One in three SMEs hit by critical business issues

worried businessman

These incidents include damage to a client’s business reputation following consultancy services, injuries being sustained on a company’s premises by clients and the loss of confidential data.

The research also showed that the larger the business, the more likely they are to experience these problems. Only eight per cent of sole traders have experienced problems, compared to 25 per cent of micro businesses, 41 per cent of small businesses and 62 per cent of medium businesses.

The survey of UK small business owners found that the most common incidents were employees being injured on site, having an employee steal money or information from the company or a client, losing a client as a result of giving poor advice and having a client experience a financial loss because of service provided.

Table One: Most common critical business issues experienced by SMEs

Incident Percentage of SMEs that had experienced a critical business issue
Had an employee get injured while on duty 29%
Had an employee steal money or information from you or a client 21%
Lost a client as a result of giving poor advice 19%
Had a client experience a financial loss because of your advice 18%
Had a client suffer an injury as a result of your service/skills 18%
Had a client experience damage to their businesses reputation because of your advice 16%
Had to hire a lawyer over advice you gave 16%
Lost confidential data 15%
Had a client suffer an injury on your premises 14%
Had a client suffer injury as a result of using one of your products 13%

Source: Direct Line for Business 2016

Jane Guaschi, Business Manager at Direct Line for Business, said: “Advising clients and running premises comes with its risks, so it’s important to makes sure you have the right safety procedures in place to minimise any potential issues. Even if you’re professional and always give advice and sell products in good faith, everyone has the potential to make mistakes. The costs of litigation and damages can be steep, so small business owners should ensure they have the relevant insurance cover to give them peace of mind and allow them to get on with growing their business”.

The research found that over two thirds of small business owners who have experienced these issues said the incident had impacted their business, with the most common outcome being that they had to pay the compensation out of their own pocket. Staff leaving, losing clients and a bad reputation followed in terms of the most common incidents that impact on businesses. 

Table Two: Most common outcomes of these critical business issues

Incident Percentage of SMEs experiencing an incident following critical business issue
I paid out of my own pocket as recompense 23%
Staff resigned 18%
I lost a client(s) 18%
It affected my reputation within the industry 18%
I incurred a fine 17%
I lost an employee(s) 15%
I had to lay off staff 14%
I had to dissolve the business 13%
It did not impact my business 30%

Source: Direct Line for Business 2016

Guaschi continued: “Small businesses should consider taking out Professional Indemnity (PI) insurance which includes cover for breach of confidentiality and professional duty, malicious acts or omission by former and present employees and loss of data or damage to a client’s reputation.

“If you have customers visiting your premises or are visiting clients at their own premises, then Public Liability (PL) insurance will provide cover for damage by your business to their property,  as well as injuries,  such as if somebody tripped on a piece of loose carpet in your office and hurt themselves.”

While over a quarter of SMEs claim not to need Professional Indemnity cover, 24 per cent of the remaining businesses don’t have any PI cover in place, with eight per cent claiming not to be familiar with PI at tall. Of the companies that told us they do have cover, more than one in five have had to make a claim on it, with 10 per cent having to claim on it on multiple occasions.

About Business Matters

Business Matters staff