Mistake 52 – Not having back-up strategies in place

The previous section referred to planning your response in the face of certain ‘business threatening’ events. One very important part of this planning should be to have solid strategies in place to deal with some of these events.

Some of the things that you should seriously consider doing are the following:
Cover yourself against possible loss of income during times of illness: There are some very good insurance policies available that can protect your income during times of serious illness. Speak to a financial advisor about setting up such a policy. You will certainly sleep a little bit better at night if you do!

Cover yourself against the financial implications of losing your job: Many insurance companies will, at a premium of course, insure you against the possible loss of your main source of income. You can normally choose different levels of cover and for how long you would like benefits to be paid.

Clarify your legal position: It is very important that you have a solid understanding of what your position would be in the case of a marriage break-up. A solicitor should be able to help you and your partner to assess this and also to draw up contracts in such a way that that it gives you and your spouse the maximum tax benefits as well as the best possible individual protection. This is obviously quite a complicated area and you would be well advised to appoint a solicitor with a great deal of experience in these kinds of matters.

Set up a contingency fund: The best way to deal with sudden demands for large amounts of cash would be to have funds available that were set aside specifically for this purposes. The setting up and management of contingency funds are discussed in more detail elsewhere in the book, but allow me to here just emphasise their immense importance to the long term survival of your business.

Have a clear ‘exit strategy’: Drawing a ‘line in the sand’ in terms of how much loss you are willing to sustain is not enough. You will also have to set out very clearly what you will do should you ever reach that line. Planning for this and putting it in writing could help you a great deal should this ever happen.

Get your will in order: Make very sure that your will goes way beyond your personal effects and circumstances. You should ideally also have some kind of ‘business will’ in place. A solicitor can help you to attach or combine this with your general will. Such a document should spell out in great detail what should happen with different parts of your business. Having this in place can save your family from a great deal of head scratching and even from serious hardship.

None of us would obviously like to see any of the events described above happening to us. But to pretend that such events do not happen or that, if they do, they will not have a serious impact on your business, is to be like an ostrich with its head in the sand!

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