Small businesses lost between £3-£5.75bn of vital funds in 2020 because annual contracts and subscriptions were renewed without their knowledge, according to new research released today by SME insurance provider, Superscript.
At a time where small businesses need as much help as possible, frustration is high amongst business owners who perceive that they are ‘locked in’ to too many contracts with little to no room for flexibility.
In fact, 82% of respondents said that their current annual contracts and subscriptions are too inflexible. On average, up to half of small businesses’ annual subscriptions are totally locked, with 84% small businesses saying they would prefer to be able to amend contracts/subscriptions on a monthly basis.
Annual auto-renewals is an issue that a majority (60%) of small businesses have to contend with. The reason for this seems to be that there is a significant communication problem between the service-providers and clients, with 37% of businesses that have lost money through auto renewals saying they weren’t alerted to the upcoming renewal, and 34% saying they didn’t realise it was a rolling subscription when they signed up.
Other key findings from the survey include:
- Business Insurance is the most common type of annual contract to renew unintentionally, ahead of broadband/WiFi and phone contracts.
- Eight in ten pointed to ‘business necessities’ like insurance, WiFi or utilities as having the least flexible contract terms.
- Over three quarters (76%) of small businesses have signed up for a yearly contract just so they could use the service one single time.
Cameron Shearer, co-founder and CEO of Superscript said: “The pandemic has impacted small businesses disproportionately. Many are having to count the pennies to survive on a day-to-day basis. It does not help, therefore, that so many are having the wool pulled over their eyes by service providers that are automatically renewing annual subscriptions without explicitly communicating that they are about to do so. They are losing much needed cash unnecessarily, and this is not a sustainable way of doing business.
“For the new normal, we should be empowering small businesses to thrive by being flexible enough to work on their terms; not forcing them into contracts that don’t suit them. The future is monthly, customised subscriptions that small businesses can amend whenever the need arises.”