SMEs 'turning to family and friends for advice'

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Many new start-ups are failing to seek expert advice

New research from insurer Aviva has highlighted the considerable proportion of small business leaders that favour the advice of friends and family over industry experts.

According to a poll of more than 1,500 representatives for small to medium-sized enterprises (SMEs) carried out by the RedShift on behalf of the firm in February this year, almost two-fifths (38 per cent) of respondents said they relied solely on the advice of loved ones when setting up their business.

Just 13 per cent said they consulted with a financial adviser during the first months of running their new business, while nine per cent sought the expertise of legal counsel. Overall, just six per cent planned a meeting with their insurance provider to go over the fine details of any cover they would need to mitigate their financial exposure moving forward.

In total three-quarters of respondents said they had little to no knowledge of issues relating to bookkeeping, marketing and sales, while 85 per cent revealed they had little to no knowledge of the legal framework in which their business would operate.

Employer obligations were among the biggest hurdles highlighted for new company operators, with 21 per cent stating they are yet to set up the necessary systems to support workplace pensions auto-enrolment, despite the fact these individuals said they were aware they would need to address this issue at some point.

Moreover, one-third (36 per cent) of micro-employers - those with fewer than five members of staff - were labouring under the false belief that this was an obligation that will not apply to them (it does).

Responding to the research, managing director of commercial lines at Aviva Angus Eaton stated: "It's only natural to want to consult with your family and friends but advice from professional experts can save time and money, helping small business owners with practical solutions, learnt from similar experiences in other businesses.

"Whether it's getting hands-on help with bookkeeping, or getting to grips with the legal obligations associated with being an employer, there is a wealth of advice and material designed to support SMEs along every step of the way."

He added that being informed about the obligations all businesses face should be one of the first things all individuals starting a new business should aim to achieve, while seeking professional, expert counsel on areas like finance, insurance and legal compliance is also highly recommended.

Indeed, Mr Eaton concluded: "Clearly SMEs need a strong understanding of their legal obligations and how they can protect their business and employees to keep it trading - one claim without adequate cover could easily be enough to put severe financial pressure on an organisation or even close it down completely."