Losing key personnel could spell the end for more than 50% of SMEs
More than half of small or medium sized companies would be forced to stop trading if a key member of staff was lost, according to new research.
A whopping 56% of SMEs would shut down if one or more vital members of staff were out of work through illness or long-term incapacity, including death.
Of those to respond to Scottish Widows’ survey, more than three quarters said there was at least one employee whose death or long-term incapacity would seriously impact their company’s ability to make a profit or survive.
Staggeringly, only 17% of companies have measures in place to protect against such a loss, including insurance cover.
Failing to look at the wider picture
The latest trend comes against a backdrop of an increasing number of SMEs taking on liabilities including business loans and overdrafts.
It suggests that many business owners and directors are focusing on day-to-day challenges and are giving little thought to the long term.
Of those to respond, 82% were micro-businesses with ten employees or less, so it is easy to see why losing one member of staff could have a significant impact.
Ensuring a business can continue to operate without suffering losses should something go wrong is absolutely vital for the numerous small business in the UK. Failing to plan sufficiently in this respect could lead them to consider entering into agreements such as a pre-pack administration if things advance to such a degree.
Katya MacLean, protection specialist at Scottish Widows, said: “Businesses need to strike a balance with their priorities.
“They can survive without a photocopier, for example, for a short period but the majority would be in far greater difficulty in both the short and long term if they were to lose one or more of their key employees.
“Companies need to look carefully at succession planning and all the risks posed to a business regardless of how likely they are to happen to ensure they can continue to meet what they consider their key business priorities, whatever the eventuality.”
By Phil Smith