In this episode of WealthTalk, we dive into the world of business insurance and explore the essential policies that every business owner should consider to protect your business. Joining us on the podcast this week is WealthBuilders SSAS Director, Paul Brooks. Paul walks us through three crucial insurance policies that can protect your business from unforeseen risks and provide peace of mind. Whether you're a seasoned entrepreneur or just starting your business journey, this episode provides valuable information on insurance policies that can shield your business and ensure its long-term success. Tune in to learn from the expertise of Paul Brooks and gain the confidence to make informed decisions about protecting your most valuable asset – your business.
In this episode of WealthTalk, we dive into the world of business insurance and explore the essential policies that every business owner should consider to protect their business. Joining us on the podcast this week is WealthBuilders SSAS Director, Paul Brooks. Paul walks us through three crucial insurance policies that can protect your business from unforeseen risks and provide peace of mind.
Whether you're a seasoned entrepreneur or just starting your business journey, this episode provides valuable information on insurance policies that can shield your business and ensure its long-term success.
Tune in to learn from the expertise of Paul Brooks and gain the confidence to make informed decisions about protecting your most valuable asset – your business.
Resources In This Episode:
>> Built to Sell by John Warrillow [Book]
>> WT66: 6 Tax-Saving Tips For Business Owners
Next Steps On Your Wealth Building Journey:
>> Join the WealthBuilders Community
>> Join the WealthBuilders Academy
>> REGISTER HERE FOR ACCESS TO FREE RESOURCES
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Unknown Speaker 0:01
The purpose of wealth talk is to educate, inform, and hopefully entertain you on the subject of building your wealth. Wealth builders recommends you should always take independent financial tax or legal advice before making any decisions around your finances.
Unknown Speaker 0:20
Welcome to Episode 199 of wealth talk. My name is Christian Rodwell, the membership director for wealth builders joined today by our founder Mr. Kevin Whalen. Hello, Kevin. Hi, Chris. Good to be with you again. Looking forward to your holiday on you. Yeah, well, yes, I am indeed off to off to Glastonbury and and then to to Spain. Although by the time this podcast comes out, Glastonbury probably will have finished so. So yes, there we go. Getting Things Done in advanced this week. anything worse than Glastonbury?
Unknown Speaker 0:52
Yes, I'm going around in the field being hot or muddy? And watching people we everywhere No, no, not for me. Enjoy. That's it. That's it, we've all got all got our own little thing. So yesterday, we're carrying on from where we were last week, which was inviting Paul Brooks to talk to us about the different types of protection be that personal cover, which we talked about last week, or cover for your business, which is what we'll be focusing on this week. Yeah, and interesting, albeit relatively dry subject, obviously, because nobody's going to be inspired by insurance. Because the very nature of contemplating things going wrong, doesn't inspire anybody. But it can be useful. It can be informative, it certainly can be when when you discover that you're in the mood for thinking about the reality of the situation of being in this case, in business, although there's an incredible overlap between personal protection and business protection, because in the end, it's businesses are run by people. And a wealth is created by people and the legacies for people. So the shielding that's referred to in the title is really more about how do you protect people so they can carry on and deliver a great outcome. And so insurance is necessary, because for the most part, I won't dive into all this content and in great detail, because as always, Paul knows his stuff really, really well. And as best as he can, you could describe those things. But the key thing is to recognise that you need insurance when things when you don't have enough. Now, you know, it's a temporary position, hopefully, that you insure yourself because your family are not wealthy, yet.
Unknown Speaker 2:45
You insure your business because it doesn't have enough recurring income coming in to cover
Unknown Speaker 2:51
things yet. So let's listen to Paul and then I'll give a different take
Unknown Speaker 2:59
on the three biggest mistakes I see in business that relate to this concept of shielding, and I think that's a good title. You chose CRISPR today, because shielding is protecting yourself from unknown and unforeseen circumstances. And life is all about that, isn't it? I mean, everybody gets something in their life thrown at them. That wasn't known the day before it came at them. So we have to recognise and acknowledge that sometimes for good and sometimes bad, so we need to deal with that. Yeah. Okay, then. So let's dive in. And let's listen to Paul Brooks, our SAS director for wealth builders. Welcome back again. Could see back so soon. Yeah, it's, it's a bit like deja vu. But now look, you know, thrilled to be back. And we're looking forward to today. Yes, so let's just recap for anyone who didn't catch last week's episode, which was episode 198. And we were looking at personal cover personal protection and three essential insurance policies that you should consider. And perhaps you can just summarise what those three were purple. Yeah, absolutely. So we talked about life insurance, you know, effectively giving you or your loved ones, a financial cushion in the event of the worst happening to you before a time where you're financially secure or independent. We talked about critical illness cover which in most cases is actually far more likely to happen, you know, seriously ill health and therefore, having a policy that provides again, a financial cushion for you if you're either temporarily or permanently caught up in some serious health related issues. And then finally, income protection, which similarly protects against ill health or be it, you know, there to protect a salary, let's say or replace part of a salary rather than more traditionally a lump sum with critical illness cover. Yeah, yeah, brilliant. And we know that wealth builders need to think like
Unknown Speaker 5:00
entrepreneurs, which means most likely being a business owner. So today, we're focusing specifically on those three vital insurance policies for business owners. So where should we begin?
Unknown Speaker 5:13
Well, I guess,
Unknown Speaker 5:15
why don't we just do what we did in the last episode and talk about each of them, what it, what they cover what they're for. And I can get into a little bit, not a lot of a little bit of detail about, you know, how they might be used, and in the potential tax considerations to think about, and I guess, for some business owners, you know, they get excited, they start a new business, they're busy, busy, they're marketing they're selling. And perhaps it's not until something bad happens that they actually think, Oh, I didn't think about what protection I might need, what cover I might need. So this is a good idea to understand this. And obviously, decide what you need. We're not saying that you have to have all of them, but certainly there insurances that you should be aware of, and then you can make the right decision based on your circumstances. Yeah, absolutely. And of course, all businesses are different, aren't they just like all sets of personal family circumstances. So you know, it's very rare that you would need on three you might want or needle three, if you're, you know, perhaps a more developed business, if you're an earlier stage Billing Business, certain elements of the points where companies, they may not be applicable to you now, but as you rightly say, Chris, you know, making sure that you look at these things early means you've got that protection there. And, of course, insurance is an interesting thing, isn't it, you know, it's a bit of a necessary evil, you know, you have to pay for something that you might not ever need, and that feels counterintuitive. But when you're filling in that claim form, you will realise the value of the insurance, you know,
Unknown Speaker 6:52
it's almost like a bit of a,
Unknown Speaker 6:55
I don't know, some sort of
Unknown Speaker 6:58
mental safety net, maybe feeling of protection, even though you may never need and actually ultimately, don't ever want to have to claim on it. But he says the worst happens. Okay, so we're going to break down the three key types of insurance in simple terms, again, so that you can understand each one. So which is the first one you'd like to start with? Well, I'll start probably with the simplest one, if that's okay, Chris, and we're going to call it loan protection. So,
Unknown Speaker 7:26
as the name suggests, businesses will often take out finance could be a bank loan, could be an overdraft, could be some other form of loan, even potentially, from a SAS pension in the form of a loan back, if you have a SAS pension, these are obligations that the business has to pay. And loan protection is really designed to pay out a lump sum to the business. Now, this is the big separation in people's minds, we need to start thinking about the business as a separate entity to you. Okay, so the business has got its own assets and income and bills to pay, and so on, and so on. Of course, it's an income generating asset for you, but it is its own entity. So this cover is about providing the business with a lump sum to pay off a debt in the event of usually someone in the business who is key to it a director or an owner passing away. And it really is as simple as having the money available to the business to clear the debt. And either give the business the ability to, you know, continue on,
Unknown Speaker 8:36
with less disruption, certainly less financial disruption.
Unknown Speaker 8:41
Or at the very least, if you know, that person was key to the running of the business, and there's no ongoing business, then you know, at least the business is worth more to the people that are left behind to inherit the value of it. And it could be life, or it could be critical illness cover, you know, it can equally cover both, you can have policy that just pays out in the event of death. Or you could have it in the event where someone who is key to the business contracts, serious illness, critical illness. And again, similar to what we talked about on the last podcast, you know, critical illnesses there to protect against any one of a number of sort of reasonably major health conditions.
Unknown Speaker 9:21
That should pay out pretty quickly once once. Yeah, usually it doesn't take very long if you've got a valid claim. It's really just a case of the insurance company, getting the medical diagnosis from whoever your health professional is and having it processed. And then if the claim is payable where it meets the conditions, then of course, that's when the insurance company will be looking to write the check.
Unknown Speaker 9:46
Obviously, I don't know the inner workings in all insurance companies are slightly different. But you know, I don't believe it takes very long for valid claims to be paid out. And understandably because of course the business needs that money to be able to take
Unknown Speaker 10:00
keep operating. Okay. So that's, I guess, calculated based on obviously how long you think that loan will be outstanding for and can that be adjusted as the the amount gets lower? It can be absolutely, I mean, there are several ways that you can take loan protection. And one of the most common and perhaps the most obvious ways is to have what's called a decreasing policy. You can do this with personal life cover as well, you can have a policy that starts off at a figure that represents how much debt you've got today. But accepts that over time, if you've got a repayment debt, of course, that debt will reduce, and therefore the amount needed to pay out will reduce. And if you take a cover, that reduces each year, then the cost less is cheaper. Overall, it doesn't reducing cost each year, because they price it on the basis of
Unknown Speaker 10:52
averaging out the cost each month for the full term. So you know, it might start at 150,000, over 10 years, and each year, it will decrease down by whatever rate is appropriate. So that in year 10, there's only a small amount of copper left, you're paying the same premium each month, but it's lower than having a fixed lump sum that pays out the same lump sum in year one as it does in year 10.
Unknown Speaker 11:15
Okay, good. So that's the first one anything to add to the loan protection now, well, only really just a little bit on the tax treatment. Loan protection insurance is not generally considered to be wholly and exclusively for the business, and therefore, the cost of the premiums, I don't believe can be offset against the company's corporation tax bill. So just a minor point, but something to bear in mind. Okay. All right. Good stuff. So what's the second vital insurance policy that business owners should be considering both well, okay, second one continues a similar theme, but is a bit more complicated or a bit more general. Loan protection, very specifically talks about covering an amount of debt that is known.
Unknown Speaker 12:06
He min cover is the second cover, I should say key person cover sorry, the person cover is designed
Unknown Speaker 12:16
to protect the business from the loss of somebody who is critical to the business making profit, usually. And that could be an owner, director, it could be a member of staff who is critical. It could be you know, a fantastic marketer, it could be a brilliant salesperson, it could be an engineer, whoever it is in the business, it doesn't matter, whatever your business starts, if your business has some reliance on one or more people within it being significantly linked to the amount of profit that that business generates. That's exactly what P man cover is for. And it works similarly to loan protection in that typically pays out a lump sum. But the way that it's calculated is a bit different. You know, it's not always easy to quantify what the value of a claim would need to be, you know, how much profit might you lose? How disruptive might it be to the business. And it's a bit too complicated to get into the details of this chat, Chris, but usually speaking, there is a metric that factors in the salary of the person who has been lost, and a length of time that it might take to replace them. Or there is a link to how much profit is attributable to that person or attributable to the business in any period of time that would need to be, which would be the risk period if you'd like
Unknown Speaker 13:54
an either one of those two primary methods are used to establish how much cover would be needed.
Unknown Speaker 14:02
So, again, you know, you could be getting a lump sum payment, if someone critically co who's critical within your business steps away, either temporarily or sadly passes away. So again, it's that life insurance basis, or possibly that critical illness insurance basis.
Unknown Speaker 14:21
But you can also get key man on an income protection basis. So it's actually all three of the options we talked about on the last podcast are available for the business. But again, remember, in this circumstance, it isn't about you, the business owner getting paid a benefit to you personally, it's your business, getting paid some money to financially support it whilst you find a replacement for you or whoever you've lost, whether that's temporarily or permanently. Okay, that makes sense. It does. Yeah, it's just I'm just curious, and I'm not sure you'll have the statistics for but you know, how many businesses have got
Unknown Speaker 15:00
leave policies in place, would you? Would you care to take such such a tiny number? I, I'll admit, I don't know the number. But protection across the whole of the UK is so under utilised, you know, and we talked about this on last week's episode didn't weigh, you know, fear of talking about someone dying, fear of premiums being too expensive, any one of those more or more of those reasons could be a factor for somebody not taking cover. But actually, Joe, more than anything else, I would say, for business owners, and business protection. It's just lack of knowledge that this stuff exists. You know, most people come across life insurance in their life, whether it's linked to their job, whether it's linked to, you know, them taking out their first mortgage, and the mortgage broker, or the financial advisor recommending they take some cover, it's a lot more available. And it's a lot more known about when you're talking about it for you and your family. But business owners for lots of reasons, don't actually think about insuring the risks of being in business. I mean, predominantly, in the ways we're talking about it.
Unknown Speaker 16:09
So I would say a lot of it is just simply just lack of awareness. And then probably, as we know, because we see this with the roof in general,
Unknown Speaker 16:19
even if they do No, they're too busy to get it done. Right. It's one of those that's on the to do list just keeps getting pushed to next month, next month, next year. It is yeah, you're absolutely right, you're absolutely right. And and again, look, you know, it's easy for that to happen in life day to day, especially if it's a topic you're either not particularly keen on getting stuck into or it isn't, you're not aware of it enough to realise the importance of it, and therefore escalate it up the list of priorities. Yeah. And it's so just a thing. In addition to that, of course, we've talked about wealth dynamics, and many business owners are the creative types. And, you know, dealing with insurance and paperwork is something that they're probably, you know, would rather not be putting their attention to. So that may be another factor in it. Yeah, absolutely. Yeah, absolutely. Okay. Right. So that's good. So we've covered the first two there, loan protection was number one, key man insurance or key person. Number two, what's our third insurance policy for business owners? Okay, so this one's a little bit different. We're going to call this shareholder protection or ownership protection. So think of it like this, if the first two policies are designed to provide a financial support for a business, if somebody dies, and or somebody becomes seriously ill, it's the same broad circumstances for shareholder or ownership protection, but it's specifically about that transition between someone in the business either dying or being seriously ill and therefore not able to continue to contribute to the business. So this is more relevant, I would say, for businesses that are owned by multiple owners who aren't necessarily related. You know, quite commonly, you have business partners, who are not siblings, husband and wife, partners, etc. And, therefore, the transition is easier there. Because it's all still part of that same family legacy. But when you've got dual owners of a business, who have very separate different and separate personal lives, when somebody dies, there can be a real challenge. Firstly, have the beneficiaries of that person's estate, you know, their loved ones got the financial means to sorry, bank accounts have the owners of the business that are left got the financial means within the business to buy the shares that have been inherited by the family, you can be often left in a position as a business owner, where if your business partner has passed away, you're now in business with their husband or their wife, or their partner. And actually, that person may have no knowledge of how the business works, they may not have the same skills as the person who's passed away or become seriously ill. And what you're then left in a position with is either the business owners that are left or stuck in a position where they have to continue paying profits to the shareholders, because that's legally, you know, important, but the people who are left may not want to have any continued involvement with the business. You know, if lots of reasons they can't contribute, they don't want to contribute. It's a it's a tough time when you lose someone you love or you've got seriously ill health and all those things can mean that that person who's now technically a co owner of the business doesn't really want to be involved in it. So they can be a real bind on both the families of the person who's ill or died and the actual business owners that are left and shareholder or ownership cover because it can work for partnership.
Unknown Speaker 20:00
as well as limited companies, but let's just call it broadly ownership cover for now, is designed to plug that gap is designed in a way that if you imagine the two parties, let's say, let's, let's use the the example of someone, a shareholder in a business who's died, somebody's passed away, they've got a family who are now going to inherit the shares of that business, usually speaking, unless some other kind of, you know, proper planning hasn't already taken place.
Unknown Speaker 20:29
And you've got business owners who are now the owners of a business, but have lost someone who's critical to moving it forward. The life cover in this instance, is designed to,
Unknown Speaker 20:43
firstly, pay money to the surviving business owners, or the business so that there are the financial means available to buy the shares that are now being passed on to the family. And you usually depending on how you set it up, and there are a few ways but commonly what you would have is a set of legal agreements.
Unknown Speaker 21:05
And again, without getting too specific, one of those agreements is called a cross shot cross option, double cross option agreement, which says, in conjunction with this life insurance policy that is going to be paid to the surviving business owners if I die. So it's I'm the one who's insured my life, what will happen is, if I die, my money will pay to those business owners, those business owners will have the ability to buy the shares. And the cross option agreement allows either party, the family of the deceased, or the business owners to trigger that in a tax efficient way. So there's no obligation unless one party says yes, I want to sell or yes, we want to buy. Does that make sense? So you know, it's about giving the amount of money needed to the business or the business owners to allow them to continue to be in business on their own without having to pay profits away to you know, the family of somebody who can't add can't contribute can't continue, you know, adding to the business, and giving a clean break to the family members who actually may not want to continue paying involved, they may want to just take the value that's been accrued and do other things with it. Yeah, very useful. So a bit more complicated than the other two, because the other two are really just about protecting the business and keeping it alive and operating. You know, ownership protection is more of a legacy and a succession plan to make sure that both sides of the equation get looked after. And it's complex stuff, as you say, Paul, and again, this might be a reason, which puts some people off, right, certainly with the personal is just where do we begin? Who do we go to? Who do we trust? So you know, we can definitely help anyone listening who, you know, just wants to have a chat. We've got all of the professionals within our community, our trusted partners. So if you're listening today, and you're thinking, Yeah, I need to find out about this or even need to get something done. By all means, reach out to us, right, Paul, and just drop an email Hello at wealth builders.co.uk Or just book in a call with us go to the wealth builders website forward slash
Unknown Speaker 23:14
wealth builders.co.uk forward slash discovery call. And you know, we help people every day with this kind of stuff. Yeah, absolutely. Absolutely. You know, hopefully I've distilled it in a way that makes some sense and isn't making or is making it sound a bit less complicated than perhaps people might feel it is so yeah, absolutely. Easily, resolved easily sorted.
Unknown Speaker 23:40
Definitely something for people with the business to think a bit more about for sure. Okay, great. So we've covered off the three vital insurance policies. Is there anything else that anyone should be thinking about? Paul, as a business owner? There is there's there's one other little economy golden nugget, let's call it
Unknown Speaker 23:57
and we've talked about it before Chris. Some time ago now. It's called relevant life. Oh, yes. Our old friends relevant life, are we you know, members of wealth builders Academy will know about relevant life because this is a very much key part of off the roof. But of course, just for business owners, right. Yes, that's right. Yeah. Relevant life is it's a bit of an anomaly because it doesn't really sit in either camp. It's not really personal protection, and it's not really business insurance.
Unknown Speaker 24:27
Do you remember last week we talked about death in service cover? So you know, you work for somebody a business and usually as part of a benefits package in most cases of business might offer some kind of debt in service to your family, a lump sum of money if you die while you're employed? Well, relevant life cover is basically like a one off single standalone death in service policy. And the thing that makes it so fantastic is that the premiums of the life insurance policy can be
Unknown Speaker 25:00
paid by the business, and they're tax deductible for the business. So you're actually getting the tax man to cover some of the cost of your life insurance. So as a business owner, let's use our example, Chris, we could take a relevant life insurance policy, we could have wealth builders pay the premiums for that life insurance policy, but that life insurance policy, if it ever pays out, doesn't pay to wealth builders, it isn't a business insurance in that respect, because it's a death in service. So it gets written into trust. And we talked about trusts on the last episode too. And we've alluded to them when we were talking about shareholder or ownership protection just a moment ago. But it gets written in trust, which means the death benefit doesn't go to the business, it goes into the trust, and the trust is there for the beneficiaries of us, our families, our loved ones, my circumstances, my wife and my children. And they then inherit that value through the trust, which is an incredibly tax efficient way of having life cover. Really, really important.
Unknown Speaker 26:03
So just to recap, instead of you having to pay the premiums yourself, you can have the business pay them, and they are automatically reduced by tax relief. When the benefit pays out, it doesn't get taxed. Because it gets paid into a trust and that trust is there forever, will you for your loved ones, whoever they may be. And lots of business owners sometimes fall into the trap of running their own personal life insurance through their business because they want their business to cover the premiums. But that's an incredibly inefficient way of doing things. Because what you end up doing is the business pays the premiums, and it can claim them as a tax deductible expense, but you as the employee or as the director, get taxed on what's called a benefit in kind on the on the premiums, which means you're actually paying tax on those premiums. And it's really not a very efficient way to do things. Relevant life removes that tax completely and just leaves you in a position where the total overall cost is lower, because the business is getting tax relief from the premiums. Yeah. And we've actually done an episode podcast episode. It was long time ago, Paul was back in episode 66. And, and it was titled six tax saving tips for business owners. So there are there are multiple savings aren't there for relevant life. So without going through all of those again, I'm going to point any one listening right now, back to Episode 66. And I'll put a link in the show notes. So once you've finished listening to today's episode, you can click on that and find out what they are. Right. Cool. Well, we've covered a lot there, Paul, thank you. My pleasure. As always,
Unknown Speaker 27:52
you know, I genuinely hope that if nothing else, at least people are a little bit more aware that business cover is available. And if you're a business owner, and you're listening, have a think about the impact of some of these things, how would it impact your business, and then in the end down the road, income that comes into your life? Now, if you lost a key member of your team, would that have a big impact on potential profits? Would it have a devastating impact on the business? You know, if you've got someone who's delivering for you, and that is easily linked to profit, you should really take have a take a moment and think about key man. If you've got debts in the business, and the repayment of those debts, if someone died or was seriously ill would have a massive impact on the business and potentially cause it to end. Have a think about loan protection. And if you're a business owner who is in business with other people who are not your immediate family, and by that usually I'm meaning partner, spouse, etc, then I would really consider you urge you to consider thinking about ownership protection to make that transition should it be needed as clean and as beneficial for all involved as possible.
Unknown Speaker 29:07
And if you've got personal life cover, and you're a business owner relevant life is definitely worth exploring. If nothing else, you might be able to save the cost of your premiums because you get this actually a double whammy of episodes back to back there, Paul, we mustn't leave it so long next time. We'll be in the two hundreds next time we have you.
Unknown Speaker 29:27
Looking forward to hearing big episode 200 as well. So don't put the pressure on please. All right, and thanks, Paul. We'll catch up again soon. We'll do cheers, Chris. Thanks again.
Unknown Speaker 29:40
All right. So as you say, Kevin, Paul knows this stuff, and went into good detail there. But before we pull out some of those points, let's head on to Trustpilot and got a bit of catching up. So there's a review from a couple of weeks ago actually. And this one's from rose and it's
Unknown Speaker 30:00
starts off the pursuit for all authenticity and support. So my wife and I attended the wealth builders webinar last night. And what resonated was the authenticity of both Kevin and Christian in their pursuit to support people's wealth journey. We both look forward to the next steps in hours support experience and connection is what we are looking for. Thanks, guys. And that is from Craig and Rose, who had joined the academy off the back of that recent webinar, and they've made a storming start, they're firing already.
Unknown Speaker 30:33
That sounds good.
Unknown Speaker 30:35
Yeah, just what are you catching up with? What are you catching up with more than one? We'll do one? We'll do one. We'll save one. Okay. All right. So have I do a different take on shield and? Okay, that work? Yeah. Look, I think there's an important distinction, although, as I mentioned earlier on, there's similarities, that I believe in the power of business, I believe that business has got the capacity to generate more wealth more quickly,
Unknown Speaker 31:03
than any other asset. I think there's no limit to the ROI or return on investment. In that case, although we know, there's at least a dozen ROI guys that I often refer to, but in this case, return on investment. And when you understand the tax breaks, I mean, the taxes are getting tougher, of course, corporation tax gone up, entrepreneurs, Relief has come down. That's the tax break you get when you sell your business. And I'll touch on that very briefly. But in the context of a podcast about business owners, I want to say one thing
Unknown Speaker 31:35
about business owners, I love them, right? I love the fact they put themselves on the line. I love that they're the backbone of, of the economy, the beating heart of what's going on in terms of creating jobs and taking risks. And I applaud them wholeheartedly for that and encourage anybody who's an employee to get into entrepreneurship in some format, because that's the pathway to wealth. It's the quickest, most enjoyable pathway to wealth, but and why as smart as they are people who get into business and what I mean by smart is, it's another one of my acronyms, Chris, you probably nodding, sagely and recognisable and come in. So what are they what do they do they do, they do sales, they do marketing, they do admin, they build relationships, they've got to deal with tax their team, they've got to do everything. And in many respects, you know, I'm not a big fan of the programme. But the kids often referred to Britain's Got Talent, right, I never watch it. But I think business owners got talent, I think they're often standing there, you know, often on their own, nobody's talking to them, talking about them, because you know, almost like, that's the pyramid. They're standing here normally. And they've got nobody to talk to the air is pretty clear. And what they often do then is they stand on this, this business. And with one hand, they're spinning plates, and on the other hand, they're trying to juggle balls. And somewhere, somehow, something gets dropped. And usually, within a business, we know that as business owners, Chris, that when something gets dropped, and it's made out of plastic, or it's made out of rubber, it bounces back at you and you have another go and catch you. But when it's made out of crystal, we can't do that.
Unknown Speaker 33:23
There's no second do overs, there's no chances when you get that wrong. And what they get wrong, almost in all cases, is they don't give themselves time to protect their families.
Unknown Speaker 33:38
They don't do it
Unknown Speaker 33:40
yet, because they're so focused on the positive standing there on that mountain and business, you know that the clouds are all gone, the sun shining on him and to shake themselves, they put on the rose tinted sunglasses, and they see optimism everywhere. And they never see negatives. And my dad fell into that trap.
Unknown Speaker 33:58
You know, thought he was Superman. didn't think anything could happen. invincibility comes to mind. And business owners so so often won't put in the time to think about what could go wrong, because they're so optimistic about what's going to go right. So they don't do their wills. They don't do their power of attorney. They don't put life cover in place to protect their family. They don't have a business succession plan in place. So if, again, now my father, you know, when he had a good business, but when he died, the business died with him, and he didn't protect the family. And I'm sure that wasn't his intention. I'm absolutely convinced of it. But he didn't do it. And I see that trap consistently. Every week, every month every year. I talk to people and say, have you done they haven't? They haven't, which is why we put it as the roof in step three of the academy and we do our best although we can't insist but we do our best to do
Unknown Speaker 35:00
have virtually sit on people's heads to say, look, this is a task. You know, you need to get done. Let's get it done this month. So let's do the wills and powers of attorney this month. Let's look at your protection next month. So it's done. And when it gets done, the peace of mind that business owners feel for me is great. And that's that's all I would say there so that the number one biggest mistake, which often therefore does not shield the business, is the failure to protect against something going wrong.
Unknown Speaker 35:31
I've Paul described some of the insurances you can use to do that very well, of course, the second big mistake, unlike the
Unknown Speaker 35:43
suppose,
Unknown Speaker 35:45
dying too soon, although dying too soon is an exit in itself, isn't it? All the world's a stage all the men and women are merely players according to Shakespeare, and they have their entrances and their exits. And when you think about this, in simple terms, first, every business
Unknown Speaker 36:02
has an exit. Because every business owner will exit. If you die too soon, like my father, and you have put some things in place, you go, the business goes. And if you live too long,
Unknown Speaker 36:15
the business doesn't get sold, and you then you've got a business that withers on the vine, and statistically, less than 1% Quit. So this is, you know, we talked about 95% population don't make it numb the numbers, you know, couldn't be worse for business owners if they don't get it right. So while the power is there, there's a negative and business as well, which is only less than 1% sell their business proactively for more than a million. And these stats are kept by the government. Because you've got to pay capital gains tax when you sell a business, so that means 99% of businesses, which never gets out.
Unknown Speaker 36:55
So most business owners don't get paid for their blood, sweat and tears, they just don't get paid for it. So my suggestion is and again, wholeheartedly when I work with business owners try and get them to think about is what is your exit strategy?
Unknown Speaker 37:10
Start the business with an exit strategy or exit strategies in mind and we do this with property people to buy a piece of property or what's the exit is it to rent it is it to sell it is is development is now multiple exit strategies. And you'd like you in Glastonbury, first thing I will be doing is towards the end, it's
Unknown Speaker 37:29
probably not you is Where's where's the intent on should be a good should be a good show should be a good show. So problem number two, then or challenge number two business owners don't
Unknown Speaker 37:42
seek their exits far enough in advance. So getting your exit strategy. And there are a number of exit strategies that I won't go into any detail. Maybe I'll do one another day, Chris, we think it's useful podcast, which is selling to an acquirer, MBO MBI, e o t, we've done a podcast on employee ownership trusts often overlooked, where you can get all your money out tax free, as well as passing business on to the family. And not all families ready for that? Certainly, I don't think mine will take over from wealth builders, which is why I'm delighted that you all are co directors, my succession plan is my surrogate boys. You informed Paul. And the third problem is I think there's a
Unknown Speaker 38:25
focus on the wrong things. The wrong type of income, you know, how we talk in wealth builders about there's two types of income work income and asset income. Work income was trading time for money, asset income is owning something that puts money in your bank account while you sleep. And I think business owners often focus on the wrong income as well. They focus on the trading income, you know, so I sold a good product, I sold a good service, I delivered a good this or that.
Unknown Speaker 38:52
And they might get some repeat customers, but it's not recurring. It's not contractual, it's not delivered by you know, automated agreement. That, of course, needs to be supported by good service and good delivery, and focus on the result for your customer. But I think there's a there's a lack of focus on the recurring income. And interestingly enough, in a great book by John Warrillow, called Built to Sell, he talks about the value of a recurring income business is often up to 10 times more valuable
Unknown Speaker 39:29
than a business that just focus on trading. And so here's the question. Do you want to work 10 times as hard for 10 times as much profit?
Unknown Speaker 39:39
Or do you want to get a recurring income business then that you can sell? Because an acquirer of a business wants predictability more than anything else? If you've got an automatic recurring income business go, there you go. This is how this little baby works. You don't need to have long earnout periods. You don't need to worry because you've got
Unknown Speaker 40:00
created something you can keep, you can sell or you can pass on no matter what. So a little bit of a diversification from Paul's point but all about shielding the business to get the maximum value, instead of just standing there on top of the mountain, hoping you can protect yourself from everything build shields around you. And sometimes insurance is a good thing. But sometimes it could just be a change of your mindset. And and finding a coach or a guide or a mentor that can help you make those distinctions. And we're happy that we're in that space as well. Wow. Yeah, just to pick up on point to there. Kevin, I think perhaps quite a sobering for for people, if suddenly they weren't there in their business tomorrow, you know, what would happen? And I would sit, I would think perhaps there is no, there is no plan at this stage. So hence, if you're listening to this podcast now, and this applies to you, then we hope that this stimulates Steve to perhaps think and even take some action. But perhaps you know, someone in business, and perhaps sharing this episode with them, again, would be a worthy thing to do. So we always appreciate everyone listening, sharing and spreading the word, Kevin, if they're finding the words that we're relaying purposeful and helpful, and we're pretty busy, because I bumped into did a presentation recently, and a guy said, I really love your podcast. I said, Do you really love him? He said, Yes, it was my review.
Unknown Speaker 41:27
He said, How do I leave a review? I don't know how to leave. Only make it easy for people. Just to take one minute, we'd really, really appreciate it. Take one minute out of your life, go grab yourself a cup of coffee. This is what I'm doing now. And just have a Slurpee and just put a review in so where would they go to do that? Wealth builders.co.uk forward slash reviews? Couldn't be easier, right? Yeah. Yeah. Yeah. Thanks. Yeah. Well, that I think wraps up today's episode pretty nicely. And, you know, the two part contribution from our SAS director Paul Brooks. So we appreciate Paul coming on and sharing all of his knowledge there with us. And wow, it's the biggie next week have episode 200.
Unknown Speaker 42:13
We bet you're thinking we had pedagogy in place. We had indeed, yes. No, it's yet another milestone that's come around. And well, who default when we kicked off in I think, February 2019. When we started the podcast, Kevin. Yeah, um, you know, I never get bored of the podcast. I don't think oh, no, no, the podcast. I don't ever think that because it's always something interesting and inspiring. That comes from other people or something to comment on, that we can make a distinction. And certainly, one of the comments made by Robert Kiyosaki, which often isn't quoted, but I've mentioned it is, you know, wealth is about the power of the distinctions. It's your ability to make an act on distinctions. And I think being in a community where you've got that 360 view, and we talked about being on top of the mountain, and if you've got full sight 360, most people haven't a look in one direction. And you can get an insight a distinction, a shortcut, an intellectual shortcut, a connection shortcut. I don't mean shortcut as in taking a shortcut that's negative, I mean, taking shortcut that's positive. That gets you to where you want to get to quicker and I think that's our journey is about that. And I never get bored with that. Because every every week, I'm making those distinctions and hopefully getting stronger as someone who can help make those distinctions. And the podcasts will go on, if something happens to me, right. And, you know, the business will be in safe hands if something happens to me. So I'm pleased to act on my own guidance. But thanks for your continued support, but no tears, you know, it's not emotional yet. Probably 200. I might, I might get a little bit I might get a little bit in motion then. Well, we hope you enjoyed listening today. And we hope you'll tune in for our 200th episode next week. So Kevin will catch up Same time, same place next week. Until the biggie my friend see you.
Unknown Speaker 44:13
We hope you enjoy today's episode. Don't forget that we are constantly updating our resources inside a wealth builders membership site to help you create, build and protect your wealth. Head over to wealth builders.co.uk/membership right now for free access. That's wealth builders.co.uk/membership