A few years ago a bad thing happened.
We received a telephone call from a potential new client asking to cancel our appointment with him and his business partner because his business partner had died suddenly the day before. The purpose of the meeting had been to arrange some life cover for each of the two business partners so that if either of them died the other would be provided with enough money to buy out the other's shares in the business.
However shocking the sudden loss of a close friend and business partner was, the troubles didn't end there.
The family of the dead partner had never had any involvement in the day to day running of the business but of course they had depended upon the business for their income. What were they going to do now?
The two business owners had been skilled professional engineers and been responsible between them for most of the business reveue. With only one fee earner remaining the business faced significantly lower revenue meaning that the business could not continue to fund at the same level both sets of income - something would have to give.
How did this story end?
The remaining shareholder who was in his late 50's and had been hoping to retire in a few years was forced to remortgage his own home to provide the capital necessary to buy out his ex business partner's shares - putting up his own home as security was the only way he could raise the necessary required funds. Big change for him then and for his own family.
Here's a thought - what if I said this man was lucky! How could that be? Surely he was unlucky?
Well obviously he was unlucky because he hadn't put a robust disaster recovery plan into place in time and it ended up personally costing a him a fortune in added debt, delaying his retirement by years and putting himself, his family and his home at risk. The cost of the insurance premiums necessary to prevent this personal calamity would have been a fraction of what he ended up having to pay.
And the lucky bit? Well this all happened a few years ago at a time when he was able to raise sufficient extra equity from his property to finance the share purchase.
It could have been much worse - it could have happened now.
Because as we all know - right now persuading banks to lend money is a completely different proposition compared to a few years ago and likely to be even more difficult when the bank learns that the business has just lost a key person who was a responsible for a earning a significant proportion of business revenue. Put bluntly for a great many business owners the answer right now is going to be no.
And then what? A forced sale to a third party perhaps?
If you a have any concerns about protecting your business and your assets why not contact us at Moneysworth 0845 430 5200. We can help you take back control and make a plan to insure against the huge costs and risks of this future potential catastrophe for your own business.
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