Nearly one in four SMEs “could fold within a month” if they lost a key person

SME survival in question if key member of the team was off

Nearly a quarter (23 per cent) of UK SMEs would only be able to continue trading for a maximum of one month if they lost a key person within their business, according to new research from Scottish Widows.

The study, based on a survey of 2,019 UK business owners, highlights the potential impact that serious illness or incapacity can have on business continuity, particularly for smaller organisations that rely heavily on a small number of individuals.

The research found that one in 10 businesses would cease trading immediately if the owner became incapacitated due to illness, while 94 per cent of SME owners acknowledged that their organisation relies on more than one key person. Despite this, almost half (45 per cent) said they had never sought advice about business protection.

With more than 1.3 million micro and small businesses operating across the UK, Scottish Widows warns that many organisations may underestimate how vulnerable they are if a business owner or key employee is unable to work for an extended period.

Catherine Trimble, Head of Distribution, Protection at Scottish Widows, said:

“Business protection is often seen as specialist or unknown territory. In reality, the opportunity is much closer to home. Advisers are already having the conversations that lead to business protection. Clients talk about debt, succession, reliance on key individuals, pressure on cashflow and uncertainty about what would happen if something changed unexpectedly. The need is there. It simply does not arrive labelled as business protection.”

She added: “At the same time, most small businesses remain under-protected. Many rely on a small number of people to generate income, service debt, and drive growth. Yet a significant proportion have never taken advice, do not fully understand their options, or have no funded plan in place.”

The findings suggest many businesses may not be taking a proactive approach to resilience planning, despite the significant financial and operational risks associated with the loss of key people through illness or injury.