"Small businesses are constantly changing so they need insurance cover that can flex as their business does. "
Three million UK SMEs need to expand or contract throughout the year to meet business demands, according to research from Direct Line for Business.
These 'Balloon Businesses' don’t follow a continual growth trajectory, but instead recruit and release employees in response to business needs, or open pop-up or temporary locations as demand fluctuates.
Nearly half (49%) of SMEs say the headcount of their business fluctuates throughout the year, followed by a 32% of micro businesses and 27% of sole traders. When it comes to premises, a third of SMEs say the number of locations they operate from changed between the second half of 2017 and 2018, as businesses increasingly take advantage of short term leases and pop-up locations.
This extends beyond functional changes too; over the last five years, more than 2.6 million (47%) SMEs have started offering a new product or service outside of their primary industry, with 11% expanding their service or product offering every year.
The research also shows that UK SMEs are extremely optimistic about their growth prospects in the next year, with 64% of businesses anticipating their revenue will grow by an average of 10.6% over the next 12 months. A third of SMEs plan to employ new full-time staff, while 28% plan to bring in part-time staff and 21% plan to hire temporary staff to deal with seasonal business demand.
Looking ahead, one in six SMEs (16%) are planning to start offering a new product or service within their own industry in the coming 12 months. 12% want to expand their footprint within the same region, while a further 12% want to expand out of their existing area of operation to somewhere new.
In spite of the operational changes they make throughout the year, nearly two-fifths (38%) of SMEs only change their insurance policy annually when the existing one is about to expire. In addition to this, just 11% amend their policy when there is a change to the number of premises they work from, while a fifth (19%) do so when there is a change to headcount, meaning they risk invalidating their insurance or being underinsured.
Even more concerning is that one in nine SMEs (11%) claim that they do not have any insurance at all, rising to 36% of sole traders who admit they don’t have any cover whatsoever.
Jazz Gakhal, managing director at Direct Line for Business, said: “Traditionally business growth has been viewed as a linear process, but small companies are now incredibly agile, hiring contractors to meet demand and taking advantage of short term leases to test the landscape and expand their footprint. By adopting flexible working practices, they can quickly scale up or down their operations without putting the company’s survival at risk.
“Small businesses are constantly changing so they need insurance cover that can flex as their business does. While being agile is important for businesses in the UK, there is a risk if the policy is not up-to-date. Direct Line for Business has recently launched an end-to-end business insurance solution that enables customers to personalise their policy according to their business needs.
“We also have no mid-term amendment fee, which means our customers can make cover revisions whenever their business goes through change, so they can feel reassured that they have the right cover in place and a policy that keeps up with their ever changing world.”