The excitement you might have felt when you started your small business is often tempered by the reality of trying to keep your business afloat in the current market. Reality sets in even more when you look at the survival rate of businesses between 2014 and 2018.

Specifically, only 59.6% of non-employing SMEs and 69.3% of SMEs with 1 to 4 employees survive their first three years. So what’s the problem? Why are these SMEs failing and what are you doing that may make your business follow in their footsteps?

Top 5 Challenges for SMEs

1. Reduce cyber risk

One of the biggest risks to any size business is ransomware and phishing. In fact, in 2018, nearly 80% of small businesses experienced some form of cyber attack. Unfortunately, most small businesses are unprepared for cyber attacks or data breaches. There are many ways to protect your business from cyber attacks, however, one of the most important strategies is to take out Cyber Insurance to reduce your risks.

2. Diversify your client base

If one of your clients is responsible for more than 50% of your income, then you need to diversify your client base. Whilst you are trying to keep your own business afloat, if this customer goes out of business, you will likely follow suit very quickly, unless you can replace their income. It’s always a good idea to have a large number of clients, so that if one drops away, it doesn’t heavily impact your revenue.

3. Manage your taxes

The smaller your business, the less likely you are to employ accountants, bookkeepers and tax specialists. This can be a big mistake, because any breaches of the tax laws can bring the full might of the ATO down on your shoulders. At the very least, you need a tax specialist who can ensure that your business is up to date with its business tax. However, unless you can keep track of all invoices, payments, expenses and employee wages, etc., you will need a payroll officer, bookkeeper and accountant as well.

4. Address legal issues

Some of the issues that SMEs need to address to avoid running afoul of the legal system include:

  • Securing the IP of their business name, trademark or logo.
  • Obtaining the appropriate licence(s)
  • Complying with the Privacy Act
  • Properly structuring company ownership, commercial leases and other contractual agreements
  • Ensuring employee pay is accurate and timely
  • Risk and insurances that protect against professional liability, and the list goes on.

Protecting your company from legal risks allows you to focus on growing and expanding your business, so it should always be an essential pillar of your business plan. SME Business Insurance or just Liability Insurance can reduce some of these risks, however, taking on board appropriate legal advice will also reduce many other risks.

5. Anticipate natural disasters

The bushfires, followed by severe flooding has left many SMEs financially devastated and unable to trade. Unfortunately, your financial obligations don’t end just because your revenue has temporarily ceased. Whilst there are steps you can take to reduce the outcome of natural disasters, business interruption Insurance can keep your business ticking over until you can begin trading again.

For help deciding which types of insurance can help to lower your business risks, talk to Lisa Carter today.

General Advice Warning: This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is appropriate for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement.

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