Key Person cover
“Take away my people and leave the factories, and soon there will be grass growing on the factory floors, but take away my factories and leave my people, and soon we will have bigger and better factories.”
Andrew Carnegie
Did you know that even a small drop in revenue of 10% may be enough to put you into the red if it happened suddenly? What would your bank do? Are those loans jointly secured?
The loss of a key person, even for a short period, may have a huge impact on your cash flow. Imagine finding out tonight that your business partner has just been involved in a car accident and may not survive. What would you do? What would your business need?
If he or she then died, could you pay off debt? If his or her Executor came knocking on your door, demanding repayment of shareholder loans, could you pay them?
Human Capital is the most important asset your business has, and probably the one you value least. Your business will have at least one person, probably more, who generate the lion’s share of the revenue. Your key people probably include you, but may include designers, engineers and sales people. Business is about intellectual property and relationships and in small businesses if these relationships are lost due to the death or disability of a key person, the business may not survive in its current form.
Key person cover needs to be worked out carefully (usually with your accountant’s input) and needs to ensure that if a key person did die or become disabled that:
1) Your business could continue to trade
2) You could continue to pay your bills and your creditors
3) You could satisfy your bank and any other creditors
4) You can reassure your key customers that you will be there to help them (and they need not go to a competitor)
5) You can reassure your suppliers that you can pay them now and in the future and they don’t need ‘cash with order’
6) You can continue to pay yourself and your staff
Should you wish to know more please simply complete the following form and we shall be in touch.
