If your best customer loses their appetite for your services and starts craving brains instead, could your company take the hit or would you be forced to head for the hills?
A zombie apocalypse is an extreme example, but there are plenty of everyday setbacks that can have a serious impact on revenue for small businesses like yours, ranging from staff sickness to flood, fire or damage to essential equipment or vehicles.
Our research found that (based on the money they have in the bank) 26% of trade businesses would fold within two months if faced with any form of income interruption* – and that's why it's so important to have an apocalypse-proof survival plan.
Fortifying defences
A stockpile of savings is a small business's first line of defence against the unexpected (and the undead). However, we found that 24% of small businesses have less than £5,000 in savings, while a further 26% have less than £1,000 – barely enough to cover the cost of your average flamethrower*.
When faced with shortfalls in income, 45% of SMEs turn to short-term solutions like credit cards or overdrafts to plug the gap*. However, while seemingly 'silver bullet' credit options like these are relatively speedy and convenient, interest charges and fees for late payment can quickly come back to bite your bottom line.
Staying vigilant
Everyone knows that in a zombie apocalypse, vigilance is crucial: patrolling the perimeter and taking turns on watch can help to catch threats early. The same applies to running a small business, and it's critical to keep a close watch on your cash-flow to avoid solvency issues.
Even businesses with a strong pipeline or order book can find themselves floundering if a late payment or project delay means they can't pay their staff or buy the materials to fulfil an order. That's why it's vital for small business owners to know exactly what’s going out, what’s coming in, and when. Some smart practices include:
- Keeping an accurate and up-to-date inventory, and only ordering what you need in the short term.
- Comparing costs from different suppliers and negotiating agreements to get the best price.
- Making sure your invoices clearly state your payment terms, and dedicating regular time for credit control (checking and chasing late payments). You may also want to consider offering small discounts for early payment as an incentive.
Getting backup
If you saw a horde of zombies on the horizon, you wouldn’t hesitate to call in the emergency services – or the army. Having powerful backup is essential for survival, yet a surprising number of small businesses are failing to protect themselves with basic (and sometimes legally required) insurance.
- 53% of small businesses that are legally required to have employers' liability insurance, don't.
- 43% don't have public liability insurance to cover costs in the event the work they do results in injury to a customer or damages the customer’s property.**
These types of cover protect against genuine risks that can pose a real threat to SMEs. In a survey of UK employees, we found that 36% had been injured lifting heavy objects; while our survey of business customers found that 48% of homeowners have suffered property damage at the hands of a tradesman of visiting business. ***
Of course, these kinds of incidents don’t always lead to hefty compensation claims, but those that do can completely wipe out an unprepared business – and that's a prospect that's much scarier than zombies.
*AXA Business Insurance survey of 297 small businesses (January 2015)
**AXA Business Insurance survey conducted in two waves: a study of 365 small businesses (April 2014), a survey of 2,000 employees in October 2014.
***AXA Business Insurance and Enterprise Nation Home Insight Report among nearly 800 home-based businesses (March 2014)
