Many SMEs would go under if founder left, study suggests

Nearly half of SMEs in the UK believe their businesses would close in under 12 months if their founder were to suddenly leave the business.

Nearly a third of UK businesses say their company would survive less than a month if this were to happen, according to a survey of owners and managers by IT services company Network ROI.

English businesses are the most pessimistic about their prospects. A third of English businesses feel they would not survive the month and in some parts of the country, including the West Midlands, this rises to more than 50 per cent.

In Scotland the picture is equally as bleak, with over 50 per cent believing they could not last a year without their founder and a quarter believing they would go under in less than a month.

Conversely, businesses in Northern Ireland demonstrate more confidence in their business continuity strategies, with two thirds confident their companies could survive without their founder, the highest figure in the UK.

Respondents aged 65 or over are the most bullish, with 100 per cent of respondents believing their businesses could survive, indicating the impact experience can have on business survival rates following a crisis or disaster.

Sean Elliot, managing director of Network ROI says, ‘We carried out the business continuity and succession planning survey to get a better understanding of attitudes towards these issues within the UK small business community. The results show that business continuity is an area that requires a greater deal of investment and understanding, especially within the SME space.’

Despite the lack of planning in place, SMEs are clearly aware of the threat. A more recent study carried out by the BCI found that ‘77 per cent of professionals are concerned about the effects of unplanned IT or telecommunications outage’, putting IT at the top of the list of perceived threats. Unplanned downtime cost millions in terms of lost revenue, brand and reputation damage as well as deploying solutions.

The Federation of Small Businesses have released figures which show that up to 80 per cent of businesses affected by a major incident close within 18 months, while 90 per cent of businesses that lose data from a disaster are forced to shut down within two years.

Elliot says, ‘Succession planning represents an important part of the business continuity process, and it deserves some careful consideration as many smaller businesses fail in the immediate aftermath of losing a leader.

‘Doing simple things like having a discussion with your family and professional advisors in the first instance are important. Blocking out a few hours in your work diary each week will give you enough time to put a simple plan together.’

Further reading on succession planning

Ben Lobel

Ben Lobel

Ben Lobel was the editor of from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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Succession Planning