As we deal with the fallout of the 2009 economic recession, it is vital that we remove the stigma attached to business failure. We’d do well to follow the example of the Us, where the entrepreneurial environment is far more accepting of failure – indeed, it is almost regarded as a necessary rung on the ladder to success.
Now, in the process of rebuilding our battered economy, we have an ideal opportunity to change the focus of our lens and adopt a positive and supportive approach to second-start entrepreneurs.
Building through experience
A failed business may mark the end of the enterprise, but it does not mark the end of the entrepreneur. International experience shows that failure can be an opportunity to succeed, to build on what has been learnt. The European Commission on Enterprise and Industry estimates that 18% of successful new ventures in Europe are those established by second-start entrepreneurs – and that’s in a cautious and risk-averse society. In South Africa, where both the necessity and appetite for entrepreneurship is much stronger, we could do far better.
Typically second-time-around entrepreneurs have an established strength of resolve. They have gained valuable insights and they are more prepared to meet the challenges. These are the candidates who are most likely to be genuinely talented entrepreneurs with the full potential to create jobs and wealth.
They are the ones who will be able to pick up the pieces and move forward. However, they could do with the right help for their re-entry ventures, in the form of both financial and moral support for their second ventures – which means that the enterprise development sector needs to foster a positive attitude to risk-taking and failure, and provide appropriate support.
So how can this be done? Firstly, financial institutions and small business development agencies need to be especially sensitive to the circumstances in which failure has occurred. Let’s remember that, worldwide, the recession took most of the business community by surprise – most of us did not see it coming.
In this context we cannot attach negative connotations of failure to those small businesses that could not survive. For instance, if a business has gone under because it lost its core customers, or its key suppliers, as a result of the downturn, this does not mean that there is no entrepreneurial potential. So we need special measures to create a more conducive environment for second-time-around entrepreneurs. It’s time for an additional focus on reconstruction in the field of enterprise development – a kind of RDP for the small business sector.
Banks are well-placed to offer support to their clients who have had to shut up shop, not only by extending restructured credit, but also by offering advisory and support services that will assist the failed entrepreneur to rehabilitate and start up again. Now, more than ever, banks need to be flexible and open-minded and recognise the context in which failure has occurred. The public sector also needs to come to the party by giving priority to incentives and grants for re-entry entrepreneurs. The industry, as a whole, needs innovative new products to help entrepreneurs to perform an analysis of their failure and develop new business plans informed by the lessons they have learned.
Supporting entrepreneurial development
As part of our economic recovery, we cannot afford to douse the flame of entrepreneurship. We need experienced entrepreneurs to help grow jobs and rebuild the economy, add value, pay taxes and build the culture of entrepreneurship. But those small business owners who have been felled by the recession need some help to get back into the ring. There will be long-term consequences if they are allowed to drop out of the game completely.