How do local businesses protect themselves against major threats?
Yesterday, we revealed the major findings of our Small Business Threat Index. To recap, we surveyed 2,300 business owners in all 50 states to understand the most damaging threats facing small businesses. We discovered that SMBs consider threats to revenue or the physical store most damaging.
Today, we’re focusing on how prepared local businesses are to weather a proverbial (or literal) storm. Specifically, we asked respondents in our survey:
- How much financial runway they have in case of a crisis
- What they plan to do in the next 12 months to prepare against potential threats
- How they’re using insurance to mitigate against business risks
What if sales stopped completely?
As we reported yesterday, small businesses operate on a razor’s edge with respect to cash on hand, which exacerbates the problems of a bonafide business threat — from overt ones like a natural disaster to subtle ones like an increase in interest rates.
We found that 1 in 5 American small businesses wouldn’t even survive one month if sales completely stopped, and 3 in 4 would last less than 6 months. Here’s the full rundown:
Small business threat management
We wanted to understand what, if anything, small business owners are doing to reduce the impact of potential threats. In addition, we were curious to know if their preparations match the threats they consider most damaging.
First, we asked what respondents plan to do in the next 12 months to reduce their risk:
Next, we asked respondents which insurance policies they currently have:
In general, small business owners aren’t insuring themselves sufficiently against the threats they consider most damaging. For example, 67% of owners with less than a month of reserves consider floods, fires, and other disasters “extremely damaging,” but only 21% have disaster insurance, and only 14% have business interruption insurance to maintain cash flow during a stoppage.
To further illustrate, we isolated respondents who said a natural disaster would be “extremely damaging” to their business. Here’s what we found:
- 27% would last less than 1 month if sales stopped, and 78% less than 6 months
- 55% have overcome a natural disaster that impacted their business in the past
- Yet only 28% have disaster insurance, and 23% have business interruption insurance
These companies are at high risk of shutting down if a major weather event caused flooding, fire, or other significant damage to their businesses. Nevertheless, their threat mitigation preparations aren’t in line with how they evaluate risk, particularly considering their financial exposure.
In a future post, we’ll explore the impact of online threats to local businesses, and how they compare to the physical threats that Main Street companies are so afraid of. Stay tuned.
Over 450k small businesses use Womply software. Now we’re helping you get the emergency funding you need, ASAP. Get started by filling out the form to the right form below.
By submitting this form you agree to Womply’s Services Agreement
Learn more about Womply
Womply Product Overview - Reputation Management, CRM, Email Marketing for Small Business.