Plans that are too limiting can create stumbling blocks for small and privately owned businesses.
Advisors need to know the pitfalls of a company, recognize the business’ dynamics and how these influence decision making.
Creating a checklist will help the client understand where the business owner is, what they have, and what gaps exist. From this point, produce a forward plan that takes products into account.
For example:
1. Key person coverage - Insure the human assets of the business. Consider the replacement costs and business interruption involved. The smaller the business, the harder the hit!
2. Share protection - Make sure funds are available to buy company shares, in the event of partner death or grave illness. This share value can be turned into cash.
3. Partnership protection - If the shareholder dies or is seriously ill, in most cases, co-partners will have to pay the partner’s relative or in-law.
Additionally, look at retirement planning, estate planning, succession planning, ill health and disability.
Understanding a small business’s personal drawbacks can add value to the business owner, aid in plan development and create a successful relationship.
