Majority of Small Businesses Have Inadequate Cash Reserve
2.4 million companies would be forced to close permanently if unforeseen circumstances led them to cease trading for just two weeks
New research unveiled today revealed that the majority of small businesses only have reserve finance to last two weeks, leaving them unprepared for unforeseen circumstances that could lead them to cease trading temporarily.
The survey of over 1,000 businesses, conducted by YouGov and commissioned by Simply Business, found that 52% of the UK’s small businesses have savings of £10,000 or less, 30% have £500 or less and 20% have no cash reserve at all. The lack of additional funds among the small business community is a concern due to unexpected incidents that have occurred in the UK, such as last year’s floods that resulted in many businesses closing down.
The report highlighted a lack of awareness among small business owners, with 16% unaware of how much cash their business would need if they ceased trading temporarily and an additional 17% unable to calculate their firm’s fixed monthly costs whilst trading.
22% believe that they would be able to survive at least six months if they were forced to cease trading. However, the report estimates that over 2.4 million small businesses may close permanently if they are forced to temporarily shut-down as the average monthly fixed costs for a small business is estimated at over £20,000.
CEO of Simply Business, Jason Stockwood, discussed the findings:
“Even after last year’s storms and flooding, which cost over £830m of damage to firms nationwide, small businesses are still woefully underprepared for unforeseen circumstances which will prevent trading.
“Small business owners play a crucial role in the economic recovery, but we must ensure they are not existing so close to the brink.”
Preparing for unanticipated disasters is vital to any small or mid-sized business’ survival. For more information, check out our guide to planning for and managing crisis.