Money Talks – analysing business risks for your practice

Assessing and preparing for business risks ensures that your family’s and personal wealth is protected, explains Iain Stevenson.

Assessing and preparing for risks in your business ensures that your family’s and personal wealth is protected, explains Iain Stevenson.

As a business owner, life has never been busier. 

Looking after staff, premises, insurances, recruitment, income, costs and generally managing everything it takes to run a successful dental practice is challenging in itself. 

It’s therefore easy to overlook some very important risks associated with your business, which can have a direct impact on your family’s wealth and your own personal income. 

Find 30 minutes this week and put together your partnership agreement or articles of association. Then, contact your specialist financial adviser and ask the following questions:

  • What happens to my share of the business if I die or I’m diagnosed with a critical illness?
  • What happens if my business partner or a key person in the practice, who we really couldn’t do without, dies or is diagnosed with a critical illness?

Without the appropriate provisions in place, it’s possible that you, your family and/or your business partners could suffer serious financial implications should any of the above happen.

Let’s look at each one in turn.

The impact of business risks on family

Your family may inherit your share of the business, but unless they’re dentists and keen to be part of it, they would most likely want to sell it. 

Where would they start? What if the remaining partners don’t have sufficient funds to purchase your share of the business? 

It’s preferable to ensure you have the right money in the right hands at the right time. 

You also want the appropriate legal underpin to ensure your family can easily sell their share of the business back to the remaining partners and that those partners have the funds to do so. 

Business contingency planning

You’ll want to ensure you have access to sufficient funds to buy out the estate of the deceased business partner.

You don’t want them to be part of the business and claim a share of future profits without contributing to the running of the practice.

Ensure an appropriate legal document is in place to guarantee your right to buy the share of the business.

The wider picture

Do not underestimate the value of that skilled worker within your practice.

It may be the person who performs a certain type of dental procedure that only they do. Without them, the income to the business suffers. 

It could also be the practice manager who does such a wonderful job keeping the practice going, keeping systems up to date and generally performing tasks that they would be very difficult to replace. 

Either way, the financial implications to the business and, ultimately, to you could be detrimental. 

It is so easy to leave this on the back burner of tasks to get around to one day. Unfortunately, it’s just one of those tasks that you cannot put off any longer. 

You rarely get warning of a personal tragedy. Without adequate provisions in place, the financial and practical consequences could be severe.

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