When you are working on your business plan - or not working on it, as the case may be - the risks that you are usually considering are things like:
How you’ll handle cash flow issues
Where your next customer is coming from
How you’ll manage staff
What we rarely consider, because we, as business owners and entrepreneurs are naturally superhuman, is:
What happens if you cannot - physically or mentally - show up for your business?
It’s a bleak consideration. Many of us just toss the idea away, simply seeing it as either impossible or unsolvable. The truth is, however, that’s it’s extremely possible and, if not entirely solvable, it’s manageable.
Why It’s Possible, Even for You
Over 11% of Canadian adults have experienced one of the three most prevalent disability types: pain, mobility, or flexibility. Of those 11%, more than 40% experienced all three at the same time.
After that, the next commonly reported disabilities were mental/psychological at 3.9%, dexterity at 3.5%, hearing at 3.2%, and seeing at 2.7%. Memory and learning disabilities each hit 2.3% of the population*.
That’s about 28.9% of Canadians, dealing with a serious setback.
Imagine how well you could run your business if you were in constant pain or struggled with movement. Imagine if you could not see, hear, or were dealing with catastrophic psychological issues.
Most people imagine disabilities as a broken leg, and feel confident they could work through that. But a brain or back injury is going to make your job incredibly difficult, no matter what you do for a living.
A serious illness, like one of the Big Three (cancer, stroke, heart disease) will make dealing with day-to-day business development, management, and all of that etc, even more difficult.
Planning Does Make a Difference
This is the tough part. How in the world do you plan for a risk you can’t define? We don’t know what kinds of disabilities or illnesses we may end up with - or if we’ll end up with them at all. How much time and effort should you honestly put into a plan for something so nebulous and unknown?
We don’t like the idea of wasting your time or money. Efficient use of resources sits pretty high in our value systems, so we think plans for unknowns such as these should be:
Easy to update
Throughout 2019 we have been running a series of productivity articles all all about resilience, the process of adapting well in the face of adversity, trauma, tragedy, or stress.
The idea is to create a business that is strong enough to not only support and expand your vision, goals, and dreams, but also to run without you, should you need it to. This involves creating [links] financial resilience, delegation, building a strong team, creating powerful processes, plus:
A Written Business Plan
You may feel that you have things kind of in your head, and that it would be difficult to write things down, and maybe business plans are just for people who want loans, so why do you need one?
A written business plan does a lot more than qualify you for a loan, however. It’s the concretization of your vision and strategy. It’s a reminder not only of where you’ve been, but where you are going. This is useful not only in reminding yourself how far you’ve come - vital in the maintenance of your positive focus - as well as keeping your eye on the target.
It will help you say “no” to the wrong things, so you can say “yes” to the right things.
It will be your North Star, providing direction and guidance on your darkest days.
It will provide clarity for your team and your staff, not only about what you are planning, but also how they play a role in your plans. Muddy expectations are a killer for morale and engagement - clear expectations make it easier for your team to do their jobs well, but also to provide great insight and catapult you beyond your targets.
A written business plan will make it easier for your team members to step in and support you when you can’t be there, whether you are on holiday, parental leave, sick, disabled, or even moving into new ventures. Should you decide to sell your business, a solid business plan makes your business much more interesting to prospective buyers.
Procedure Manuals & Job Descriptions
Again, setting expectations and clearly outlining where you’re going, why you’re going there, and how you’re going to get there - no matter how big or small “there” is - makes it so much easier for your team to do their jobs well. How can they meet your expectations if they don’t know what they are?
How will you know if they’re doing a good job, if you haven’t told them or yourself what a good job looks like?
Don’t feel you have to write and maintain these procedure manuals and job descriptions, though. We’ve found that having the person who is learning the job write the procedures, and outline their job descriptions, communicates clearly what they do and do not understand, and where communications are being garbled. This means of course that your staff cannot be wrong about how they wrote these procedure manuals and job descriptions, but simply misinformed.
Use your documented processes and staff manuals as a system of constant communication. Update them each time someone new is trained. Review the results. Discuss the changes and tweaks that make each day just that much better.
If you ever can’t be there, whether for great or terrible reasons, knowing that these tools are in place, and that you and your team members can access them from anywhere, will ensure that your business is able to run no matter who happens to be holding the wheel.
Empower Your Team
You may feel like you need to make allllll the decisions. It’s your business, after all. But if your team is empowered to make their own decisions in the areas where they are strong and well-informed, not only will they feel a sense of ownership (every leader’s dream) but they’ll also be able to make those decisions when you are not there, leaving you in good shape to take a real holiday, at the very least.
It is absolutely fair to feel nervous about handing off these decisions - you should. At the end of the day, everything is still your fault in the eyes of your customers. To manage for this, create a communication system that allows you to oversee the decision making and understand what decisions are being made, why, and when. As you provide ongoing feedback, your team will get better at making decisions, and you’ll become freer to not only be away, but to focus on things that get you excited.
Create Skills Overlap
Whether you are working with partners or staff, you need to ensure there is some redundancy on your team. Ideally, more than one person understands how to complete a particular task, process, or strategy, and is involved in its continuous evolution. This goes for not only your work and decision-making but also for those of your team members. You’re not the only one who may be away - unexpectedly or not - and building resilience into your team means enough redundancy that your business doesn’t come to a screeching halt when any one person can’t be there.
Passwords, Authorizations, and Financial Management
If you’re entirely unavailable, will your bills be paid? Will your communications go out? Will your out-of-office message be placed on your email? Will your appointments be rescheduled?
Ensure that someone (or a few someones) have access to your passwords, authorization to make basic financial decisions like bill payments and payroll, and that anything you’re working on is handled and well communicated.
A fully operational team, whether in-house or virtual, can ensure that all of the above is managed and in place long before a hiatus occurs.
What if the money just…stops?
If you, your family, and your business, rely on your ability to get to work each day and produce, a sudden illness or disability is going to impact a large number of people.
There are several ways to mitigate this impact:
Cash Flow and Debt Management
A cash flow management system will ensure that you know exactly what it costs to run your life and your business successfully. It will also help you pinpoint areas where you can make sacrifices, if you need.
A debt management strategy will also ensure that your debt is structured such that you can make appropriate adjustments to any debt you may have, and roll with the punches as they arrive.
An emergency strategy is also important, and part of your cash flow plan. Your emergency fund could manage for that flat tire on a Sunday in rural, snowy Canada in the dead of winter. It can manage for the variations of income that are typical for many businesses. Finally (and: of course) your emergency fund can help you manage through the short-term and unexpected loss of income.
Insurance on your ability to work is just like insurance on your house or your car: you pay for it, but you sure hope that you never have to use it. If it’s a no-brainer to protect your property in case of fire, theft, or damage, surely protecting your MoneyMaker (YOU) requires even less grey matter.
It’s worth noting that if you’re a health care professional, you’ll often qualify for extra-special bells and whistles on your disability policies, including protection in case of occupational HIV and additional benefits if you perform invasive procedures.
Personal Disability Insurance
This is the insurance that is intended to replace your personal income if you are disabled. There are a few different ways to get this insurance:
Group Disability Insurance
This is the kind that you might provide, as an employer, to your employees. You can also pick it up through your industry association, alumni association, or local chamber of commerce. It’s generally the least expensive option, as the risk is spread across all the people in the group, reducing the risk for the insurance company.
A few key things to remember:
Max Benefit vs Non-Evidence Max Benefit: All group policies will have a “maximum benefit” that’s usually a dollar figure, say $5,000 per month. But check the fine print - there’s another “maximum benefit”, called the “non-evidence maximum benefit”. This means that if you haven’t submitted medical evidence (which they don’t generally ask for), this is the maximum amount you’ll receive. It could be as little as 50% of the other maximum benefit, say $2,500 per month. That’s a big difference in your pocket. Check for both and ask your supplier or group administrator for the necessary forms to submit medical evidence.
Own Occupation vs Any Occupation: You are considered “fully disabled” if you qualify under the terms of the contract. If your contract has an “own occupation” definition, this means that if you are not able to perform the duties of your own job, then you are considered fully disabled and eligible for benefits. If your contract has an “any occupation” definition, this means that if you are not able to perform the duties of any job for which you are reasonably qualified by experience and education, then you qualify. This means if you’re a professional lawyer, doctor, accountant, or financial planner and can’t do your job, but you could teach it, you could be kicked off benefits. All contracts, whether group or personal, will have these descriptions. Many group contracts will give you an “own occupation” definition for the first 24 months of disability, with an “any occupation” definition thereafter. This can get really complex. Just know that “own occupation” is the one you want, and that if you have an “any occupation” definition either right away or after 24 months, your benefit may be on shaky ground.
Elimination or Waiting Period: This is the length of time you must be totally disabled before your benefit starts to pay, and it changes from plan to plan so look for the number. It can be anywhere from 30 to 240 days, but 90 days is pretty standard. Some organizations will have short-term disability plans in place to manage for this waiting period, and others will simply pay this out as “sick pay” out of their own pockets, choosing to self-insure. Remember that your emergency fund - both personal and business - is available for this.
Benefit Period: This is the length of time you’ll receive a benefit if you are disabled. Your options are usually 2 years, 5 years, and to Age 65. Obviously, the longer the term, the more expensive the product. If you have the option to choose, choose the longest.
Premium Payment: You can choose to have your business pay the premium but it’s much more tax-efficient to pay this personally. Why? Because it’s taxed differently depending on who pays the premium. If your business pays the premium, and deducts it as an expense, then any future benefit you receive is taxable income to you personally. If you pay the premium with after-tax dollars, then any future benefit you receive is tax-free to you personally. Given that disability benefits are limited to a percentage of your pre-disability income, you will want to keep as much of that benefit in your pocket as humanly possible. Pay for it personally.
Personally-Owned Disability Insurance
This is more expensive, and involves more work on your part to qualify. However, there are some great benefits:
These policies are hugely customizable and you can take advantage of all kinds of bells and whistles, including partial and recurring disability benefits, automatic benefit increases as your income grows, protection for your specific industry, adjustments to your benefit to meet the increasing cost of living, and even opportunities to have your premiums refunded if you don't use the policy.
Fixed premiums - it’s one of the coolest, least discussed things about personal disability insurance. Your group benefits premiums are priced based on your age, and increase as you get older. They could be renegotiated altogether, when the policy renews or your group finds a new provider. Your personal disability plan can be non-cancellable (the insurance company can’t cancel it unless you stop paying - only you can) and often will not increase premiums until your age 65.
It sticks around even if you’re on leave, whether that’s maternity, parental, or that sabbatical you always dreamed of. It’s yours and you can do what you want, within reasonable limits, without losing your benefits.
Portable - It doesn’t matter where you work, you’ll always have this policy. You can change businesses, jobs, careers, and your policy comes with you.
You are less likely to be in a situation where the insurance company is doing their darndest to stop paying you. That’s a thing, and we can tell you stories about it. We’ve run into it several times with group disability insurance providers - once that 24 month “own occupation” period is over, pushback is pretty much standard. If you’d like to read some case law, here’s a link to law firm (that we don’t know, we just googled for case law, so we’re not recommending these folks) who has dealt with some interesting cases.
Business Overhead Insurance
No, there won’t be enough money from your personal disability insurance to cover the ongoing costs of your business. Personal disability insurance is really designed to cover your individual income. So how do we manage for office rent, utilities, staff coverage , accounting fees, membership dues, company vehicle payments, liability insurance, business loan repayments… and so on?
A business overhead insurance plan provides for this. The premium is paid by your business, and the benefits are paid to your business. The premiums are generally significantly cheaper than a similar benefit for a personal plan, and this is because the benefit period is nearly always shorter. The reality is that your existing business will only carry on so long without you - so a year or two of benefit may be all your business needs to either hold steady for when you return, or give you time to close up shop without ruining your credit and the lives of your staff.
This is where your documented procedures, business plan, and empowered employees are really going to shine, because your insurance company is going to have very strong opinions about you popping into the office to set schedules, pay bills, or talk to vendors (a.k.a. “working”) while receiving benefits because you’re not able to work.
Business Buy-Sell Insurance
Got partners? Got a shareholder agreement? Please say “yes” to the second question if you’ve said “yes” to the first! If not, get thee to a corporate lawyer tout suite.
If you have such an agreement or are in the process of writing one, check for a long-term disability clause. Get one written in if you don't have one. If you or your partner(s) are disabled for the long-term, you need a plan in place to ensure that all partners are financially taken care of if somebody dies, is sick or disabled, or divorces.
Why? Because googling the case law for those particular concerns will leave you blinded by the sheer volume of litigation. An insurance plan will provide the funding after a period of disability so you can buy out your partner or your partner can buy you out if you’re too sick or injured to contribute. Trust us, it’ll be good for everyone, in so many ways, this would have to be its own incredibly long article to even describe it.
Critical Illness Insurance
Yes, if you’re so critically ill that you can’t get to work, you will qualify for your disability insurance. But your disability insurance is designed to pay a percentage of your pre-disability income. It will not help you cover the loss of your retirement savings, the costs of your family taking time off work for various reasons from them being distraught to them taking care of you, bucket list travel, off-plan prescriptions, in-home nursing, additional paramedical support, or any of the other myriad of things we spend time on when we have cancer, heart disease, or strokes.
Won’t happen to you or anyone you love? The Canadian Cancer Society reports that nearly 1 in 2 Canadians have had or are expected to get cancer. Sadly, it will happen. Compounding illness, grief, and pain with financial stress is just not worth it.
Your group insurance may have a critical illness benefit, and it’s worth checking into because group is always cheaper. Look for policies that give you 1-2 years’ income (tax free!) and cover more than the top 3 (cancer, stroke, heart disease). If you can’t find it in group, it’s time to call that insurance professional.
“Anything that can go wrong, will.”
As Julia’s Uncle Henry likes to say: Murphy was an optimist. If you’re like Henry, then it simply would make sense that by spending all this time planning for the potential losses and hiccups associated with disability and illness, you’ve actually protected yourself against it.
Remember, your risk management strategies should be:
Easy to update
Even if Murphy was right, you can use much of the planning in this article to improve your business operations, make it saleable, train your staff, increase your tax deductions, and stop worrying - potentially the biggest win for your life and your business.
* Source: Canadian Survey on Disability, Statistics Canada, 2012