It’s true what they say – timing is everything. For some businesses, the pandemic will go down in history as one of the biggest challenges to their supply chain management, human resources, and overall bottom line.
But many of the businesses that started up during or post-pandemic will note the last 18 months as the foundation of their success. New data from Quotezone.co.uk reveals that the number of small businesses in the UK has increased by 20% from January to August 2021, when compared to the same period in 2020.
The data, which is based on a sample size of over 15,000 small businesses looking for business insurance, correlates with recent ONS data that shows a 24% increase in small businesses established in the UK during Q4 2020 compared with the same time in 2019. This represents the biggest quarterly peak in four years and points to an exponential rise in entrepreneurship during the pandemic.
Many of these new startup founders were likely furloughed or made redundant during the pandemic, while others may have simply seen an opportunity to tailor their businesses to the new needs and interests of a population locked down and working from home.
However, as new businesses saturate the market and the world begins to move on from Covid-19, the next few years will be make-or-break for lockdown businesses hoping to survive beyond the pandemic. Particularly since 20% of new businesses in the UK fail in year one and 60% fail by the end of year three.
While many new small businesses might have originated as side hustles, with the end of the furlough scheme last week, we can expect to see more entrepreneurial initiatives transition to become primary revenue streams.
The end of furlough could also cause a hit to the wider economy, which would in turn affect many small businesses. That’s why it’s important for new entrepreneurs to ensure they are being cost-savvy when taking out insurance for their business.
While there are many different types of business insurance entrepreneurs can invest in to protect their business, three of the most common ones are commercial property insurance, public liability insurance and professional indemnity insurance.
As the name suggests, commercial property insurance is designed to protect businesses that own an office, shop, warehouse or some other type of commercial property.
Professional indemnity insurance covers any sole trader or company who is in business to sell their professional skills or knowledge. And lastly, public liability insurance protects businesses from the risk of liability claims if a member of the public is injured or their property is damaged.
Quotezone.co.uk has some tips on how SMEs can save while building healthy business foundations.
- Small businesses can protect themselves from loss of income, business interruption and even damage to stock and equipment via commercial property insurance
- Some professionals may be required by their regulator or industry body to take out professional indemnity insurance. Mortgage intermediaries, accountants, solicitors and architects usually have to have this type of cover
- If a small business rents their premises, they might not need commercial property insurance because their landlord will often insure the property, however, they will need to discuss the precise details of their business with the landlord to check they are in fact permitted to run a business of that nature from that particular property – and that the details are shared and covered by the insurance provider. Note certain types of business could invalidate the insurance so leasees need to make sure they double check the lease agreement and not just sign without clarification
- Small businesses can compare various types of business insurance and search for cheaper deals and better policies on a comparison website so that they get the cover they need without paying over the odds for it.
Greg Wilson, Founder of business insurance comparison website Quotezone.co.uk said, “Our data shows that the pandemic has resulted in a boom of new businesses entering the market, and with furlough ending and fresh job losses looking likely, there’s a good chance new business creation will continue to soar – a welcome trend as small businesses are the backbone of our economy.
“Of course, it’s also important to be mindful of the fact that 20% of new businesses fail in their first year, and over 60% will go bust by year three.
“Two of the most common reasons businesses give for their failure are that they ran out of cash (29%) or they experienced pricing and cost issues (18%). That’s why we would urge any new entrepreneurs who have launched a ‘lockdown startup’ to be mindful of their cashflow, and to reduce their overheads as much as possible by shopping around for the best deals on all their essential business expenses.”