Small Business Owners Unprepared for Income Loss

0

Less than 20% of small and medium enterprise (SME) owners have sufficient insurance and financial planning strategies in place to fund their livelihood and living expenses for longer than a week in the event of their unplanned absence.

At the same time, many SME owners have linked their retirement to the success of the business with 55% considering the sale of a business as part of their retirement plans, according to research released by REST Industry Super.

The research, conducted among 1,700 Australian workers and employers using a customised online quantitative survey in May and June, found that 5% could survive for less than a day, 15% for less than a week and a further 9% for up to three weeks with 25% able to survive for up to 2 months. Only 10% of SME respondents indicated they could survive for more than a year based on their current life insurance and financial planning arrangements.

The figures have been presented in a whitepaper produced by REST – Bridge the Gap, with Chief Executive, Damian Hill stating while SME owners were responsible for the  livelihood of around 4.7 million working Australians many were unprepared for potential risks to their own financial wellbing.

“SME owners are relatively unprepared for the future when it comes to planning for their financial security – in terms of both their ability to continue supporting their livelihood following an unexpected event, as well as their plans for an eventual retirement,” Hill said.

“While it can be difficult to find the additional cash for income protection and total and permanent disablement insurance, small business owners can access these through their superannuation.”

Hill said that while most respondents indicated their business would not be able to remain profitable without their continued presence the research found many saw the sale of their business to be important in funding their retirement.

“SME owners put themselves at risk if they rely solely on the sale of their business – and the assumption that it will remain viable for sale – upon retirement.”