Looking after your key personnel is huge part of any business plan
YOUR business has planned out its principal risks, insuring the buildings against fire and taking out public liability insurance in case a member of the public should have an accident and claim against you.
You may even have professional indemnity insurance and legal cost insurance.
But have you ever considered what would happen if a key staff member was forced, through ill-health or death, to give up any active involvement in the running of your business? What then happens to the business and all the others dependent upon it?
According to the European Commission, almost three-quarters of family-owned businesses ceased trading within five years of the death of the founder of the business.
More than 19 out of 20 businesses have contingency plan for a major fire but few have a plan for the death of a key business figure. If a company has eight directors, the fact is there is an 89pc probability that one will die before retirement.
A business is far more likely to close as a result of the loss of a key individual than as the result of a major fire.
While a business doesn't necessarily have to insure against all potential risks, it does need, where possible, to consider and plan for them.
The effect of losing key staff goes well beyond simply the cost of their salaries and the cost of replacement.
As they're central to the business's prosperity, their loss will have a knock-on effect on the bottom line and over profitability of the business.
In addition, when a business takes out a loan or raises bank finance the lender is quite likely to require a personal guarantee or a charge on their personal property.
This especially applies to small and new businesses. If these guarantors become seriously ill or die, the lenders may be entitled to call in the loan. None of us like to think about such scenarios, but we need to.
In the event of the permanent loss of a critical person in your business, even if it's not the boss, it's important to ensure that your business objectives remain as you had originally intended and that ownership and control of the business remain with the surviving partners or directors.
Ideally, funds would be available so that the deceased or ill partner's share of the business could be purchased from him or his estate ensuring that the family of the deceased partner or the ill partner receive full value for their business interests.
The family or the estate of a deceased partner or major shareholder may want to sell their stake in the business and the surviving members in the business may not want those stakes held by newcomers.
So it's necessary to plan out a mechanism to enable this to happen as amicably as possible. That's a tall order in the current environment where borrowing is particularly difficult.
There are a number of issues that need to be considered should you lose this key person in addition to supporting them and their family.
Firstly, the business plan may need to be redrawn to help your business recover during the extended period when your key personnel are unable to work or to train or recruit a replacement.
The interests of the other shareholders or partnership need to be considered as well as the possible reaction of your lenders, particularly where the key individual was involved in guaranteeing business loans or banking facilities.
So who are your key people? Not surprisingly, they are the ones who steer, create and drive your business. Those people without whom your business would lose significant sales and profits or without whom even the basic viability of the business would be shaken.
It's not just directors and partners; it could also be a sales person who is responsible for key customer relationships.
Michael Bradley is a qualified financial adviser and the principal of Rathcoole, Co Dublin-based Clear Financial