A second chance

During a debate in the House of Commons recently, the issue of the stigma of business failure in the UK was raised. Reference was made to an interesting European Commission report from last October which passed me by. Entitled 'promoting second chances for entrepreneurs', the policy document outlines the need to overcome the negative public attitude towards those that have failed in business. I couldn't agree more.

In the UK, and indeed throughout Europe, people look down on failure. Think of the tabloid newspapers which have bigged up a celebrity, only to shoot them down for making a mistake. The same is true for business owners. If you run a company which fails, the stigma surrounding bankruptcy is huge. This is despite the fact that, as the EU report shows, even though only one in 20 bankruptcies involve fraud, the general public often perceives it as a criminal affair.

The same cannot be said in the US where, as internet entrepreneur Paul Birch recently said, "it is almost a badge of honour". Indeed, many investors will only provide cash to those who have had at least one business failure in the past.

Some of the best and most famous entrepreneurs have failed. Multi-billionaire Bill Gates' first company collapsed during the 1970s, while in the 1990s Dragons’ Den panellist Peter Jones was forced to sleep on his office floor when he was forced to shut down his company after a creditor went bust. Jones is now worth around £100m.

Why? Because he learnt from his mistakes.

Survey after survey shows that the fear of failure is the main reason putting people off from starting a business. But it shouldn’t be. By failing you discover what doesn’t work and in turn what does work. Applying these learnings to a second venture are hugely beneficial.

The government is admittedly taking note of the issue. A little reported detail in the new enterprise strategy released alongside Alistair Darling’s budget states that the government proposes to give insolvency officers discretion to decide whether or not to place an advertisement in local press about an insolvency. They are currently obliged to do so. A welcome step if it happens.

But more is needed.

There are some good examples to learn from. In Germany, the Start Award scheme, for instance, includes a 'Restart' category which celebrates honest entrepreneurs who have learned from business failure and succeeded with their second start-up. What a great idea. In addition, an "early warning system" is being introduced in Denmark which flags up businesses facing potential trouble pointing them to practical advice. Again, a hugely beneficial action.

Figures from Barclays revealed last week that while the number of new businesses being set up last year was higher than ever before, the amount failing also increased. With the public's current attitude to failure, how many of those entrepreneurs whose businesses have collapsed will have another go? Very few I'm guessing.

The enterprise spirit is alive and well in the UK; that cannot be doubted; but it would be even further reaching if failure wasn't seen as a negative thing.

I'll leave the last word to Thomas Edison: "I have not failed. I've just found 10,000 ways that won't work," he said. And that's from the man who invented the lightbulb.