A candid review of life insurance, key-person risk, and continuity for a professional firm.
Setting the Scene
Harry and Sally* have spent three decades building a boutique law practice that prides itself on personal service and rock-solid client relationships. Their five-person support team hums along, fee revenue sits at $2 million, and profits average $800k. Yet when we met for a Business Owner Risk Protection Review, one phrase kept surfacing:
“We’re too busy to take time off.”
Behind that innocent confession lay an uncomfortable truth: if either partner had to step away—temporarily or permanently—their beloved firm could unravel in weeks, not years.
*Names of people and advisers have been changed for privacy. Professional advisers have also been anonymized.
The Wake-Up Call: Key Facts We Uncovered
Firm age: ~30+ years
Equal Partners: Sally (64) & Harry (53)
Staff: 5 support plus 2 partners (7 total)
Turnover: $2.4 million p.a.
Average profit: $800k p.a.
Valuation method: 4 × maintainable earnings → $3.2 million
Overdraft: $250k (unused)
Buy-sell cover: Sally: Life $1.59m | TPD $1.35m Harry: Life $1.65m | TPD $1.40m
Personal cover: Harry: Life $3.93m, IP $25k/month, Trauma $700k
Sally: Self-funded, does not require personal insurance
The Vulnerabilities
- Concentration of Knowledge & Relationships
- Talent Pipeline Gaps
- Overdraft secured by personal property
- Continuity Strategy Is Unclear
- Estate & Tax Planning Gaps
Scenario Modelling: “What if Sally Couldn’t Work Tomorrow?”
– Partnership becomes a sole proprietor partnership
– Revenue drop: Potential 30% ($600k) & goodwill impairment
– Immediate Recruitment: Senior solicitor $200k p.a.
– Additional admin support: $60k p.a.
– Fixed expenses: $15k/month rent + salaries
– Partner equity transfer: Trigger buy-sell proceeds of $1.59m
Result: short-term cash flow pressures unless cover and reserve planning are strengthened.
A New Question Emerged
If Sally or Harry exited unplanned, would the intention be to shrink the firm to a more manageable level—or continue the legacy with a succession plan in place?
Recommendations We Made
- Top-Up Key-Person Trauma & Life Cover
- Insure Goodwill impairment
- Fund CGT & Professional Fees for sale
- Create a Succession Timeline
- Estate Documents in Order
Lessons for Every Professional Partnership
- The “Holiday Test” = Continuity Test
- Buy-Sell Isn’t the Whole Story
- Succession Doesn’t Happen by Accident
- Plan First, Protect Second (ensure your insurance funding is in sync with your business plans)
A Warm Word of Advice
Too many professional partnerships assume continuity will take care of itself—until one day, it can’t. For Harry and Sally, this review opened space to ask the uncomfortable but essential questions: What happens if one of us is no longer here? And what do we want to happen next?
Whether you choose to wind down or build a legacy, the most dangerous path is the one that assumes the decision will be made later.
If you’re unsure what would happen to your firm without you in it tomorrow, it’s time for your own Risk Protection Review. Let’s talk—it’s one hour that could provide crystal clarity and save your business years of uncertainty.