At Coraggio, our Members benefit from the shared experience and practical wisdom of industry experts who understand the realities facing private business owners. One of the most overlooked areas in business planning is protecting the enterprise — and the people behind it — from unexpected events.
We are featuring this article from Coraggio Member Paul Milbourne, Founder of Milbourne Insurance Solutions, because succession planning, business continuity, and risk mitigation are recurring pressure points for the business leaders we support. Paul brings decades of hands-on experience advising business owners, and his insights provide a valuable reminder that a strong business plan must extend beyond growth — it must also anticipate the unforeseen.
Does the Business Will Cover Everything?
I spend my working week with the owners of small to medium-sized enterprises, providing practical life insurance advice — both personal and business. It’s a collaborative process in which I regularly work with their accountants, lawyers, and financial advisers to ensure appropriately structured outcomes.
When I began to build my business more than twenty years ago, I was constantly surprised by the number of successful business owners who had set up their businesses without a meaningful end in mind, ie creating a Will for their business. A typical example could be three colleagues: one an engineer, one an accountant, and the third a dynamic salesman. Together, they developed an idea where each of their respective skills were complementary. From the humblest of beginnings — a founding shareholder’s garage converted into an office with three desks — a successful business evolved.
Their professional advisers ensured that the business was incorporated, shares were held beneficially, and that the enterprise operated compliantly. They went into some detail to structure a Shareholders’ Agreement that addressed individual “wish lists” regarding how they should interact with each other. From the beginning, early wins were reinvested into future growth. When I was introduced to them by an existing client, they were operating profitably in challenging circumstances. They had survived the COVID downturn, but new opportunities were becoming harder to convert.
During our initial meeting, I asked, “What is your exit strategy?” They didn’t have an answer. They had gone into business together as a means of funding their lifestyle. Early success encouraged that pursuit. They had built a business asset with some value, but more so for themselves at this stage of its development. It was mutually agreed that the business might not be readily saleable at their notional price ($6,000,000).
Then came the real bombshell moment. The Shareholders’ Agreement was quite specific in its valuation formula and the procedures around mutual obligations and ongoing participation. But what were the provisions for an unplanned exit, such as an untimely death or permanent disability? How would the surviving parties equitably fund the interests of the departing beneficial owner without a massive drain on business cash flow (vendor terms) or personal resources? They conceded that a ready buyer was certainly not waiting in the wings.
Fortunately, I could provide the most cost-effective solution using life insurance as the funding mechanism. It simply became a matter of formalising my advice in writing and working with the firm’s lawyers and accountants to ensure that our proposal satisfied their preferences regarding policy ownership and underlying documentation. A good legal draughtsman can satisfy the most demanding accountants.
We also identified a second life insurance need for the business itself. Their beneficial owner with the sales background was something of a “rainmaker.” I was able to confirm a previous suggestion by their external accountants that Revenue Purpose Keyman cover should be separately owned by the business on his life. Premiums on this type of life insurance are a deductible expense to the business enterprise, but as a corollary, policy proceeds, in the event of a claim, will be taxable. These factors need to be taken into consideration when determining an appropriate sum insured.
At Coraggio, we know that many business owners are so focused on growth, people, and operations that long-term risk planning is often pushed aside. Paul’s insights highlight the importance of structured exit strategies, shareholder protection, and continuity planning — issues that regularly surface in our Advisory Board discussions.
We appreciate Paul sharing his expertise with the broader Coraggio community. For Members seeking guidance on business succession, key person insurance, or ownership protection strategies, Paul is available for direct consultation:
Paul Milbourne
Email: paul@milbourne.com.au
Milbourne Insurance Solutions Pty Ltd is a Corporate Authorised Representative of Bombora Advice Pty Ltd AFSL No. 439065 ABN 40 156 250 565. This information is general in nature and does not take into account your personal objectives, financial situation, or needs. It is not intended to be a recommendation, offer, or financial advice. Before making any financial decisions, you should seek advice from a qualified professional. While we believe this information is accurate, it is not intended to be tax or legal advice. You should confirm any related matters with your tax or legal adviser.