New research by Direct Line for Business reveals almost a third (31 per cent) of UK small business owners have experienced critical business issues that have had a damaging impact on their business, as well as a knock-on effect on their clients.
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 shows 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 (enterprises with up to nine employees), 41 per cent of small businesses (10 to 49 employees) and 62 per cent of medium businesses (50 to 249 employees).
Direct Line for Business’ survey of UK small business owners finds that the most common incidents were employees being injured on site (29 per cent), having an employee steal money or information from the company or a client (21 per cent), losing a client as a result of giving poor advice (19 per cent) and having a client experience a financial loss because of service provided (18 per cent).
Jane Guaschi, business manager at Direct Line for Business, says, ‘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 finds that more than two thirds (70 per cent) of small business owners who have experienced these issues say the incident has 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.
Jane Guaschi continues, ‘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 more than a quarter (28 per cent) 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 say they do have cover, more than one in five (22 per cent) have had to make a claim on it, with ten per cent having to claim on it on multiple occasions.