Half of small businesses living dangerous close to the edge

Over half of the UK’s small businesses are not prepared for unforeseen problems, research has revealed.

According to a survey of 1,015 small companies (those with less than 50 employees) by Simply Business, 52 per cent said they had cash reserves of less than £10,000. More worryingly, 20 per cent saying they had none at all.

The findings coincide with other warning signals that have been surfacing for Britain’s SMEs. Firstly, the survey illustrates why the issue of late payment is so prominent and oft talked about among these smaller firms, with many unable to cope with a sudden missed payment.

Furthermore, the results are indicative of the rising number of ‘zombie businesses’ currently skulking around the UK. It is something we have written about before here; the term essentially refers to companies that cling to survival at times of little economic progression as they are propped up by easy forbearance from the banks and low interest rates, allowing them to continue to trade despite experiencing slow or no growth.

The lack of cash savings demonstrates the fragility of these businesses. And with this fragility comes opportunities for the stronger, more financially stable competitors in the market.

As the economy recovers, those whose foundations are unable to support growth will quickly begin to fall behind. And in the Darwinist nature of the business world, they could become attractive prey to the aggressors.

Simply Business’ research clearly shows that a great deal of companies are teetering on the brink of collapse – they are just one failed deal, one slow month or one unforeseen error away from entering serious trouble. As such, now is a great time to be closely monitoring winding-up petitions and administrations to ensure, should you be looking to buy a business, you are well poised to capitalise on these distressed small businesses.

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