Research suggests that most start-ups fail within the first five years. In the UK, however, there’s a real stigma attached to failure, so how is this affecting British start-ups?
While British business is booming – more than 608,000 new businesses were created in the UK in 2015 – there does appear to be an issue around failure. The Global Entrepreneurship Monitor identified the fear of failure as a significant barrier to enterprise in the UK with 43 per cent of the population affected, compared to just 30 per cent in the US.
This is reflected in the gap between entrepreneurial intentions in the UK and entrepreneurial activity. The RBS Enterprise Tracker has found that around a third of UK adults say that they would like to start their own business, but only around six per cent are doing so at any one time. If this fear of failure could be overcome and all of those people started their businesses, the UK could see 3.6 million new start-ups a year, rather than 600,000.
This fear of failure is nothing new, however. Back in 2012, research carried out by Barclays identified that among 1,000 small businesses the fear of failing was holding them back, with more than half admitting that they put off making important decisions in case they make the wrong call. Nearly as many admitted that their fear of failure had prevented, or could prevent, their business from growing.
Among the things that these businesses were concerned by were economic uncertainty, cash flow and late payments, increased competition, and legislation and regulation. And these kind of fears won’t have disappeared in the last four years.
"The ability to make important decisions is vital to the growth of all businesses and the overall UK economy. At the time of making important business decisions, it’s only natural to be scared of getting it wrong," Sue Hayes, MD of Barclays Business Banking said. "It can feel like you are taking a big risk – whether that is decisions about staff, products, finance or even your marketing strategy. Despite the tough external environment, there are many opportunities to be seized upon."
But, it’s been suggested that to boost the UK economy, businesses must learn to embrace failure.
"Our track record of failure has never been a hindrance. It’s helped us to build up an experience base," Randal Pinket, founder and CEO of American based BCT Partners, said. "The question is not whether you have failed and fallen down, but whether you’re willing to get yourself back up."
Betfair’s ex-chairman Ed Wray agreed, saying in 2013: "There’s never been a better time to start a business, but the fear of failure is the single biggest thing I think that holds back the entrepreneurial culture in Britain. The fear of failure, and the criticism of failure. I’m not saying you celebrate failure, but I do think you celebrate people who learn from failure. Hopefully people don’t repeat those mistakes if you can talk about them."
According to Unilever’s global SVP of marketing, Marc Mathieu, one of the best ways to help start-ups overcome their fear is to work with them. Speaking at the Marketing Society’s conference in 2014, he said that businesses needed to "embrace the risk of failure much more than we have in the past if you want to succeed in the future" and that working collaboratively enables large business to invest in new ideas without "the fear of failure".