Entrepreneurial insights - failure is an option

Businesses fail, it’s a harsh reality.

In South Africa, more than half of all new businesses fail in the first year and 96% of those will have closed their doors within 10 years.

Allon Raiz, CEO of business incubator Raizcorp, suggests to entrepreneurs that it may not be easy to shrug off the stigma of business failure, the best solution is to get back on that bicycle … as difficult as that may be. He suggests that one of the major obstacles is that the risk-reward ratio for entrepreneurs in South Africa is not appropriate, thereby stifling initiative and contributing directly to a low re-entry rate for those who have been burnt by a failed business.

“When we look at what is restricting enterprise development in South Africa, it appears that a major constraint is that we are too scared to fail. A pronounced stigma of failure is often blamed for hampering entrepreneurship, innovation, and growth,” he says.

There are obviously some tough hurdles to overcome when re-entering the small business sector: black-listing is hard to shake off; it is more difficult to borrow money the second time around; people who have debt agreements may be banned from getting further credit; and banks won’t lend to people with a less than rosy credit record, especially those with judgments against their name - even after repaying their debt.

The problem, he says, is that people who have managed to pick themselves up after they failed and have the passion and commitment to try again do not receive recognition. The risk in discouraging entrepreneurs who failed the first time around is that they are denied the opportunity to try again, avoid those same mistakes and thereby be better equipped to be better business people.

Those lessons they may have learned are also lost to new generations of entrepreneurs who may fall foul of the same mistakes.

“We need to rethink how our social attitudes to failure have infiltrated and are undermining all our best efforts to support enterprise development,” says Raiz.

Key takeaway: No-one sets out to fail at business, but it needn’t be a life sentence. Fear of failure or failed entrepreneurs carries a far higher price tag to the growth of our economy.