More than 550,000 small businesses in the UK have been forced to halt trading due to a disruption in the last two years, according to new research by small business insurer Direct Line for Business.
Destroyed stock and delivery vehicles breaking down are just a couple of incidents that have been known to cause a halt in business trading. The average cost of keeping a small business afloat while unable to trade for two weeks is estimated to be £8,775.
The average small business believes that it would last around eight months and three weeks if it were forced to halt trading, with sole traders (nine months, one week) faring better than microbusinesses – businesses employing fewer than 10 people – (nine months) and small businesses (six months, two weeks).
Of those companies that have had to cease trading due to business disruption, the period of shutdown lasted, on average, more than three months. This will be of particular concern for the one in five (21 per cent) small businesses that claim that they would not be able to survive if their businesses had to cease trading for more than a month.
Reduction in profit (48 per cent), reduction in revenue (42 per cent), loss of customers (39 per cent) and putting personal money into the business (32 per cent) were found to be the most common impacts of an interruption in trading on small business owners.
Table One: Most common effects disruptions have on a business3
|Effect of disruption||Percentage of small business owners who had experienced disruption in last two years|
|Reduction in profit||48%|
|Reduction in revenue||42%|
|Had to put personal money into the business||32%|
|Used up cash reserves||32%|
|Had to place expansion plans on hold||23%|
|Forced to lay off employees||16%|
|Had to borrow from friends and family||10%|
|Forced to source credit to keep business afloat||10%|
Source: Direct Line for Business 2016