How To Survive Business Failure.
Help for small businesses through the Coronavirus Pandemic
In the present critical stage of the Coronavirus pandemic and the highly probable, if not inevitable, economic impact resulting in many business failures, the struggle for survival will become a part of many business individuals working lives. The experiences of those who have had to deal with the stress, anxiety, trauma, and financial distress caused by the ultimate collapse of their business can give valuable insight into the process of business failure and also the subsequent struggle for survival. At present, there is little practical help of this sort available.
Small and medium-sized enterprises are the wealth creators of the economy and prolific providers of employment. People who have the inspiration, skills, stamina and courage to set up in business with dreams of success are sometimes faced with insurmountable challenges that lead to business failure. This is a fact of business life and the factors that bring down a business are sometimes totally out of the control of the business owner.
“The highly probable, if not inevitable, economic impact resulting in many business failures, the struggle for survival will become a part of many business individuals working lives..”
The Importance of Helping Small Businesses:
The prosperity and well-being of our country has always relied, and will rely in the future, on those people who have the initiative, courage, and entrepreneurial spirit to set up and develop businesses. There is therefore an urgent need to ensure, through the provision of help and support, that this entrepreneurial spirit is not extinguished altogether in those who have suffered business failure and in those who are in the last stages of fighting for the survival of their businesses.
In the free market economy, some businesses are bound to fail. To a large extent, failure is an inevitable consequence of the way the free market operates. Businesses grow by gaining a competitive advantage over other businesses and taking some of their market share. Sometimes businesses will disappear as a result of other factors such as products being superseded by new technology, fashions changing, or unforeseen factors that result in a sudden economic downturn. The ideal scenario is to be prepared to close down before losing money and to have a new business ready to meet the new opportunities which are always appearing. But this is not always possible.
Help for Small Business Owners and their Workforce
If a business fails many of those who have worked closely with the business, investing their time, skills, energy and money, are likely to feel a deep sense of personal loss and failure, over and above the financial loss. But they should not feel so discouraged that they will not start again, or so that they feel their prospects of building up another livelihood have been severely damaged by the experience. There are many lessons that can and should be learned from the failure of one business which makes it more likely that people who have been through failure and survived with their confidence intact will succeed better next time. The first lesson of survival is to detach the personal from the commercial.
Organisations such as Federation of Small Businesses which provide help to businesses when they are starting up and which encourages and gives valuable support to them in order that they grow successfully ought also to give them help when they are failing or have failed. On some occasions, the help they give may prevent business failures. In others, the experience of failure can be mitigated, commercial lessons learnt and the individuals involved can be helped to overcome the consequences of failure in a positive way.
“If a business fails many of those who have worked closely with the business, investing their time, skills, energy and money, are likely to feel a deep sense of personal loss and failure, over and above the financial loss.”
Business failure can affect any business, from a small solicitor’s practice to a large manufacturing firm. In the current uncertain economic climate, due in large part to the coronavirus pandemic, business failure will be an increasingly common part of business life but those who suffer it are mostly ignorant of the consequences and the procedures that form a part of it. When embarking on a new venture business people and their backers do not approach the question of failure. The fact is that banks are supportive financially and commercially in the good times when a business is expanding or at starting-up stage, but much less supportive when difficulties are encountered.
There is a complete lack of impartial help with the personal trauma and also for dealing with creditors, receivers, liquidators, and the banks as they make increasing demands on personal assets. The lack of advice about business failure is not restricted to those starting out in business but continues throughout the life of the business and beyond.
What Small Business Owners say:
In a study on business failure, carried out by Leszek Jakubowski where the sample interviewed were those who owned businesses that had failed the following comments were made;
“I wish there had been someone to give impartial advice and who was not personally involved in the business, didn’t have a vested interest in the collapse, and had been through a similar situation.”
“I felt a victim of circumstances which were beyond my control.”
“After our business collapsed there was nowhere to go for help. We were on our own, confused, and didn’t know where to turn.”.
“The business failure resulted in great personal anxiety and I wish I had someone who had been through the same situation to share it with”
“A training programme that teaches the crisis management style necessary to deal with extreme situations in a rapidly changing and unknown business or personal environment would have helped.”
“I am trying so hard within myself to ensure that the entrepreneurial spirit lives on.”
“Life is the world’s greatest teacher and the experience of failing has made me stronger, more determined and a great deal wiser.”
The Key Themes of Business Failure:
There are four key themes when considering the provision of help for those who have or are experiencing business failure.
How to Combat These Issues:
The issues described above could be met by a number of possible courses of action:
Local & Regional Survival Revival Forums:
Set up local and regional “survival and revival forums” providing a channel for people who have failed in business to contact and meet others who have been through a similar experience. There would be enormous therapeutic value in developing a community of those who have failed in business in order to provide moral support for each other.
Government to Include a Module on Business Closure
A module on business closure should be included in all government sponsored diagnostic business health-check type training programmes for start-ups and existing businesses. This module should be about the mechanics of business closure and not about personal failure.
Training Programmes on Crisis Management
Offer a training programme for advisers on crisis management and how to advise businesses in a dangerous or critical state.
“A module on business closure should be included in all government sponsored diagnostic business health-check type training programmes …Module should be about the mechanics of business closure and not about personal failure.”
Small Businesses Help through Effective & Impartial Advice
Set up a “life support” service, using specially registered and trained advisors, to help businesses in serious difficulty; the advisors would be independent (unlike receivers) and would need to have specialist skills to give effective and impartial advice.
Leszek Jakubowski is author of “Fighting for Survival” a book about life and the trials and tribulations of business failure. He is a Fellow of The Chartered Governance Institute (ICSA), Past Chairman of CambsTEC Training and Enterprise Council, Past President of Cambridge and District Chamber of Commerce and Past Chairman of British-Polish Chamber of Commerce. In 1991 Leszek was advisor to the Polish Prime Minister on Business support infrastructure and the development of entrepreneurship.