One in four businesses in regional and rural Australia would not survive if they had to close their doors for three months, new research has found.
A survey of small business owners in regional and rural NSW, Victoria and Queensland by CGU Insurance found that 25 per cent would have to shut down if they experienced a major business disruption such as a fire or major machinery breakdown.
This figure jumped to 38 per cent if the shut down happened during a busy period in the year.
A further 23 per cent of business owners said their business would struggle to cope with a three-month closure, and their business survival would be threatened.
Despite these findings, less than a quarter of business owners surveyed were covered by business interruption insurance.
Business interruption insurance covers the shortfall in gross profits caused by the interruption to a business, helps pay ongoing costs and protects profit margins until the business is back on its feet and back at its profit level before the interruption.
The research also found that:
- Those employing less than 20 staff were the most fearful of their prospects if their business had a prolonged shutdown;
- 62 per cent of those with two to four full-time staff said their business could not survive or would have their survival threatened; and
- 14 per cent of all businesses surveyed experienced a shortfall in income because of a business interruption in the past 12 months.
The research findings highlight the devastating consequences of a business interruption for small businesses in regional and rural areas.
Are you covered for business interruption? Speak to your insurance adviser to find out. For more information about business interruption, read Insuring for business interruptions under our Explore business section.