A suc­cess­ful SME is a pro­tected one

En­trepreneurs can ben­e­fit from early cov­er­age

The Star Malaysia - StarBiz - - Smebiz - www.pru­den­tial.com.my/en/our-ser­vices/pru­biz-be­yond/ To learn more about Pru­den­tial’s SME pro­tec­tion op­tions, please visit

WE are liv­ing in the age of small and medium en­ter­prises (SMEs). One of the key ar­eas of growth in Malaysia, SMEs are ex­pected to con­trib­ute up to 41% of Malaysia’s Gross Do­mes­tic Prod­uct (GDP) by 2020. Cur­rently SMEs are recog­nised as an im­por­tant con­tri­bu­tion to the Malaysian econ­omy, re­spon­si­ble for al­most 36% of the coun­try’s GDP.

While SMEs con­tinue to have a bright path in our coun­try, one of the most mis­un­der­stood things about SMEs is the ten­dency to over­look the need for busi­ness pro­tec­tion.

Of­ten, SME own­ers tend to over­look the need to man­age risks with fewer re­sources, while deal­ing with the var­i­ous con­cerns of run­ning a day-to-day busi­ness.

Run­ning a busi­ness al­ways in­volves fi­nan­cial risks, but Busi­ness In­sur­ance can as­sist en­trepreneurs in re­duc­ing un­cer­tainty while en­sur­ing a pro­tec­tion plan is in place to pro­tect the core el­e­ments of an SME’s busi­ness.

Let’s take the ex­am­ple of Daryl who has the goal of es­tab­lish­ing his own in­de­pen­dent dig­i­tal and cre­ative agency. After spend­ing a decade in the cor­po­rate world, Daryl knew it was time to fol­low his dreams by start­ing his own busi­ness. With strong de­ter­mi­na­tion and a gift for strate­gis­ing, Daryl started small, slowly work­ing his way and ex­pand­ing his agency.

Over the years, Daryl’s agency grew with a strong rev­enue sheet and hiring record, boast­ing a client record of some of the top in­ter­na­tional brands in the world. It seems al­most im­pos­si­ble to be­lieve that this agency started in Daryl’s bed­room, while he worked with friends, part-timers and free­lancers.

One of the first things that Daryl did when he ex­panded was to seek coun­sel on pro­tect­ing his busi­ness. Daryl has a young fam­ily and is the sole bread­win­ner, hence, his busi­ness is his fam­ily’s lifeblood.

If some­thing un­for­tu­nate were to hap­pen to him, his busi­ness would suf­fer and in turn im­pact his fam­ily.

With this in mind, he saw the need to have his busi­ness pro­tected to en­sure that his loved ones would still be cared for should an un­for­tu­nate cir­cum­stance arise.

Pru­den­tial As­sur­ance Malaysia Bhd (PAMB) re­cently in­tro­duced a busi­ness solution called PRU­biz be­yond that fo­cuses on pro­tect­ing SMEs against un­cer­tainty and risk. While the ma­jor­ity of SMEs will typ­i­cally have in­sur­ance to pro­tect their as­sets, such as their premises, stock, and ve­hi­cles, the human as­set of the busi­ness is of­ten left unin­sured, po­ten­tially threat­en­ing the fu­ture growth of a busi­ness.

PRU­biz be­yond is a spe­cially de­signed propo­si­tion for SMEs. It pro­vides them with a com­pre­hen­sive pro­tec­tion and sup­port solution that goes be­yond busi- ness in­sur­ance – with tai­lored life in­sur­ance so­lu­tions to pro­tect the busi­ness con­ti­nu­ity, of­fers pro­fes­sional ad­vice to help SMEs to work more ef­fi­ciently, and re­wards them with ex­clu­sive busi­ness life­style priv­i­leges.

In the case of Daryl’s busi­ness, PRU­biz be­yond is able to pro­vide busi­ness pro­tec­tion against three main sce­nar­ios.

Key­man pro­tec­tion

This busi­ness-spe­cific life in­sur­ance can com­pen­sate a com­pany for the fi­nan­cial loss and other con­se­quences of the death of an im­por­tant mem­ber of the busi­ness. Key­man in­sur­ance can pro­vide ad­di­tional se­cu­rity to Daryl’s busi­ness as it safe­guards against the loss of a key em­ployee (which also in­cludes himself and/or his part­ner), which may re­sult in a dis­rup­tion to sales, cred­i­tor’s con­fi­dence or cus­tomer re­la­tion­ships.

As an em­ployer, he has peace of mind know­ing that his busi­ness is pro­tected from any fi­nan­cial fall-out due to death or in­ca­pac­ity of a very im­por­tant mem­ber of his staff.

Credit risk pro­tec­tion

Should an un­for­tu­nate loss hap­pen to Daryl or his part­ner, it could af­fect his busi­ness’ abil­ity to re­pay loans or per­sonal guar­an­tee that could put the busi­ness’ prof­itabil­ity at risk. By tak­ing up a credit risk pro­tec­tion, it would help pay off the bor­rower’s debt if the bor­rower dies thus, pro­tect­ing both the com­pany’s credit lines as well as the de­ceased bor­rower’s per­sonal es­tate.

This will pre­vent dis­rup­tion in busi­ness op­er­a­tions and pro­vide cred­i­tors, cus­tomers and other stake­hold­ers the as­sur­ance of a smooth tran­si­tion.

Busi­ness con­ti­nu­ity pro­tec­tion

Daryl’s agency con­tin­ued to ex­pand as he merged forces with an­other bou­tique agency to be­come a one-stop con­sult­ing agency that uses dif­fer­ent and novel ap­proaches to en­gage con­sumers in a two-way com­mu­ni­ca­tion. This en­abled Daryl’s agency to dou­ble in size and ex­pand their client list in months, prov­ing the prof­itabil­ity and far sight­ed­ness of the part­ner­ship.

With the merger, Daryl’s agency now com­prises of three part­ners. With most of the part­ners be­ing the main bread­win­ner in their fam­i­lies, they all agreed to con­sider tak­ing up the busi­ness con­ti­nu­ity pro­tec­tion, also known as, part­ner­ship pro­tec­tion.

With this pro­tec­tion plan, it al­lows the part­ner­ship to con­tinue with­out the in­volve­ment of their next of kin. If one of the part­ners dies, the fi­nan­cial se­cu­rity and sta­bil­ity of the part­ner­ship may be jeop­ar­dised.

The re­main­ing part­ners may be obliged to pay a cap­i­tal sum to com­pen­sate the de­ceased’s es­tate for his stake in the part­ner­ship.

With busi­ness con­ti­nu­ity pro­tec­tion, a lump sum will be re­leased, al­low­ing the de­ceased’s share of the part­ner­ship to be bought from their next-of-kin in the high­est value.

Pru­den­tial’s SME pro­tec­tion plan comes with var­i­ous added val­ues through part­ner­ships with es­tab­lished part­ners such as RHB Trus­tees, Baker Tilly, Cy­cle & Car­riage Bin­tang, KDU Univer­sity

Col­lege, CIT Travel and Oris. These part­ner­ships com­ple­ment and sup­port Pru­den­tial’s SME propo­si­tion by pro­vid­ing cus­tomers with a busi­ness solution through access to var­i­ous ser­vices be it tax ad­vi­sory, trus­tee ser­vices and life­style priv­i­leges.

Ul­ti­mately, busi­ness in­sur­ance pro­tects busi­ness in­ter­ests and forms a ma­jor part of the over­all wealth value. It is im­por­tant that SME pro­tec­tion plans en­sure that busi­nesses are prop­erly pro­tected through a wealth max­imi­sa­tion plan that en­sures smooth tran­si­tion and suc­ces­sion of busi­ness un­der any un­ex­pected cir­cum­stance.

This prom­ises to in­stil con­fi­dence into em­ploy­ees, sup­pli­ers, cus­tomers, and banks en­sure that your SME con­tin­ues to pros­per.

SME own­ers need to eval­u­ate cer­tain fac­tors as they con­sider pro­tec­tion plans for their busi­nesses.

First it is im­por­tant to as­sess the value of the as­sets and con­tent of the busi­ness be­fore un­der­stand­ing the lim­its and li­a­bil­i­ties. This al­lows the owner to iden­tify the per­ceived and prob­a­ble risks be­fore recog­nis­ing and iden­ti­fy­ing the manda­tory re­quire­ments for em­ploy­ers and em­ploy­ees pro­tec­tion and ben­e­fits.

Back­bone of growth: SMEs are recog­nised as an im­por­tant con­tri­bu­tion to the Malaysian econ­omy.

Wear­ing ev­ery hat: Small busi­ness own­ers tend to have their hands on ev­ery part of the op­er­a­tions, mak­ing them key to the sur­vival of the com­pany.

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