Small businesses face up to disruption costs
More than half a million small businesses have been forced to halt trading in the last two years as a result of some sort of disruption, according to new research.
Direct Line for Business revealed that at least 550,000 firms have faced such an issue, with faulty vehicles and destroyed stock among the reasons for a stop in trading.
The research adds that it costs a small business an average of £8,775 to stay afloat for two weeks when they are unable to trade.
Many small businesses believe they could survive for eight months and three weeks should they be forced to cease trading, while sole trades fared slightly better.
These figures will vary based on the scale of the problems faced, but firms that operate on very tight margins will be harder hit.
The average period of closure for firms that ceased trading due to business disruption was more than three months.
One in five small businesses reported they would not survive one month if they had to stop trading, meaning such a problem could leave them facing insolvency.
Businesses reported a range of impacts from interruptions to their activity, with reduced profits and revenue most likely – named by 48% and 42% of owners who had suffered disruption respectively.
Lost customers was an issue for 39% of those affected while a third reported that they had to seek alternative finance options, use their own money or cash reserves to overcome the disruption.
Other issues including being forced to lay off staff or to halt expansion plans, while 6% of those who experienced disruption in the last two years saw their business fail.
Head of Direct Line for Business Nick Breton warned businesses to stay prepared, adding that a lot of issues that cause trading to be seen cannot be predicted.
When a business is failing to generate funds, owners need to ensure that any disruption can be kept to a minimum –opting for suitable business insurance and having contingency plans in place can aid with this.
By Phil Smith