- Recent Crime Experience
- Changes Due to Crime
- Local Law Enforcement
- Crime Prevention
- Insurance Companies
- Final Comments
Crime, both against people and against property, has declined over the last several years, and rather substantially. The accompanying concern seems to have declined as well. Still, crime occurs more frequently than anyone would like. And, crime remains a business cost if for no other reason than the crime prevention steps taken to deter illicit conduct consumes management time and requires direct outlays on crime prevention measures, higher taxes to pay for law enforcement and security, and larger insurance premiums to pay for the consequences of criminal activity. It also dampens business in some neighborhoods by heightening fear among potential customers. This issue of the National Small Business Poll, therefore, focuses on Crime.
Two-thirds (67%) of small businesses are located in areas their owners term “low crime areas” and another 20 percent in areas they term “somewhat low crime areas” (Q#25). Just 2 percent think their businesses are sited in a “high crime area” and 11 percent in a “somewhat high crime area”. Still, crime prevention is a high priority for 33 percent of small employers, almost half of whom consider it a very high priority; 47 percent think it is a low priority and 19 percent a moderate priority (Q#1).
The larger the firm, the more concerned its owner is about crime prevention. Fifty (50) percent of those operating firms with more than 20 employers consider crime prevention a “high” or “very high” priority for their firms compared to just 30 percent operating firms of fewer than 10 employees.
Recent Crime Experience
During the last three years, few firms experienced crime often and 48 percent experienced no crime at all. The most prevalent type experienced was vandalism. Twenty-two (22) percent indicate that they encountered at least one act of vandalism against their business in the last three years (Q#2A). Half of that 22 percent report a single instance, the other half multiple instances. The least prevalent type of crime was violence to one’s person, such as mugging. Ninety-eight (98) percent had no experience with that type of criminal activity during the reference period (Q#2I). However, 3 percent had at least one shake-down attempt or threat, in which physical violence is often implied (Q#2K).
The most prevalent class of crime appears to be theft. Twenty (20) percent had a robbery or a burglary over the last three years (Q#2F). While 12 percent experienced one, 8 percent experienced more than one, suggesting a considerable problem. Shoplifting was another type of theft that many acknowledged, the crime being particularly severe for retailers and personal service firms. Fourteen (14) percent experienced shoplifting and the overwhelming majority of those on multiple occasions (Q#2B). In fact, shoplifting joined check fraud as the most common repeat criminal activity experienced.
Employee theft is another common type of illicit activity. Nineteen (19) percent of small businesses encountered it in the last three years, 11 percentage points more than once (Q#2G). Employee theft appears more common in the goods producing industries than in the services, though the survey shed no light on the reason. The survey identified embezzlement, a specific form of employee theft, as a separate class of crime. Four percent report its occurrence over the reference period (Q#2E). Stolen deliveries, a crime potentially committed by outsiders or
employees, was less frequent. Still, 7 percent report at least one instance in the last three years (Q#2J).
Payment fraud is also one of the more common types of criminal actions that small firms encounter. Seventeen (17) percent ran into check fraud over the last three years, 11 percent multiple times (Q#2D) and 12 percent credit card fraud, 6 percent multiple times (Q#2H). But, there is no evidence this type of fraud is confined to firms serving the general public.
Comparatively few, 3 percent, report illegal sale of controlled substance or drugs (Q#2C). Though the survey did not specifically mention such offenses as arson or cybercrimes, respondents had the opportunity to identify them. They virtually never did and instead chose to reiterate their concern with robbery and burglary (Q#2L).
A strong size component appears in these evaluations. The most notable is employee theft. Forty (40) percent of the largest small firms experienced employee theft in the last three years compared to just 16 percent experienced among the smallest. Greater size obviously means greater potential to have an employee engaging in theft. Still, it is an open question whether there are factors inherently related to size, such as esprit d’corps, that may also affect this outcome.
The criminal activity that generates the most concern is burglary and/or robbery. Twenty four (24) percent indicate it is the one type of illegal activity that concerns them most (Q#2a). The second most cited is “none” at 14 percent, these small business owners being unconcerned about crime.
Employee theft is the most frequently cited by 11 percent, but the concern is highly centered on those firms employing more than 10 people. Vandalism creates greatest concern for 10 percent, followed by credit card fraud (8%), check fraud (8%), and violence on a person (7%), though the crime rarely occurs.
Most of the uninsured losses from criminal activity are relatively small. The median uninsured loss among those experiencing any loss from a crime(s) was about $1,000, the 75th percentile being about $5,000 (Q#3). However, 7 percent claim to have lost $25,000 or more in the last three years, a tidy sum just to have been wasted on someone else’s avarice or irresponsibility.
Considerable amounts of crime go unreported. Just 43 percent of small business owners who experienced criminal activity in the last three years reported all incidents to the police (Q#4). In contrast, 35 percent did not report any of it. The data are not sufficiently precise to allow determination whether the frequency and seriousness of the crime is tied to report of crime, though it likely is so.
Changes Due to Crime
If a business is a victim of criminal activity, it is highly likely the owners will evaluate the incident(s) and determine whether changes in the operation and set-up of the business are warranted. They often are. For example, 68 percent who experienced a crime in the last three years changed their operations and/or procedures (Q#5A). Fifty-two (52) percent changed employee training (Q#5B). And, 17 percent made an investment in security measures of greater than $5,000 (Q#5C). Of those who did not make an investment that large, 33 percent experiencing criminal activity, or 28 percent of the population, made one over $1,000 (Q#5D).
Local Law Enforcement
Part of being safe is feeling safe. Small business owners generally feel a police presence in the neighborhood where their business operates, protecting their person, employees, and property. Forty-three (43) percent strongly agreed that they sensed such a presence and 39 percent agreed (Q#7). However, 12 percent disagreed and 5 percent strongly disagreed.
Owners also generally have confidence in their local police authority. Sixty-nine (69) percent have “very much” or “much” confidence in them while 10 percent have “little” or “very little” in them (Q#8). Twenty-one (21) percent express “moderate” confidence.
Working cooperatively with local law enforcement is often a good way to prevent crime. Such cooperation has a variety of dimensions. One indicator of cooperation is how well the business owner knows the officer(s) that patrol the area where the business is located. Forty-two (42) percent of small employers claim to know, on a firstname basis, one or more of these law enforcement officials (Q#6).
A second way to work cooperatively is for police to sponsor, host or participate in sessions with area business owners to help owners undertake crime prevention measures, stay informed of pertinent developments, etc. Twenty-one (21) percent say that the local police or sheriff’s department organized or participated in a program, panel, or meeting with area business owners on ways to prevent crime in the last three years (Q#10). Similarly, 17 percent say that the local police or sheriff’s department has inspected their place of business and made crime prevention recommendations (Q#9).
Security guards, that is, uniformed private security personnel who are not part of the local authorities, increasingly augment and complement police and sheriff’s department personnel. Ten (10) percent of small business owners now think that security guards that they or their landlords pay have become the first line of protection for their business rather than the police (Q#12). The level of confidence shown in private security guards, typically considered inferior to police
and without their powers, remains positive. Twenty-five (25) percent have “very much” confidence in their security guards and 26 percent have “much” confidence in them (Q#12a). However, 33 percent have “some” confidence in them while 14 percent have “little” or “very little.”
Self-help is also important. Twenty (20) percent have a Neighborhood Watch-type program in the area where business owners look out for one another (Q#11). But only 52 percent of those with such a program think that the program is strong compared to 38 percent who consider it weak (Q#11a). Part of the strength or weakness of such a program is business neighbors knowing business neighbors. Where such Neighborhood Watch-type programs exist, 26 percent of small employers claim to know all their business neighbors, 31 percent most of them, 34 percent some of them, and 9 percent none of them (Q#11b). Given that these owners participate in a cooperative program with other business owners, the level of familiarity with neighboring business owners appears quite low.
Police departments often prepare and publish lists of recommended crime prevention steps for local business owners. Items are remarkably similar from list to list, so a core of advisable actions can be readily identified. They can be roughly categorized as involving investment, employees, and operations.
Sixty-two (62) percent of small businesses have some type of security system to prevent intruders (Q#13). However, 82 percent of the largest have them. The systems could include alarms or security cameras of some type. Thirty-four (34) percent have security cameras, the largest businesses having them almost twice as often as the smallest (Q#14).
Lighting is often a recommended method to reduce crime, both interior and exterior. Sixty-four (64) percent of all small businesses have interior lighting that is turned on at night (Q#20). But exterior lighting is not usually necessary for those on the second story or higher in a building. Ninety-one (91) percent of small businesses are sited on the street or ground floor (Q#21). Of that number, 86 percent have outside security lights that are turned on at night (Q#21b). Ninety-six (96) percent of the largest, small businesses use outdoor lighting.
Businesses on the ground floor can also be vulnerable to entry through broken windows. Twenty-eight (28) percent of these firms have installed burglar-proof window panes or metal screens to cover them (Q#21a).
Employees can also be a source of problems. One means to avoid them is to check the backgrounds and references of job applicants and/or possible hires. In fact, 27 percent of small employers check police records on all prospective employees themselves or have someone do it for them (Q#15). Another 14 percent check some prospective employees in this manner and another 6 percent check only key prospective employees against police records. A little over half (53%) do not ever check police records.
Another cautionary means to prevent crime is to install payment systems among employees handling checks or other forms of money. One way is to require that all invoices are paid, all checks signed, and all outgoing payments be signed by the owner or a family member. Eighty-three (83) percent follow this procedure (Q#17). The smaller the business, the more common it is. A more elaborate procedure demands that all invoices paid, all checks signed, and all
incoming payments recorded be reviewed by a minimum of two people. Forty (40) percent employ this financial management technique (Q#18). Larger, small firms are almost twice as likely to use it than smaller, small firms. Just 6 percent did not apply one of the two while 29 percent applied both.
Employees can also be a solution to crime problems and almost always employees would like to help. One means is enabling employees to identify fraudulent credit cards and/or checks. Forty-four (44) percent of small employers claim to train relevant employees to spot them (Q#16).
Numbering and tagging all major pieces of business equipment and inventory has become increasingly easy with bar codes, scanners, and portable computers. Half (50%) of all small employers take the numbering and tagging crime prevention step with those employing 10 or more people substantially more likely to do so than those employing fewer than 10 (Q#19).
Small business owners buy insurance to protect themselves from losses resulting from crime. Insurance companies, therefore, have a considerable interest in ensuring that small business owners take reasonable steps to prevent it. Crime prevention, therefore, should be a partnership between small businesses and insurance companies with insurance companies providing incentives to small employers to help themselves, and to a modest extent it is.
An insurer can require a small business owner to take certain crime prevention steps before it provides coverage. Seventeen (17) percent of small employers indicate that their insurers require them to do so (Q#22). The incentive-based approach is more common. Thirty-four (34) percent, again with no differences between large and small, give discounts or rebates for taking specific crime prevention steps (Q#23). Firm size is associated with neither.
Another method insurers employ is to provide small business owners information on steps they can take to prevent crime. Nineteen (19) percent indicate their insurer provides them information on crime prevention steps (Q#24). Larger firms receive such information somewhat more frequently then smaller firms.
Crime no longer fits high in the pantheon of small business problems, but crime and crime prevention generate unnecessary business costs which fall high on any small business problem list. Many remain concerned about the problem however, if not explicitly, at least implicitly, as evidenced by the location of their businesses in relatively low crime areas and the crime prevention steps they take. Still, a large proportion do not feel compelled to take even rudimentary crime prevention steps, particularly owners of the smallest, excepting the handling of finances which appears to generate increased caution.
Of note is the confidence that a large percentage expressed in their local law enforcement authority. With the clear relationship between physical location in a low crime neighborhood and confidence in the local police, it is not obvious that the association is causal, let alone the direction of any causality existing.