Small Talk: Fear of failure is putting off many would-be entrepreneurs

Richard Setterwall says his dog-sitting site is about trust and reliability

Britain is proud of its entrepreneurial spirit: self-employment is at an all-time high and 2015 is set to be the second successive year in which a record number of businesses are launched. Yet compared with many international competitors we appear to remain off the pace.

Research by Amway, the consumer goods company that produces the Global Entrepreneurship Report, suggests that Britain is below average when it comes to entrepreneurial spirit. Based on three factors – the desire of people to set up a business, the likelihood of them being put off doing so by friends and family, and their confidence in their ability to get a venture up and running – Britain ranks well beyond many competitors. Of 44 countries in Amway’s survey, the UK comes in at number 24. That’s well behind India, China and Thailand, the three top-ranked countries, but also lagging many of our neighbours, including Slovenia, Finland, Denmark, Greece and Ireland.

What holds Britons back is a fear of failure. Seven in 10 would-be entrepreneurs say they’re daunted by the possibility of not succeeding. While British entrepreneurs also complain about a lack of money or business knowledge, it’s the possibility of ventures going wrong that unnerves them.

For policymakers, that represents a knotty problem. There are practical initiatives that might help people overcome such fears – better advice and support, for example, as well as safety nets for those whose enterprises do fail. But before we embark on such initiatives, we ought to question whether fear of failure is such a bad thing.

The truth is that a large proportion of new businesses do fail – often within a short period of launch. Such failures cause the founders hardship, stress and unhappiness. Would-be entrepreneurs who don’t at least consider these eventualities haven’t done their homework.

This is not to confuse fear of failure with stigma. The fact that an entrepreneur’s business fails should not be a source of shame – or necessarily even a reason to doubt their ability to pull it off with their next venture. British entrepreneurs don’t always get the second chances routinely afforded to business founders in other countries.

Amway suggests the average age in Britain for someone to set up their own venture is 45. That might be surprising, given our tendency to celebrate young entrepreneurs, but while younger people are more likely to want to set up their own ventures, they’re not confident that they have the skills and experiences to do so, according to Amway. Later on, people’s appetite for entrepreneurship slips back, but those who retain such ambitions see their confidence grow.

Again, these findings are better news than they might appear. Just as it’s important that entrepreneurs recognise the possibility (or even probability) of failure, it’s reassuring to know that these are typically people who wait until they have learnt skills and gained experience. Their businesses then have more chance of enduring.

Amway’s ranking of countries’ entrepreneurial spirit makes interesting reading, but the assumption is that we should all want our countries to be top of the list. By all means be impressed by people’s desire to start businesses, but don’t be disheartened when many question their ability to make it work, or concede that they might listen to the objections and criticisms posed by their nearest and dearest.

We have come to associate entrepreneurship with confidence to the point of brashness – we expect our business founders to be unmoved by negativity and capable of the sort of bravado we see on The Apprentice each week. In fact, that’s not what we should be looking for – and if self-awareness and caution are really such bad traits in an entrepreneur, it is to be hoped the UK remains well down Amway’s rankings for years to come.

Much-needed reality check for crowdfunding sector

Are we on the verge of a crowdfunding backlash? The collapse last week of Zano, a Kickstarter project that raised more than £2m from investors excited about the promise they would each receive one of its mini drones, has prompted anger. Some investors accuse Kickstarter of failing to look out for their interests.

Meanwhile, research by Alt Fi Data into the fate of companies that raised equity via five crowdfunding platforms between 2011 and 2013 shows that one in five have failed: quite an attrition rate for the very short term.

Still, if these setbacks force investors to reconsider crowdfunding that will be no bad thing in the long term. The growth of the sector over the past three years has dragged in investors who haven’t understood the risks, despite warnings from regulators. A reality check is important, even if it slows growth for a period.

Heroes of small firms must make personal sacrifices

Small business owners are suffering a heavy personal toll as they build their enterprises. Some 38 per cent regularly work more than 40 hours a week, according to a survey by IT company Sage, while more than a third say they’ve had to put their enterprises in front of their families. Some 48 per cent have had to miss a family event because of their work. Just one in 10 such entrepreneurs believe it was worth it.

Sage’s chief executive, Stephen Kelly, said: “We should support these heroes and recognise all those hours of hard work they are putting in after the rest of the world has gone home.”

Small Business Ma of the Week: Richard Setterwall, Chief executive, DogBuddy

“I launched a social network in Sweden, where I’m from. We opened an office in London and I moved here – when the business didn’t quite work out, I wanted to stay.

“I had a Rottweiler and I’d always had enormous trouble finding people to look after it, having to cancel vacations and meetings with friends. I was interested in the area of collaborative consumption and I felt sure there was something in the Airbnb model that would translate into this market.

“We did lots of research before launching the DogBuddy site in August 2013 – everyone told us that they hated putting their dogs into kennels but couldn’t find a better alternative. Our site matches people with dog sitters in their area who look forward to spending time with their dogs.

“We’re more affordable than most kennels but price is low on the list of things people ask me about. It’s about trust and reliability. We vet our dog sitters carefully – we do checks that we developed after talking to pet rehoming charities, we look at their profiles in detail and we interview many of them; in fact, only about 20 per cent of those who apply to become sitters make it on to the site.

“Britain has turned out to be the perfect market to launch into – Britons have so many dogs and they love them so much; the way people treat their dogs like humans here means our service really resonates.

“We’ve grown quickly since the first months, when we were recruiting sitters and picking up customers through vets and by word of mouth. Our bookings rose 550 per cent over the first year and sales are up 350 per cent year-on-year since launch. We’ve also expanded into Spain, Italy, Germany and France.”

Comments