Small to medium enterprises (SMEs) are regarded by many as the engine that will drive the UK out of recession. They’re run by ingenious, exciting and passionate people, willing to risk all to be a success.
However, AXA Business Insurance has found that contrary to stereotypical perceptions of entrepreneurs as risk-taking mavericks, they are, in fact, more prudent and risk-averse than the general public.
A study, carried out with the Association of Business Psychologists, found that entrepreneurs showed far less adventurous characteristics (3.6%) than the average public (12.8%). The majority (52%) of small business owners questioned fell within one of three risk types: wary (22%), prudent (15.2%) or deliberate (14.8%).
It seems that business owners working alone are more carefree, intense and spontaneous than those working in partnerships, making them more flexible in their decision-making. By contrast, those working in partnerships are more likely to be wary, prudent and composed.
Despite the seemingly conservative approach taken by entrepreneurs, the research found that people who are calm, confident, optimistic, organised, methodical and measured have greater financial resources and may, therefore, make more successful small business owners.
This cautious, risk-averse streak displayed by entrepreneurs means that two thirds of small business owners bought insurance as soon as they launched their business.
A recent survey of small businesses carried out by AXA Business Insurance found that the main concern business owners have is being sued, followed by day-to-day risks such as accidents and making mistakes. The consequences of not having adequate insurance cover is seen by 72% as very significant or threatening to the future of the business. In fact, protection is regarded as more important than growth for the majority of survey respondents.
Whether you work from your kitchen table or spare room or have an established business and employ staff, neglecting to protect yourself and your business could leave you seriously out of pocket if disaster strikes
Protect your business
First of all, your home contents provider will want to know if you are using your home for business purposes, even if it’s for only a couple of days a week. If you forget to tell them then you may not be covered if you make a claim.
If you’re working from home you’re likely to use your personal equipment for business use, like your computer and mobile phone, sewing machine or kitchen equipment, depending on the type of work you do. But your home contents policy may not cover it for business use, so you’ll need to consider business equipment cover too.
Protect against accidents
Accidents do happen and 47% of small businesses see an accident to staff, customers or members of the public as a top five risk.
Though not a legal requirement, public liability insurance is recommended for anyone who has clients visiting their businesses premises, even if it’s a home, or for those who visit clients’ premises. It will cover you for injury or damage to a person or premises negligently caused by you. So if you visit a client and somebody trips over your laptop cable, then you can claim on your insurance if your client makes a claim against you for injury or damage.
Public liability insurance will not protect your staff. For that you need employers’ liability insurance
Protecting your staff
If you employ people, even on a temporary or voluntary basis, you need at least £5 million of employers’ liability insurance. It’s the law and the authorities take a dim view of businesses found to be operating without it. Fines for not having employers’ liability insurance can run into the thousands. And defending a legal case against a member of staff who is injured or becomes ill in the future can cost even more.
Professional indemnity insurance provides a safety net for anyone who gives advice, such as consultants and accountants. In fact, 53% of small business owners consider making a mistake to be the biggest risk to their business and 62% fear being sued by a client as a top five risk.
Compensation for legal defence costs can be very expensive and professional indemnity insurance pays out for claims of negligence or poor advice. And, in many cases, it can be backdated to the time you started your business.
Not sure what insurance you need? The AXA Business Wizard will point you in the right direction.