We typically encounter “owner-workers” in our work because of a personal injury action or their survivors due to a wrongful death claim.
Think of an Uber or a Door Dash driver.
Assume that
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- They provide a significant amount of their time in their business.
- They are injured in an accident and can’t work.
- They suffer an impairment of their ability to earn income.
An “owner-worker” is someone whose labor is the primary generator of their business’s revenues.
Think of a “gig worker.”
When an “owner worker” or “gig worker” suffers an injury, we must figure out how much we need to compensate them for their loss of earnings.
The term “owner-worker” is a designation in the literature for measuring the loss of profits and cash flow.
If we’re working on a wrongful death action, we estimate what’s due to the estate of the “owner-worker.”
Along with this dismal aspect of our practice, there is also a bright side.
What’s that?
For us living and non-impaired “owner-workers,” we need to reaffirm the financial benefits we receive from our businesses.
We “owner-workers” are visionaries. We acquire assets and combine them to allow us to manifest a vision. We want to bring something into being.
Keep in mind the adage that the entrepreneur solves “unmet” problems, or they come up with new ways to address issues someone else is meeting. That’s their mission.
What’s the bright side?
Thinking about how to measure the economic damages for “owner-workers” sharpens our focus on the differences between “total revenue,” “free cash flow,” and “net profit.”
We need to master these distinctions and understand their implications for our business before we are injured.
Also, we clarify our thinking on the differences between the money we need to run our business and the money we must pay taxes on. These are two different damages measures, ways of thinking about our businesses, and ways to think about why we’re in business – our purpose, and the benefit we receive from being in business.
We explore these and other issues in other blogs and writings.