Plan Now for the Revenue Your Business Relies On

Short answer: Start with the revenue the owner personally brings in. Then compare it with a recent revenue baseline from your own records, and test how long that revenue would stop or shrink. That gives a working estimate of how much revenue your business would lose if the owner dies.

This guide walks through that worksheet from a CPA firm’s cash-flow view. It is a planning tool, not a forecast. The numbers are only as good as the records and assumptions behind them.

Why Revenue Loss Is Not the Same as Business Value

Revenue is the money a business brings in. It is not the same as profit, and it is not the same as what the business is worth.

Revenue answers a narrow question. How much money comes in each month if the owner is no longer there? Profit asks what remains after costs. Business value asks what a buyer would pay. Don’t read a revenue estimate as a valuation.

Families and co-owners often ask this question first. The doors may stay open after an owner dies. But the income that pays staff, rent, and loans can fall quickly if key clients pause work or leave. The estimate shows that gap before it arrives.

Keep expectations plain. This worksheet produces an estimate built from your records and assumptions. It is not a promise of any result, and it cannot predict how clients or employees will act.

Map the Owner’s Role in Bringing In Revenue

The owner’s role decides which revenue is most exposed. Start by listing what the owner personally does to bring in work.

Look for these items:

• Key client relationships the owner manages personally
• Bids, proposals, and contracts the owner signs
• Referral sources that trust the owner by name
• Supplier terms the owner negotiated
• Pricing and hiring decisions only the owner makes

For each item, ask one direct question. If the owner were unavailable for six months, would this revenue pause, shrink, or keep coming in through staff? Write the answer beside each line.

Key person insurance is built around this kind of role. The Insurance Information Institute explains that key person life or disability insurance compensates a business for financial losses caused by a key employee’s death or disability. The payment goes to the business. It does not promise any revenue amount.

Build a Revenue Baseline From Your Own Records

A baseline is a monthly average of normal revenue, built from records rather than memory. Use a recent window, such as the last 12 to 24 months.

Pull invoices, bank deposits, and sales reports from your accounting system. Match invoices to payments, because the date of a sale and the date of cash often differ.

Then adjust the numbers. Remove one-time sales that won’t repeat. Note seasonal peaks so one busy quarter doesn’t inflate the average. Count recurring contracts separately, since they are the most predictable revenue.

Next, measure client concentration. Find the share of revenue from your largest customers. Suppose one client brings in 30 percent of monthly sales. Losing that client can matter more than a small average drop across many customers.

Write the baseline as one monthly figure. Attach a short note to each adjustment so an owner, lender, or co-owner can check your math later.

Estimate Revenue at Risk Over a Realistic Recovery Period

How much revenue your business would lose if the owner dies depends on how long the gap lasts. Build three cases and show monthly revenue under each.

• Short disruption: revenue dips while staff cover the work.
• Moderate decline: some clients pause or reduce orders.
• Severe loss: key clients leave, and rebuilding takes longer.

Using a hypothetical $100,000 monthly baseline, a 20 percent drop for three months means $60,000 in lost revenue. Change the drop or the length, and the total moves with it.

Who takes over the company depends on its structure and its papers.

• LLC: A person is dissociated as a member when that individual dies, under Fla. Stat. § 605.0602. The member’s legal representative may exercise the member’s rights to settle the estate, under Fla. Stat. § 605.0504. Fla. Stat. § 605.0504 reads: “If a member who is an individual dies or a court of competent jurisdiction adjudges the member to be incompetent to manage the member’s person or property.”
• Partnership: When a partner leaves without dissolving the partnership, the partnership must buy out that interest, under Fla. Stat. § 620.8701.
• Corporation: A shareholder agreement works under Fla. Stat. § 607.0732 when it is set forth or referenced in the articles of incorporation or bylaws and approved by all shareholders, or when it is in a written agreement signed by all shareholders and made known to the corporation.

A sole proprietorship has no separate company on paper. The business stays closely tied to the owner, so planning for who signs, collects payments, and handles clients matters most.

Account for Costs and Cash Flow While Revenue Is Down

Monthly shortfall is often the number decision-makers need most. Revenue is only half the picture, because fixed costs keep running while income falls.

List the costs that continue during the gap: payroll, rent, insurance, loan payments, and software. Mark which ones could be paused without harm.

Combine the two numbers. If fixed costs are $70,000 a month and revenue falls to $60,000, the shortfall is $10,000 a month. Multiply by the recovery window to see the cash need.

Cash access is a second risk. Plan now for who can pay bills during the gap.

Estate costs add to the need. Federal estate tax returns are due within 9 months after death, under 26 U.S.C. § 6075.

Check the Estimate Against Ownership and Estate Planning

Check the estimate against any buy-sell agreement, your ownership papers, and your estate plan. Those documents decide who funds the gap.

Confirm that the buy-sell terms are in writing and match the gap in your scenarios. Look at how the owner’s share would be valued and paid.

Life insurance can count toward the estate. Under 26 U.S.C. § 2042, proceeds receivable by the executor are included in the gross estate. Proceeds received by other beneficiaries can be included when the decedent held incidents of ownership at death. IRC § 2042 reads: “For purposes of the preceding sentence, the term “incident of ownership” includes a reversionary interest (whether arising by the express terms of the policy or other instrument or by operation of law) only if the value of such reversionary interest exceeded 5 percent of the value of the policy immediately before the death of the decedent.”

The basic exclusion amount is set at $15,000,000 directly in IRC § 2010(c)(3)(A), and the inflation adjustment applies only to decedents dying in calendar years after 2026. Under 26 U.S.C. § 6166, if the decedent was a U.S. citizen or resident at death and the value of an interest in a closely held business exceeds 35 percent of the adjusted gross estate, the executor may elect to pay part or all of the estate tax in 2 or more, but not more than 10, equal installments.

Under Fla. Stat. § 627.404, a business entity has an insurable interest in the life of an owner, director, officer, partner, manager or key person when that person consents in writing before the insurance is purchased.

Heirs can inherit a business along with its contracts, obligations, and operating decisions. They may not have the time or experience to run it.

Estate planning life insurance and key person insurance serve different purposes. Insurance is offered through Nischay Rawal, a licensed insurance agent, separately from the accounting practice.

Next Steps: Bring Your Estimate to a Coverage Review

A finished worksheet makes a coverage review more useful. The numbers and the coverage question can then be discussed together. Your checklist:

1. Role map: the revenue each owner-dependent item brings in.
2. Revenue baseline: recent records, with adjustments noted.
3. Recovery scenarios: short, moderate, and severe, with monthly totals.
4. Fixed costs and reserves: what keeps running, and who can pay bills.
5. Ownership documents: entity type, governing papers, and any buy-sell terms.

Update the estimate when clients, owners, or costs change. Last year’s client list may not match today’s.

Fees for a coverage review are explained in writing before any engagement begins.

Frequently asked questions