New research shows that 38 per cent rely on advice from family or friends, while less than 15 per cent consult financial advisers with even less using legal advisers and insurance providers.
SMEs found that the top three hurdles when setting up their business were financial administration, marketing and sales, and understanding and fulfilling legal obligations as an employer or business owner.
All were areas that they had little or no knowledge of when setting up – three quarters of SMEs knew little or nothing about bookkeeping or marketing and sales. An even greater proportion said they knew very little about their legal obligations as an employer.
Having established their businesses SMEs say the top three hurdles that they have still not been able to overcome are marketing and sales, getting financial help and understanding legal obligations as an employer.
Employer obligations, for many businesses, will include overcoming hurdles like pension auto-enrolment for the first time. Whilst our research shows a third have done so already, Just over 20 per cent say they haven’t yet set up a workplace pension but know they need to at some point and over a third of micro employers don’t think they need to.
Angus Eaton, managing director of commercial lines at Aviva who commissioned this research, said: “Making the time to balance the management of day to day customer, employee and supplier demands with protection against nasty surprises is a perpetual challenge for any business. Great advice helps.
“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. Government resources such as those on the Great Business website – particularly for fledgling SMEs – are a great place to start.”
Not being able to understand legal obligations as an employer or business owner is leaving some SMEs in danger of breaking the law.
Employers’ liability insurance is a legal necessity for the vast majority of businesses with staff however one in ten SMEs thought it wasn’t a legal requirement in any scenario. A quarter of SMEs also wrongly believe that employers’ liability insurance is only legally required once a business has more than one employee.
Employers’ liability provides vital cover should a member of staff make a claim for illness or injury caused by their job and it is a legal requirement. Failure to have it carries the risk of fines of £2,500 for every day the business is not properly insured.
Nearly 90 per cent of those SMEs surveyed did not know that the minimum legal requirement for employers’ liability insurance is £5 million, with a fifth believing the minimum legal cover to be less than £500,000.
And it isn’t only employers’ liability insurance that some businesses are unsure of. When we asked about all types of business insurance less than a third of SMEs said they are very confident that they have the right cover, and one in ten admitted to having no business insurance at all.
However, it seems that the longer they are in business the higher the priority for insurance becomes. A quarter of SMEs that have been in business for less than a year have no insurance but this fell to 5 per cent for more established businesses who have been operating for 8-10 years.
Eaton continued: “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.
“It seems from our survey that the longer they are in business the more likely SMEs are to have taken out business insurance and my advice would be, don’t wait – make sure you have the right insurance from the start. Making the time to get the right advice and protection for your business could be the best investment you make so if you don’t already have one speak to your local broker as soon as you can.
