Small business ownership isn’t for everyone.  If you own and operate a small business, you understand the rollercoaster of emotions.  Very few professional endeavors offer the highs of helping customers achieve their goals or the lows of worrying about operations and cash flow.

The past 18 months for small business owners have exasperated the emotions we feel.  Big challenges spurred strong emotions such as fear, worry, anger which has led to poor sleep, tension, or worse, panic attacks.

Last year, the Nashville Business Journal created a project of Small Business, Big Mission, a series documenting the unprecedented disruption and personal testimonials of small-business owners affected by the Covid-19 pandemic.

Looking back at the full timeline of events, it’s amazing how far we’ve come.  Owners were forced to cease operations, change business models, or even venture into new opportunities.  The stress on small business owners was immense, but the resiliency during the most turbulent time in modern history has been nothing short of phenomenal.

As 2021 wraps up, we continue to see across all industries and sectors, organizations grappling with rapid transformation.  To cope, small businesses must evolve to our rapidly changing world.

Moving into 2022, it’s important for small businesses to recognize the top trends and best practices for a successful future. Protecting your partners, your families, and employees must be a top priority.

The Great Resignation

Workers are quitting their jobs at a higher than usual rate.  The Great Resignation, a term that has become all too common, is a mass, voluntary exodus from the workforce.  It’s here and it’s real.

For small business owners, the cost of any turnover is expensive and possibly detrimental to the operations of the business.  According to LinkedIn, 74% of those surveyed indicated that time spent at home – either during shut-downs or working remotely – during the pandemic had caused them to rethink their current work situation.

Key employees make the most money for small businesses and they are aware their skillset is portable.  The connections, relationships, skills, and knowledge can be taken to the market and basically sold to the highest bidder.

Key Person Insurance Strategy

When it comes to the success of your small business, key employees have a large impact.  Key person insurance is a proven integral asset to a company’s survival.  Without your top talent, the company could suffer financial hardships and put undue burdens on owners.

Setting up a key person insurance policy has three essential parts:  the owner, the payer, and the beneficiary.  If a key person passes unexpectedly, the company will have money to continue business until a suitable replacement is found.

In worse case scenarios, the funds would be used to pay debts and severance to employees if the company could not survive without this key person.  In essence, the insurance helps the company and owner avoid bankruptcy in the short-term if needed.

How Much Key Person Insurance Is Needed?

The amount of insurance needed is tricky.  Factors such as compensation and budget both come into play.  A good rule of thumb will be to apply for 5 to 10 times the key employee’s annual salary including bonuses.

Premiums will be predicated on the age of the insured, the nature of your business, net worth of the company, and if the key person is the owner of the business.

Wrap-up

You won’t be able to predict all the problems that the future might hold, but you can certainly take steps to mitigate these risks.  Start by identifying the risks or possible points of failure for your small business.  If you are depending too much on a single person, your business is at extreme risk.

Emotions will always play a role in small business ownership.  Future-proofing your business from certain risks helps you sleep better at night knowing all stakeholders will have a prosperous financial future and continue your legacy.

Used correctly, insurance plays a role in creating a sustainable, resilient operations.  If you’re ready to start thinking about future-proofing your business, contact us today for a no-obligation consultation.