Tips to protect a family business
In Mexico, family is an essential part of our culture, we are taught from a young age that family is everything, therefore, you would think that the family businesses do great, right? Well, the reality is a little different from this, most family businesses don’t make it till the third generation, in fact only 30 of 100 of these companies make it to the second generation and just 5% go to the third.
But, why is this? There are a lot of reasons why this happens. The first would be the disinterest to learn or teach the fundamental aspects of the company and how to run it. Secondly, there’s the lack of access to financial sources, which is common in family businesses and limits their growth. To stay competitive is essential to continue innovating and that requires investing in projects that allow the company to increase sales and quality.
How do we protect a family business?
We need to accept that our passion may not be that exciting for our children or grandchildren, maybe you adore your company and it has taken your whole life to build it and to make it successful, why would your descendants do the same? Well, the reality is most family businesses fail because of the disinterest of future generations to keep them on track. However, there are other solutions to this problem than just forcing your children to take over once you’re gone. The one business experts recommend is to have a financial plan and this has to include insurance. One of the most recommended insurance plans for these companies is “Keyman Insurance”
What is a Keyman Insurance?
This policy will guarantee that once the “key person” in the company is gone or can’t work anymore due to their age or health, the company will have the ability to sustain itself financially until a solution is found. This solution could be to train a new “Key person” or the other shareholders buy a percentage of the company from the family of the previous owner.
The Key Person Policy is designed for employees or shareholders whose absence will mean a financial burden to the company and will be hard and expensive to replace.
Ready to protect your family business? Contact us! Don’t wait any longer, protect your investment and your family’s patrimony today. At AIR Insurance, we are ready to help you at any time and build a custom policy that fits your business needs with our “360º Insurance Guidance”. For more information, call +52 55 4444 6043 or send us an email at info@air.com.mx
The information in this article is subject to terms and conditions applicable to the time of writing. If you have any questions about the current applicability of this information, please contact an AIR Insurance Brokers advisor.
