“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

When was the last time you reviewed the key assets of your business?

Are you aware 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 Consultant and/or an accountant’s input) and needs to ensure that if a key person did die or become disabled that you have in fact given your business the crucial commodity of appropriate time;

- Time for the business to trade on without you

- Time for the business to continue to pay bills and your creditors

- Time to ease the potential concerns of your bank and any other creditors

- Time to reassure your key customers that you will be there to help them (and they need not go to a competitor)

- Time reassure your suppliers that you can pay them now and in the future and they don’t need ‘cash with order’

- Time to continue to pay yourself and your staff

- Time to survive, recuperate, and have a business to come back to.

- Time to exit on the business owner/estates terms. Not someone else’s.

- Time to focus on your health and a planned return to work

Every single business is different, and will have different needs. The true value of good business risk advice, is all about understanding in which situation, your business might require time on its side.

The information contained in this article is of a general nature and should not be taken as advice. It reflects the opinions of the writer only and does not necessarily reflect the opinions of New Zealand Home Loans.