Small business owners dip into personal wealth to survive? Of course they do

We are living through an era where there is much discussion about capitalism, taxes, executive pay and so on. Is Philip Green a monster for raiding the BHS coffers when they were his to raid? Is the pay of a city CEO morally acceptable when his lowest paid workers are on a fraction of his income? These are legitimate debates to have, but politicians engaging with them miss a crucial point: large businesses are not the majority.

I raise the point because a report has been released today by Legal & General suggesting that just over half (51%) of small business owners would use their personal wealth to support their company. L&G wanted the focus of the piece to be on another statistic they revealed, which is that around a quarter would use the company’s cash reserves.

I am not sure quite why that would be a surprise to anyone: the possibility of shocks to a business are exactly why most owners of small businesses would want to have cash reserves in the first place. The only thing that’s surprising about that statistic is quite how low it is.

So let’s focus on that 51% figure who would dip into their own pocket to keep everything afloat. What it confirms to us who already know, and what it ought to tell politicians, is that SME owners care so deeply about their business that they are willing to put their own hard-earned cash on the line when things get tough.

And anyone who has founded and/or run a small business will tell you – this is not as uncommon as it might sound. Bad months, quarters or even years can affect anyone, from the corner shop to the small graphic design agency. For most, it’s actually part and parcel of what it means to survive, and stay in business.

And that means politicians have it wrong by endlessly focusing on the whys and wherefores of FTSE 100 executive pay. It’s a million miles from the experience of SME people, who are very far from enjoying fat cat pay and fiddling the taxman, are actually dipping in and out of personal funds, up and down from great years to tough years.

These people are no enemy of society: they are its backbone, and they frequently take great personal risks just to stay in the game.

Legal & General may be surprised enough by these stats to put out a press release this morning, but I’m not, and I doubt you are either.