The damaging attitude that we have towards small business failure in the UK is something I have long bemoaned. There has never been a time when the small business failure statistics are so likely to rocket, and that it is so essential we stop equating business failure with fault and blame.
Way back in 2017, I wrote an article for Real Business putting forward the argument that Britain needed to change its damaging views on business failure. At that time, only four in ten businesses would still be trading at the five- year mark.
With COVID-19 set to send the business failure rates sky-rocketing, I believe this message is more important than ever. 0.4% ceased in the first two weeks of lock-down alone.
By 2018, I wrote again in Real Business, noting that the government’s attitude towards businesses had also changed. The Cameron-Clegg Coalition whatever else their failings, were more markedly pro-small businesses than any government that has followed and start-ups were at their height.
Then we had Philip Hammond, whose approach was to champion larger businesses. Suddenly, the FSB was reporting that 14% of small businesses were expected to scale down or stop trading altogether this year. Two years later, I see no change in the preference to large businesses and corporations.
At that point, figures showed us to be a resilient nation with a large majority of entrepreneurs saying they would start again if they failed. So the future of entrepreneurship was looking fairly rosy. What worried me, then, was the attitude towards entrepreneurs who failed: surveys showed that 31% in the UK found business failure unacceptable, and the majority saying they would never start a business with a failed entrepreneur.
Fast forward to 2020, and optimistic business owners are fewer and further between. With COVID. Increased business failure will be inevitable.
Our recovery depends on our attitude to business failure
We cannot view the people who lose their businesses and their livelihoods this year with blame as we have so often done in the past. We have to take a leaf out of the US’s book and recognize failure as part of learning. The more I talk to entrepreneurs from both countries, the more I learn of how great our gap in attitude is.
Many US studies set out to prove that entrepreneurs are more likely to succeed second-time-around and indeed in tandem with past failures. In Silicon Valley, it is something accepted, not gloried, or dwelt on, but expected that it will form part of an entrepreneur’s journey.
Failure can be a great teacher. Psychologist Albert Bandura gave two groups of people identical management tasks, tasks so hard that failure was guaranteed. The first was told the test was to reveal their management abilities. This group felt like failures, blamed themselves for failing, and made little improvement on a second attempt.
The second group were told the test results would not be provable but were being conducted to simply to give them practice. They rated themselves much more confidently and simply saw each attempt as a chance to learn and improve. Goals can be dangerous things. It makes it too easy for us to consider ourselves “not good enough” when we fail to achieve them.
Too often we fail to recognize that failure is inevitable in everything we do. Instead, we fear it so much, we stay in our comfort zones too much of the time. Oddly, certain areas, such as designing, prototyping, doing scientific experiments manage to overcome this. We recognize that falling down is a step to success here.
To have a healthier acceptance to business failure, and failure in general, we need to first accept its duality, that simply there is no failure without success and no success without failure. The people who achieve success are ready to persist, to continually try new ways, to see setbacks as only temporary.
We need to look at how children keep on falling over till eventually, they learn to walk. When we fail, we have a choice. We can define ourselves by success rather than learning or we can wallow in self-pity and self-hatred. There is no greater teacher than failure.
Stories abound of hugely successful entrepreneurs with business failures behind them. Henry Ford failed twice with the Detroit Automobile Company and the Henry Ford Motor Company. Walt Disney’s first animation company went bust. Bill Gates and Branson have had them. The greater the success, the more the failures are accepted and even applauded as part of their story.
For the economy in the UK to recover, we will need high numbers of the entrepreneurs who lose their businesses to keep going, to take what they have learned, to start again. They will need to have listened to Denzel Washington’s speech “Falling Forward”. one of the most powerful cases for the absolute necessity of not letting fear or failures stop you.
You might also enjoy my piece on why we keep starting a business