26 August 2015 10:30
Poor professional advice costs small firms £6.4bn
Poor professional advice has meant one in six small and micro-businesses in the UK has lost money in the last year, according to new research by Direct Line for Business.
The research found that consultants and other business advisers have cost Britain's small and micro firms an estimated average of £20,842 in the past 12 months as a consequence of poor advice, with 19 per cent of firms claiming to have lost between £50,000 and £100,000. According to Direct Line for Business, this amounts to £6.4bn lost by small and micro businesses in the past 12 months.
It identifies IT consultants as the professionals most likely to provide damaging advice, with 44% of businesses whose operations have been affected by bad advice blaming their IT consultant. More than a third (34%) of businesses report receiving poor advice on management issues, while slightly fewer (32%) claim that bad advice from a marketing consultant or agency negatively impacted their profits.
Direct Line for Business is not only warning consultants to consider the impact their poor advice will have on their own reputation and revenue, but also how it can damage their client businesses. Almost half (46%) of respondents that received poor professional advice claim they had to lay off staff as a result. Two fifths of respondents had to stop their expansion plans or scale back, while 34% needed to take out a loan to enable their business to get through, with 28% saying poor professional advice jeopardised the survival of their business.
Nick Breton, Head of Direct Line for Business said:
"Our research clearly highlights the devastating effect poor professional advice can have on small and micro businesses. However, the impact on an advisory firm that is facing litigation can be just as shattering. For those providing advisory services, it is important to recognise that issues can occur and clients could pursue them for compensation," he warned.