Try and fail – and try again
WARNING: REAL RISKS IN ENTREPRENEURSHIP
While it’s true that businesses do fail, it is also true that entrepreneurs can come back and try again.
South Africa has developed a culture of glamourising entrepreneurship that is, in a sense, “false advertising”. The warning label is missing. It is widely accepted that about 96% of new businesses fail within a 10-year period the world over. That is a staggering statistic and not one that can be easily glossed over.
Prospective entrepreneurs should know what the real risks are when starting a business.
If, as the government, you view entrepreneurship as the “medicine” to treat high unemployment and a lack of economy growth and wealth creation, surely it should come with a warning label like any other “medicine”?
Such a warning might read: “Starting your own business will likely lead to loss of money; loss of family; loss of friends; loss of fun; and loss of confidence.”
And it should most probably also state that there is only a 4% chance of the “medicine” working.
While it’s true that businesses do fail, it is also true that entrepreneurs can come back and try again. Provided an entrepreneur makes use of the lessons learned, the networks created, and the skills acquired during a failed business venture.
Their second endeavour will have a much higher likelihood of success.
But, when entrepreneurs try and fail and do not try again, that is the worst outcome. All that effort, money and time become fruitless and wasted.
The real indicator to watch here is not the failure rate of businesses but the re-entry rate of entrepreneurs post the failure of a business.
The average South African entrepreneur tries entrepreneurship only once and then stops trying, and the average American tries again at least two-and-a-half times after the first failure.
I believe that two of the largest contributors to South Africa’s low entrepreneurial re-entry rate are culture and character.
Culture
There is a widely known fable of the young American entrepreneur who goes to a would-be investor for money. The investor asks the entrepreneur how many times he has failed, to which the entrepreneur replies, “never, sir.” The investor responds, “son, go and fail three times and then come back to me.”
The South African version of the same story has the entrepreneur going to the investor to raise money. The investor asks, “how many times have you failed?” The entrepreneur responds that she has failed three times, to which the investor says, “thank you for calling. We will be in touch.”
In a culture that shames failure in entrepreneurship, in a banking environment that structurally impedes entrepreneurs with prior failures to raise funding, in a community environment where failure is frowned upon and where negative gossip prevails, it is no wonder we have such a low re-entry rate.
Let’s also not forget the incredibly destructive myth that a good business plan accompanied by a good dose of funding is the panacea to creating a vibrant start-up economy. The evidence does not support this delusion.
Character – not everyone is an entrepreneur
Entrepreneurs precipitate given the right conditions and life circumstances.
It’s the government’s role to create an environment of opportunities and a tolerance of risk as well as a culture that allows the entrepreneurial precipitation of those with the right life circumstances; those with the ability to take risks; those with the ability to withstand pain; and those who believe they can muster the necessary resources.
The saddest side effect of glamourising entrepreneurship is that, when people are led to believe that funding and a good business plan or a weekend course will lead to success in the shortest period possible, they are never ready for the reality of the journey – a journey which is hard work, has its ups and downs, needs perseverance, and which has a playing field that always seems to be tilted upward.
By destroying confidence, we’re destroying capital. We must stop this damaging behaviour and stop spreading the false mythology around business plans and funding being the magical elixir to success.
Allon Raiz is chief executive of Raizcorp