1 in 3 SME owners 'hit by critical business issues'

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Nearly one in three small and medium-sized enterprises (SMEs) have had to deal with "critical business issues", a new survey has found.

According to Direct Line for Business, 31 per cent of SME owners have dealt with incidents capable of having a damaging impact on their business and an adverse effect on clients.

For instance, 29 per cent had experienced an employee getting injured at work, while 21 per cent have been faced with an employee stealing money or information from the company or a client.

Meanwhile, 19 per cent revealed they had lost a client as a result of giving poor advice, while 18 per cent had seen a client experience financial loss after taking the advice their firm had given them.

Interestingly, the research showed that the larger the business, the more likely these kinds of problem are to occur.

Indeed, just eight per cent of sole traders were found to experience such issues, compared with 25 per cent of enterprises with up to nine employees.

Figures also showed that 41 per cent of small businesses employing between ten and 49 employees have dealt with critical business issues, along with 62 per cent of those with between 50 and 249 members of staff.

This suggests that SME owners will need to become increasingly mindful of these kinds of problems if they wish to scale up their business.

Direct Line for Business found that critical business issues led to a variety of common outcomes for SMEs.

Some 23 per cent of SME owners had to pay out of their own pocket as recompense, while 18 per cent saw members of staff resign.

The same proportion revealed they lost a client following an incident, while 18 per cent also admitted their reputation had been harmed within their industry.

In 17 per cent of cases, an SME incurred a fine, while 14 per cent had to lay off staff. Additionally, 13 per cent were forced to dissolve their business.

Jane Guaschi, business manager at Direct Line for Business, commented: "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."

Ms Guaschi warned that the costs of litigation and damages can be steep. As a result, she has urged small business to take out the relevant insurance cover.

This, she said, would "give them peace of mind and allow them to get on with growing their business".

"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," Ms Guaschi stated.

However, figures from Direct Line for Business showed that 28 per cent of SMEs do not believe they need PI cover, while a further 24 per cent of the remaining businesses do not have this type of cover in place.

Meanwhile, eight per cent of SMEs claimed they are not familiar with PI.

More than a fifth of those that do have PI in place have made a claim on it in the past, with one in ten making claims on several occasions.