However, their failure to seek professional advice is putting almost half a million businesses at risk of breaking the law and being fined thousands of pounds.
According to new research from insurance group Aviva, two in five SMEs are leaving themselves “vulnerable to costly mistakes” because each mostly rely on advice from family or friends – with only 13 per cent consulting financial advisers, 9 per cent using legal advisers and 6 per cent turning to insurance providers.
It found that the top three hurdles when setting up a new business were financial administration, marketing and sales, and understanding and fulfilling legal obligations as an employer or business owner.
However three quarters of new SME owners said they knew “little or nothing” about bookkeeping, marketing and sales – with 85 per cent claiming to know very little about their legal obligations as an employer.
Having established their businesses, a quarter of SME leaders said they still had not got to grips with marketing and sales, a fifth in getting financial help and a fifth in understanding their legal obligations.
Indeed, one in ten of SMEs didn’t know that employers’ liability insurance was a legal necessity for the vast majority of businesses.
Failure to have the insurance carries the risk of fines of £2,500 for every day the business is not properly insured.
In addition, less than a third of SME owners said they were very confident that they have the right cover, with one in ten admitting to having no business insurance at all.
Read more about seeking advice:
- Business advice from a position of empathy and understanding
- KPMG creates business advice “dream team” with Entrepreneurial Spark
- The road ahead: How to achieve sustained growth in a startup
Angus Eaton, managing director of commercial lines at Aviva, warned SMEs failing to understand their legal obligations were at risk of breaking the law.
“It is potentially leaving more than 600,000 SMEs financially vulnerable should a claim arise,” Eaton said. “One claim without cover could easily be enough to put severe financial pressure on an organisation or even close it down completely.”
He urged SMEs to get “great advice”.
“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,” he said. “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. There is a wealth of advice and material designed to support SMEs along every step of the way.”