Business protection is one of the largest untapped markets in desperate need of financial advice. Clare Harrop issues a call to arms
A third of businesses have no protection in place to cover the cost of purchasing shares should a business owner die or become critically ill.
Indeed, the number of businesses without a formal agreement has increased 11% from previous research.
Yet despite all this, it remains fundamentally true that the key to the success of any business is its people.
The majority of businesses have a few people who are essential to its survival, be it the owners, leading employees or major customers. Without these key individuals, any business struggles.
Far worse, the sudden loss of their expertise and experience can have a potentially catastrophic impact.
So why aren’t more advisers seizing this opportunity and advising UK businesses? Business protection is, after all, straightforward, practical insurance cover that a company needs.
It is as straightforward as any other insurance, such as employers and public liability, buildings and contents, pensions or healthcare for its employees.
The most significant differences are that business protection generally incorporates higher sums assured and that the claim will be paid to the business, not a family member.
There is a real opportunity now for advisers to break into the business protection market because, with a double dip recession now a real possibility, business owners need to understand what could happen to their business if they or a key individual in their firm were to suddenly die or become critically ill.
What about the business’s debt situation? Could the directors repay their bank loans and overdrafts, or buy the shares from the family of a deceased business owner to protect the profits of their business during this critical time? Would the finance be easily accessible to them to cover these eventualities?
Borrowing from the banks is not getting any easier and there is talk of a second credit crunch looming due to the eurozone’s woes.
Business insurance could be a cost-effective panacea to enable directors to fully protect their business.
WEATHERPROOFING BUSINESSES
So what will it take to develop the business protection market to maturity? From an adviser point of view, entering the business protection market demands a clear and coherent business strategy.
Advisers should work with their selected providers to build a business plan with very clear objectives & targets.
Firms should consider what corporate services will be required, from basic tools such as a website and business cards, to more advanced marketing strategies such as encompassing social media tools.
Once you’ve planned your marketing strategy, you need to think about lead generation (set a budget and stick to it) and prospecting among existing clients by attending seminars and through professional connections.
There are a whole range of services and offerings aimed at the business market, from trade bodies to Chambers of Commerce and industry magazines. These offer a powerful route to market.
Whichever method you choose, it’s vital to know your customer. Good research will point you in the right direction. Companies House is always a good place to start.
Think about your client profile – who are you aiming at? SME means different things to different people and you need to get your approach right if you’re to make an impact.
