New research from Simply Business reveals the shocking impact unforeseen disasters could have on small businesses.
Cash savings for two weeks
The research released today reveals that most small businesses only have cash savings to last two weeks, if unforeseen circumstances were to force them to cease trading temporarily.
The research*, conducted by YouGov on behalf of Simply Business, revealed that more than half (52 per cent) of small businesses have a cash reserve of £10,000 or less and three in ten (30 per cent) have £500 or less, including 20% who have no cash reserve at all. In recent years, UK independent businesses have battled unexpected problems ranging from riots to floods leading many businesses to cease trading permanently.
With the average monthly fixed costs for a small business estimated at just over £20,000 if they were to cease trading, Simply Business estimates that more than 2.4 million** of the nation’s businesses could potentially be out of action if unforeseen circumstances forced them to shut up shop for just two weeks.
16% of decision makers are unaware
The research revealed an even more alarming lack in knowledge from the 1000 small businesses decision makers polled. Despite one in five running their business without any cash reserve whatsoever (20%), a fifth believe they would be able to last at least six months (22%) if their business had to cease trading due to an unforeseen issue, such as a fire or a flood.
16% of small business decision makers are completely unaware of how much cash their business has to draw upon should they cease trading temporarily and a further 17% do not even know how much their usual fixed monthly costs are.
Jason Stockwood: ‘We must ensure that business owners are less close to the brink’
Jason Stockwood, CEO of Simply Business, commented: “Even after last year’s storms and flooding, which cost over £830 million of damage to firms nationwide***, small businesses are still woefully underprepared for unforeseen circumstances which will prevent trading. Small business owners play a crucial role in the economic recovery, but we must ensure they are not existing so close to the brink.”
The research also discovered considerable regional variation with average fixed monthly costs in London at over £40,000, almost double the nation’s average. This means that Simply Business estimate that businesses in the capital would only be able to survive for six days before facing closure, if they were faced with an unforeseen issue which forced them to cease trading.
Jason Stockwood continued, “It is so encouraging to see the ever rising number of micro businesses and sole traders being set up and successful in the UK; however, as we have seen in the last year, just one accident or unfortunate event can wipe out all their hard work along with their bank balance. While being a small business means you have a great deal of potential, it also makes you vulnerable so it is vital business owners across the nation proactively prepare for any eventuality so they can continue on their upwards trajectory, rather than being cut short.”
YouGov’s research also discovered that 1 in 10 (12%) small business decision makers do not know what types of business insurance they have. Furthermore, just 13% have business continuity and 16% have business interruption cover.
Notes to Editors:
* YouGov carried out an online survey on behalf of Simply Business between 7th – 11th July 2014. Total sample size was 1,015 decision makers from small businesses (i.e. less than 50 employees) and all figures have been weighted and are representative of British business size.
** Based on YouGov data, the average monthly cost for small businesses in Britain is calculated to be £23,888.98, and the average percentage change in monthly fixed cost would be a 7.41% decrease if businesses were to cease trading for 1 month. Simply Business calculate that the average monthly fixed cost for businesses not trading would therefore be £22,118.81 (£23,888.98 - 7.41%). Therefore, as 52.42% of small businesses report no cash reserve, or a reserve £10,000 or less, we estimate that 52.42% of the small business population in Britain would only be able to last c.2 weeks if their business had to cease trading. According to data from the Department for Business Innovation & Skills, there were 4,746,235 small businesses in Britain in 2013. Therefore, Simply Business estimate that 2,487,976 small businesses in Britain could be c.2 weeks away from having to close down if their business had to cease trading for an unforeseen reason (52.42% of 4,746,235 = 2,487,976).
For further information, please contact:
Nithiya Gnanathas/Jack Davies
020 7199 6196/020 7199 6193
About Simply Business
Launched in 2005, Simply Business provides an online brokerage service, delivering policies tailored to individual business requirements. Using the power of tech and data to create the best possible customer experiences, Simply Business employs over 600 people across offices in London, Northampton, and Boston in the US.
Owing to its internal underwriting capability, Simply Business can cover over 1,000 trade types – ranging from plumbers to accountants to dog walkers. An accredited B Corp for their positive social impact, Simply Business has also been voted the Sunday Times Best Company To Work For twice in a row.