4 Ways to Protect Your Business Profits

The aim for nearly every business is to produce a profit. Along with strategies on how to grow your business and increase profits, it’s vital to think about how to protect your business’ profits. With a vast amount of time and investment made into your business, don’t let an event that’s out of your control affect your profit margins.

What could affect your Business Profits?

Loss of a Key Person

According to Legal & General Report, 59% of businesses would cease trading within 12 months if they lost a key person.

When a key person joins a business, they will come with their own set of skills to grow and expand your business. If they were to suddenly become ill, the company is likely to experience difficulties, sales and profits decreasing and possibly employees resigning.

Loss of a Shareholder

The loss of a business owner or shareholder can destabilise a business and can result in financial difficulties as well as uncertainty about who will own their shares.

A next of kin or someone brand new may end up acquiring the shares if you’re unable to buy them, leading to possible disagreements, a decline in profits and struggles sharing the same vision and leading the business.

Business Loans Need Paying Immediately

If any business liabilities are secured against a certain person and the business ends up losing that person due to a critical illness or death, the consequences could be that any outstanding debts need to be paid in full.

Leaving the business under significant financial pressure if the funds aren’t readily accessible or taking its toll on the cashflow or investment plans.

Flu Season & Employee Absences

As we approach winter, more employees are likely to become ill resulting in employees taking sick days. Whether your business pays statutory sick pay or offers a generous sick pay package, your employee being off can be costly and the overall productivity of the business can decline.

In 2022, there was an average of 2.5 million UK employees signed off sick equalling to the average of sick days per employee being 5.7 days.

How to protect your business’ profits?

A popular way of protecting your business is by having contingency policies in place. Giving your business a financial lifeline.

Key Person Insurance – A policy designed to pay out in the event of a named individual’s death and/or critical illness. The business can use this payment to mitigate the financial impact on the business.

Shareholder Protection – A lump sum payout providing the remaining shareholders with the necessary funds to buy the deceased shareholder’s shares and retain control in control of their business.

Business Loan Insurance – A life insurance policy with or without critical illness to pay off outstanding business debts in the event of the insured guarantor’s death (and critical illness if policies covers).

Executive Income Protection – A monthly benefit paid to the business when an employee is absent and off work due to illness or injury and helps fund the employee’s ongoing sick pay.

The ins and outs of these policies can be complicated, ensuring that the key elements of your business are protected from the unexpected. This is where speaking to a Business Protection Insurance Consultant can be vital.

If you would like a free no-obligation discussion about your Business Insurance needs or would like a free review of your existing policies, don’t hesitate to get in touch with our Business Insurance Specialist. Call us on 01270 443510 or complete our contact form & we’ll be in touch as soon as possible. 

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