Yesterday I attended the 10th birthday celebrations of Mega Advertising – powered by Pinnacle Design. The founder, Philippa Jacobs, like 44% of the respondents to the recent Life Risk Limited Starting Up Business poll did not think of protecting her income when she started her business – there was none. Nicky Wagner is a Christchurch business icon of some 25 years business experience. She is now National MP for Christchurch Central and she sums up the poll results by stating, “I don’t think many people think of insurance when they start their businesses - they are generally cash strapped and optimistic two factors that don’t favour insurance.” This is very true and I liked her comment so much I thought it worth sharing with you.
What Philippa Jacobs of Mega Advertising discovered was that a personal income protection plan is essential for a business owner, and it is much easier to get one going before you are self employed, than after you start out on your own. In preparing for her business’ 10th birthday celebrations she counted up the client numbers, they had 999, as of Wednesday 5pm. Does she still need insurance with client numbers like that, and good staff to get them there? Philippa reminded me recently, “Neil, I haven’t needed you - but wouldn’t do without you. Peace of mind is an amazing thing.” I guess her reliance on the cover I helped her put in place speaks for itself.
These are the full results of my survey on business start up people and their attitudes to protecting income. The final day for polling was December 12th.
44% Didn’t think of or wouldn’t think of protecting their income when starting up a new business. 33% thought of it and didn’t do anything about it. 16% said they wanted to do something about it. 11% said they had done something about it and were glad. This does not add up to 100% and the poll allowed more than one answer, for example you could say, I didn’t do anything about it, and I want to do something about it now.
What will 89% of business owners do to address the very real Life Risk that is facing them? Will their assets and family recover after their health recovers? In the event of a significant life event health tragedy or illness, how long could your business survive on cash reserves and customer/supplier goodwill before the cash flow and profits dry up?
A staggering 51% of males will suffer a critical illness before the age of 70* Perhaps that is because they drink too much and eat steak at BBQs, you think? Well 33% percent of females will suffer critical illness before the age of 70*. So what are some of the financial risks associated with these statistics?
The four most common risks to a business owner are:
You’re the boss
The buck stops with you. For example, its your name on that commercial loan agreement and you’re ultimately responsible for the repayments and any other liabilities - making sure your business commitments are met. When a disastrous health life event strikes you who can you turn to? (A hint, the bank may not be sympathetic as they will be at risk too).
Covering your costs
When you are unable to work due to sickness or injury or the ultimate degeneration in health following a previous injury, you’ll still need to ensure that your ongoing business expenses are met and debtors paid. Will you be able to achieve any level of business continuity to keep your customers happy and your reputation intact? If not, how will you make sure you can achieve that or replace the money that will help pay your monthly bills at home, mortgage payments and preserve your family’s lifestyle.
Relying on others
Most businesses have a person or persons that you can't get by without. They have special skills or knowledge without whom the business may struggle to operate effectively or even survive. Do you think you can rely on ACC to help you with replacing your key person as well paying you?
Lack of planning
Business Coaches and Business Advisers tell start up business owners to look at how they will get out - gracefully. Without a plan, should the need to get out of your business suddenly come upon like a swarm of bees in the forest, due to illness or accident, the future of your business may well be at stake. Preparing an alternative income for yourself in the form of insurance be it a Start Up Income Protection type solution or an Income Protection plan for those that have one or are able to get one, is step 1 in the right direction.
* Source: GenRe LifeHealth Australia, 2005
33% of those that responded to the poll had thought of income protection, but had not protected their income. Are you like that too? Call Neil Smith on 03 323 4241 right now.
I’ve mentioned two people in this article. Here is how to learn about them. Click here for MegaAdvertising - powered by Pinnacle Design. Click here to discover what Nicky Wagner is up to.
A disclosure statement is available, upon request and free of charge
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