SCORE Small Business Blog

Planning: Four Questions That Business Owners Should Be Asking Themselves

Is the survival of your business contingent on one or more key employees, and if so, what would happen to the business if one of those key people died or became disabled?

You value your key employees and their daily contributions. However, have you thought about the impact that losing one of them would have on your business? Think about the value they bring—whether it’s their creative genius, sales acumen or leadership qualities—and what those characteristics are worth to the business. Having the foresight to protect your business against the loss of an essential employee—perhaps a company’s most valuable asset—is vital for the long-term success of your business. To properly protect the business from the loss of an integral employee, which will no doubt result in lost sales, productivity or even some good customers, the company can purchase life and disability insurance on that key person. This insurance will pay a valuable death benefit to the business, which can help replace the lost revenue while a replacement for the key employee is found. But first, you must estimate how much revenue could be lost, the cost of replacing him or her, how long it will take to find a replacement, and if clients may potentially lose confidence in your company. You can access a calculator to help you estimate the financial impact on the business of these and other factors.

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