If the UK wants to boost business, we need to reconsider how we react to business failure
Duncan Bannatyne, the health club entrepreneur and Dragon’s Den investor, is £122m in debt, the Daily Mail revealed today. While two years ago his fortune was estimated at £430m, he’s now struggling to pay off the multi-million pound loan he took out in 2006 to fund the purchase of 24 fitness clubs, and so he’s hired a team of legal and financial experts to help straighten out his affairs, according to the paper.
He’s not the only TV dragon to have faced serious financial difficulties — a little while ago I interviewed Rachel Elnaugh, the Dragon's Den investor whose business, Red Letter Days, went bankrupt. (There is no suggestion that Bannatyne is going bankrupt.) She described the subsequent ‘media meltdown’ as ‘very humiliating’ — and certainly one senses a certain degree of glee in the Mail’s coverage of Bannatyne’s woes.
As TV business experts, both Elnaugh and Bannatyne can expect considerable media interest in their business misfortunes. But, a number of entrepreneurs I’ve spoken to who’ve gone bust have reported similar feelings of shame and embarrassment. These are only made worse by common reactions to bankruptcy or business failure — often people simply conclude that struggling entrepreneurs are simply ‘failures’ and sometimes they cannot suppress their feelings of schadenfreude.
Duncan Bannatyne is £122m in debt, according to the Daily Mail
The fact that two TV dragons have found themselves in serious business difficulty ought to point to a broader truth: it’s very common for entrepreneurs to fail. Sometimes they pull themselves back, sometimes businesses go bust. In 2011, 16,887 businesses in the UK declared insolvency. Walt Disney, Henry Ford, condiment chief HJ Heinz and even the floppy-haired tycoon Donald Trump all faced personal or corporate bankruptcy early on in their careers.
Entrepreneurs need to take risks to succeed, and with every risk comes the possibility of failure: whether that’s because of ill-judgement or just bad luck. If boosting business is one of the ways to stop Britain’s economy bumping along the bottom, we probably ought to reconsider how we treat business failure.
The UK has made a few steps in the right direction — in 2004 the standard period of bankruptcy was reduced from three years to one, which, according to one QC, reflects a growing belief that a bankrupt is often a ‘victim of misfortune’ rather than simply reckless.
But we also need to address our social attitudes towards bankruptcy — if struggling businessmen fear being labelled as failures, they are far less likely to seek the help they need until it’s too late, less likely to have a second shot at starting a business and less likely to talk about what went wrong so that others can learn from their mistakes.
It’s no coincidence that Trump, Ford, Heinz and Disney are all from the States. In the US bankruptcy is almost seen as a badge of honour in business circles because it’s seen to illustrate an individual's capacity to take risks — some of which will eventually pay off.
Tempting as it might be to crow at Bannatyne's misfortunes, if we want individuals to start businesses, generate jobs and boost economic growth — all of which involves taking personal risks — we ought to be more sympathetic to entrepreneurs who are struggling.