to support the business?
   
   Appropriate business debt protection helps guard your business assets should you be unable to service a loan. Often the ability to borrow is dependent on the income generated by a key person. If that person were to die or become seriously ill or injured, insurance could help you meet your repayments.

Too often the absence of shareholder agreements in New Zealand companies is a stumbling block that often results in costly disputes over how private companies are valued, run, grown or even wound-up.

From an Insurance point of view it is important to understand how the company is structured, what agreements are in place, and what the intentions of its directors are under certain circumstances. It is a common mistake to put in place “Ownership Protection” in the form of Risk Cover, however, the policy is worth nothing if there is no formal agreement in place that stipulates what the funds are for:- Insurance and an appropriate Agreement work hand in hand.

There is very little point in paying for Insurance that doesn't fulfil the intention if it is called upon. That's just a waste of money.

The main aim of this Risk Area is to ensure the smooth transfer of ownership, or winding-up of the business in the event of a shareholder leaving the business upon death, permanent disability or diagnosis of a critical illness or major trauma.

Please call an Adviser at Bay Financial Partners on 07 578 3863 if you would like to discuss insurance to help protect your business.

A useful tool is Buy-Sell Questionnaire (click here to download) that can be used in the discussion process (under what circumstances will a Share transfer need to take place, who will facilitate it etc.)

Below is a Business Risk Guide produced by AIA that will provide some guidance for some of the risks a business might face that can be insured against.

Protect your business from the unexpected.

Business Insurance offers a range of benefits that will provide your business with a necessary cash injection should a key person or shareholder pass away or suffer an illness or injury.

Success in business is based on many factors, including an owner's passion and commitment, and the staff's ability to achieve business goals. Success can also be dependant on how a business copes with the unexpected.

Business Insurance is about protecting against the unexpected, through a comprehensive range of Employee and Business Protection solutions, designed specifically for your business, so you can focus on running your business.

New Zealand is a country full of innovators:

• 97% of all enterprises are small and medium-sized businesses (SMEs).
• 89% of SMEs employ five or fewer people.

(Ministry of Economic Development, 2008)

Expect the unexpected – make a plan

Your business is one of your greatest assets and something to be proud of. Ensure all your hard work isn't lost if something unexpected happens. Plan for the unexpected and make sure all your bases are covered. You won't regret it.

Call Jonathan or Andrew on 0800 867 323 to discuss protecting you business from the unexpected.

What is Share Transfer Protection?

For owners of businesses where there is more than one owner, one of the biggest concerns is how to make sure the business can change hands if something happens to one of the shareholders or partners.

For example, two shareholders own a business together and one of them became too ill to be able to continue.  How do the owners make sure that one owner can carry on with the business, and the other gets to withdraw their capital?

The solution is to put in place a plan that is triggered if a disaster happens.  This is how it works.

As a small business owner you have to manage the business finances, handle the marketing and gaining of new clients, the staff ... and so on! Then somehow you have to manage your personal finances as well. For many small business owners it gets difficult to separate the business from the personal finances, but these tips will help.

Budget: It is simple, and boring, but it is the best thing in the world to help plan your business and your own finances. Work out what is needed for each, and where the money should be going, and that will give you a plan even if you don't have a business plan. Think especially about these areas when doing budgeting:

• The money you have in reserve and savings – and how much you would like that to be in the future.
• Known, or fixed, costs
• The variable expenses: areas where you'd like to spend money, if you have it.
• The revenue that you need to break even and make the business stay in business
• Your desirable profit level

In today’s competitive environment survival depends on the ability to respond to change.  The change that could hit your business could be the loss of a key director/key shareholder through death, disability, ill-health or poorly planned retirement.

Many small to medium size businesses rely on the complementary skills and abilities that shareholders bring to a business for day-today survival.  Shareholders often undertake considerable personal financial commitment, bear the increasing responsibilities of compliance and invest much time and expertise in planning for the ongoing success of the business.  With so much at stake a business survival plan is a priority: