Small Firms Fail to Protect Themselves Against Losing Key Employees
Almost half of small businesses would close if they lost a key worker yet majority have not safeguarded their firm against such a situation
The majority of small businesses in the UK think that losing a key person within their business would not affect them, yet a new report from Legal & General Business Protection shows that 40% of firms would close in less than a year if a key employee suddenly left.
The research found that 63% of companies think the loss of an integral employee t would have no effect on their brand, another 58% said it would not affect their relationship with financers and 47% believed that it would not affect their cashflow.
Contrary to these perceptions, the research revealed that 63% of sole traders would cease trading immediately if a key person left as would 46% of businesses that are less than two years-old.
Furthermore, 40% of small and medium-sized companies would also close within a year if a key person had left the business.
Despite this, business owners fail to prepare for the loss of a key team member as 76% of sole traders, 72% of young businesses and 57% of small and medium firms admitted they don’t have cover in place.
Richard Kateley, head of specialist protection at Legal & General, said:
“The loss of a key person can be potentially devastating, particularly for a small business. Our research shows that many business owners do not appreciate the risks to their businesses or the staff working for them from the loss of a key member of staff.
“There is a large protection gap from business owners who don’t know about the types of policy that are available to help them. We know that when business owners are made aware of the risks and the products that are available to mitigate them, they do take out protection.”
For more information on handling staff, check out our sister site Growing Business’ section on managing people here.