The family finances of most small business owners are closely linked with the health of their business.

When orders are piling in and the business is thriving, the family can afford a better standard of living; overseas holidays become the norm, private education for the children is a possibility, a move to a larger home may be tempting.

However, when the business experiences tough times, the family will need to tighten its belt, take more infrequent holidays and accept fewer luxuries, which may have become part of day to day life.

Remember the SWOT analysis?

There is little your business can do about macro-economic factors, such as recessions, falling commodity prices or the financial crisis of 2008. However, any competent business owner, who remembers GSCE (or even CSE!) Economics or Business Studies classes, will regularly review the strengths and weaknesses of their business, whilst at the same time analysing the opportunities and threats which present themselves.

Once such threat, which in our experience many small business owners overlook, is the effect illness or death, of you, a business partner, or a key member of staff would have on your business, and consequently, your family finances.

Five key questions to ask yourself

There are some basic questions all small business owners should ask themselves:

• If you were unable to work due to illness, would the profitability of your business be hit? Could the business fail? Would the impact on your family’s finances be a negative one?
• If you have a business partner who became ill, would the business struggle replace him or her whilst ensuring their family were financially secure?
• If you or your business partner died, would you struggle to find the money to buy their shares from their estate?
• Do you have a key member of staff whose absence through illness or death would significantly impact profitability?
• Does your business have a loan it would struggle to pay if your profits were hit by a sudden illness (or death) affecting you, your business partner or a key member of staff?

If the answer to any of these questions is “yes” you have a potential threat to your business.

Two choices

Having identified such a threat, you have two choices.

You could ignore it and plough on, knowing that there is a potential threat and crossing your fingers that it won’t affect you. You may be lucky, then again…

Alternatively, you could investigate the potential solutions to the problem and make an informed choice about the action you choose to take.

If you take the first option, we wish you well. However, if you are perhaps more cautious in nature and feel that threats should be investigated, we are here to help. Our advisers will help you identify where your business is most vulnerable and suggest options to help mitigate that threat.

It’s then down to you, and you alone, what action you take; but at least it will be an informed decision.

To speak with one of our advisers call us on 01925 837736.