The top three challenges facing SMEs and how you can face them all

Let’s start with this; there’s never an ideal time to start and build an SME not least because, by its very name and nature, it’s a business in its infancy or growth cycle. An SME will be developing products, brand, reputation, all while trying to remain solvent, attract and retain great people, and keeping within the boundaries of work-related legislation.

But for most challenges that an SME faces, there is a sound solution. In this article, we take a closer look at three of those common dilemmas – especially cyber protection, financial worries (particularly the cost of living), and business interruption – and demonstrate how robust and tailored insurance cover can protect a business and aid growth. 

1. Financial woes

In the last few years, the fallout from the global pandemic, a rise in inflation and many reactive measures like freezes on wages have taken their toll on profitability and the output for many businesses, especially SMEs. Supply lines have been impacted, energy costs have skyrocketed, and consumers have less money to spend causing businesses to operate on more and more unstable ground. Year after year this has led to more businesses becoming insolvent leading to disruptions and stress for both their customer and trading partners. 

This is where trade credit insurance can really play its part. Whenever there is instability across the economy and markets, this provides a buffer from customers or suppliers that have difficulty paying and delivering, so you won’t be out of pocket and subsequently have issues settling your own bills or with your own payment arrangements.

2. Winning the war on cyber-attacks

When considering current risks to businesses both large and small, it’s the invisible enemy that often poses the greatest threat. 

On a daily basis, there’s no escaping the onslaught of disturbing stories in the media regarding data breaches, malware attacks, and system infiltration. All of these have brought transport networks to a halt, chaos to online platforms, and medical risk for hospital trusts. So, if the “big guys” are unable to foresee where the next cyber issue is coming from, it’s hardly surprising that smaller businesses will feel especially vulnerable. 

The advantage an SME may have is that with fewer platforms, staff, and apps, there are also fewer inroads for a digital dissenter to take advantage of. In other words, it may be simpler to control the online estate. But that’s not to say the chance of a cyber-attack can be overlooked. This is now a thriving industry, with as many “bad actors” under dubious employment than, well, your typical SME! The superfast development of AI, and convincing nature of social engineering and fakery means that the old scam email promising a fortune or warning of an apocalypse unless financial repayments are made, is almost historic in its nature.

So how can an SME ensure there is damage limitation from a cyber infiltration? 

While there are only so many barriers one can put in place, and training given to employees, often the most sensible protection is ensuring your business is covered by a solid cyber policy. This insurance, such as that offered via Howden, gives you peace of mind that if data is shared or records are held to ransom, your business can survive the storm with the least amount of collateral damage. It allows you the time, resources and expert support to investigate the cause, mitigate for any losses – both financial and reputational – and halt further damage.
 

3. Keeping going through business interruption

Business interruption cover is often the result of the circumstances above but needs to be upheld and viewed via its own strengths and benefits. 

This cover is your main survival tool for so many circumstances, and with the right specialist broker working with you, can be crafted to meet your specific requirements. If your shop, warehouse or office premises are damaged by fire, flood or malicious activity and you need to halt production, replace damaged stock and find temporary premises, you’ll have cover. If a crucial machine in your factory breaks down, or a delivery runs late causing your own supply and delivery process to derail, you’ll be covered. SMEs in particular are recommended to place a priority on contingency plans, and work through possible scenarios with their insurance broker. 

Discover more from Howden on the most common causes of business interruption here.

While these are the “big three” considerations and key challenges that your business could face, it’s worth mentioning there are some that are close behind and which could be more relevant to your business model, either now or in the near future.

With a new government in place, there is already a slew of possible legislation and regulations in the pipeline – all and any of which may impact businesses if passed into law. Having the resources to flex with these changes is likely to be a major consideration for a growing business, so this is also worth discussing with your broker when you arrange or renew your business insurance.

Further considerations for SMEs in particular are also financial; for example, how you’ll become more sustainable in your approach – especially if some elements of this such as carbon net zero targets become entrenched in law – without denting profit margins. You’ll also want to consider new ways of securing finance, recruiting and retaining top-notch talent, all while securing new and loyal customers. 

There may be times when, as a decision-maker for an SME, it can feel like a fight for survival with future growth always a step ahead of where you are. But by mitigating for unforeseen events and partnering with an insurance broker that supports your business interests, no matter how complex, you should be able to expand, exhale, and most excitingly, consider the prospect of transitioning into a large business.