Protection  

How to help clients protect their businesses

This article is part of
Guide to financial resilience and protection

How to help clients protect their businesses
Photo: Vlada Karpovich via Pexels

Thousands of businesses across the UK have felt the pinch from the pandemic restrictions and the cost of living crisis. 

Recent Office for National Statistics updates indicated input price inflation for businesses rose more than 19 per cent to its highest point on record, as CPI hit 8 per cent in March 2022.

Maddy Alexander-Grout, chief executive of money-saving app My VIP Rewards, says: "The rising cost of living is dismantling many families and small businesses before our eyes."

Rising inflation, two years of poor business growth thanks to Covid-19, the war in Ukraine and the Brexit effect have hit Britain's entrepreneurs hard.

Add to this figures that suggest 75 per cent of UK businesses now have some form of debt, up from 51 per cent in 2018 – perhaps as a result of coronavirus loans – and it is clear there is significant pressure on business owners.

Martin McTague, national chair of the Federation of Small Businesses, says: "It’s been decades since we’ve seen input costs surging at this kind of unmanageable rate.

“The discrepancy between the rise in costs for firms and consumer prices shown in these latest updates gives you some sense of how small business owners are taking the hit directly – in a lot of cases, reducing their take-home pay or scaling back investment and expansion rather than passing on higher costs to customers."

Alan Richardson, protection specialist at LifeSearch, concurs: "The past few years have been hard on UK businesses. Previous profits have been eaten up, rainy day funds depleted and many employees have struggled with their health – including those who are key to the business.

"Meanwhile, competitors have been able to entice good staff away with better benefits."

But while small business owners (including advisers themselves) may be feeling vulnerable, there are ways to help protect your small to medium-sized enterprise clients.

Business protection

Many small business owners may balk at the idea of adding to their monthly expenditure by taking on business protection, such as key person cover, but the last thing a small company needs right now is the loss of a senior manager or the business owner themselves.

According to Alun Beynon, protection specialist at Scottish Widows, business cover is "in essence, a survival policy for the business.

"It is protection against the financial impact that death or critical illness of a key person or shareholder could have on a business."

And, in times of economic uncertainty, there is an "increased opportunity" to communicate the need for business protection, according to Beynon. "Many business owners will be used to insuring their premises and equipment and the resulting financial loss this can have. 

"But they may have overlooked protecting the key business asset: the employees."

Payouts as a result of this cover can be used to pay off debts, buy out shareholders, pay for recruitment or locum fees – basically anything that can ensure a business can continue to support its clients.