The Probabilist . com

Improving Your Odds in Life

• Home
• Categories
• Archive
• Articles
• Links
• Books
• News
• About
• Contact
• Review

Defining Entrepreneurial Failure October 30, 2006

Posted by The Probabilist in : [Articles], Business, Entrepreneurship, Personal Growth, Responsibility, Studies , trackback

Today I will present a case report I recently wrote. It was a mandatory task in an enpreneurship course and we were given two articles to read through and use as references. Although it’s somewhat of an academic report I decided not to alter it in any way since I tend to write these in a somewhat personal perspective regardless of who the reader is.

Introduction

Using two articles and a book as key information this individual case report will tackle questions concerning the failure of running a small business and the following treatment given to the entrepreneur in charge. I will also analyze the comparison between treatment of such an individual and those failing at their work within an organization.

When has an entrepreneur failed?

In the Watson & Everett (Defining Small Business Failure) article small business failure can be classified into seven primary reasons. The first one, being bankruptcy is defined as discontinued operations with resulting losses to its creditors. Another reason for discontinuance is prevention from further losses, which means the owner recognizes the need to end the business due to continuing personal financial losses while the creditors might still be receiving their agreed-upon payments. The third reason, ‘making a go of it’ is the most subjective reason as it is based upon personal goals not being reached. While the business may not be running negative, the entrepreneur gives up because it might be too time consuming, stressful, disapproving and whatnot compared to the profit. The remaining reasons consist of retirement due to bad health, sale of business to realize a profit, unknown and other reasons.

The reason I summarized 14 pages of text into one single paragraph is not out of haste or to get off lightly, but because I considered it not to be essential in answering the topic question. Since the first objective of this case is to give my opinion when an entrepreneur has failed I will present a definition for it as well as four reasons that can lead towards or away from it.

“An entrepreneur has failed when he/she stops being an entrepreneur.”

The best way to encourage entrepreneurship is to focus on the entrepreneur and not the factual, statistical or financial results he/she or the nation in average performs. This is why I focus on the individual entrepreneur when defining when he/she has failed and the reasons behind it.

These reasons can be found in the first chapters of Kiyosaki (Retire Young Retire Rich):

The power of your mind and listening to yourself is the most important factor. Failing your first business is the key critical event that will test if you have failed as an entrepreneur. Listening to the loser, wimp, coward and cynic inside you will cause you to stop being an entrepreneur and seek the security of working for another business. However, choosing to listen to the winner, hero, giant and opportunist inside you will give the strength and the whys to start another business venture.

Another factor, also created by your mind is reality. By continuously expanding your reality about what you can do will help overcome obstacles that you previously thought you can’t do. The process on how to do this is by being a lifelong learner.

The third reason an entrepreneur can fail is by listening to others. By listening to cynics and poor people with limited reality you risk believing that starting a business is risky while it does not have to be. The conflict of interest is caused due to differences in reality while finding people with similar interests and reality will improve the business.

The last way an entrepreneur can fail is through giving in on their values. Everyone likes to see themselves as honest, caring, loyal and fair. But when the going gets rough it’s the thief, crook, liar and tyrant in you that can get your attention. By being able to block them out and face your creditors, investors, co-workers and clients with the right values when things go bad you won’t risk not getting the opportunity to start another business in the future.

While these factors are explained in an overly simplified way it is a way of explaining my shared views with this particular author while the direct answer to this question is my personal thought written as a quotation.

How are failed entrepreneurs treated?

Again focusing on the entrepreneur we will find the relevant factors explaining how entrepreneurs are treated and the reasons why some are treated differently than others.

Ask your creditors: The bankers’ and investors’ opinions about the entrepreneur will be dependent on how they were treated when the business failed. If the exit strategy was bankruptcy there is a great chance that the entrepreneur will have to find new creditors for a new business venture. Then again, if the small business was terminated to prevent further losses, and debts are ultimately paid these people will love you and want to hear your next business plan and idea.

Ask your subordinates/co-workers: While founding a small business with the goal of selling it with a profit might be an acceptable solution for the entrepreneur, the employees of the company might not see eye to eye. Since selling or restructuring a business might cost some employee’s their jobs it doesn’t matter how fancy the farewell party is. And those who do get to keep their jobs might have good or bad opinions about getting a new boss/business owner.

Ask your clients: The clients’ perspective on the entrepreneur goes through the product it provides. The greater the need and benefits the product fills, the more supportive the clients who used it are towards the entrepreneur wanting to start fresh. On the contrary the product can be unhealthy, addictive or in another way unapproved by the society sharing no respect towards the person enabling its distribution.

Ask your friends and family: When it comes to those who are nearest and dearest the opinion will be based on their reality. If the majority thinks entrepreneurship is risky and hard work he/she risks following their advice. If the majority thinks working all your life to make others rich is risky then this can be the entrepreneur’s reality.

In conclusion of this topic I’d like to emphasize that it doesn’t matter in what western country the entrepreneur fails his/her business. These are in my opinion the core truths that define how a failed entrepreneur will be treated and it is important to know towards whom you point the question. I don’t have first hand experience of failing a business. Neither do I know anyone in person who has, so giving an opinion of what kind of perspectives people in Finland share I acknowledge that I do not know. Yet once the entrepreneur knows, it will be based on the choices he/she as a person has made to treat the creditors, co-workers, clients and associates.

Failing entrepreneur versus failing employee

Reading through Farson & Keyes (The Failure-Tolerant Leader) about managers’ and executives‘ failure-tolerant leadership style opens many doors in the minds of idealist readers. It goes along saying that success and failure can be viewed equally. Both success and failure can be the result of human effort as well as an accident. The angle to reason with this statement should be that when resulting in a failure or a success one must analyze what the cause was and therefore what kind of response of action to give. Given these two variables there are four different outcomes and responses to give.

The task is a failure due to the lack of unified engagement to reach the goal: This being the least wanted outcome expresses that neither the leader nor the subordinate cares about the goal or how to reach it. There’s a lack of motivation or the atmosphere doesn’t encourage those with it to express themselves which means that personal interest prevails.

The task is a success despite the lack of unified engagement to reach the goal: Although sounding like an unlikely outcome this pattern can take place in organizations where the employees consist of strongly individual people with ‘do it yourself’ mentality and a highly and specifically delegated leadership model. The people take pride in doing what they do best while everyone has mixed expertise to ultimately match all components of the common goal.

The task is a failure despite the unified engagement to reach the goal: This outcome is expressed in the article as the most usual in organizations. By applying failure-tolerant leadership, employees who fail can understand that failure is part of success and failing does not mean you’re a failure. This way reaching the last outcome which is the most sought-after can be achieved with a higher probability.

The task is a success due to the unified engagement to reach the goal: When reaching this outcome leaders and managers understand not to evaluate the employees, but to engage in understanding what was good and what was bad. The subordinates are approached by genuine interest in what must be done to reach the goal while there is a sharing and brainstorming of ideas through both different and equal levels of hierarchy.

Now to analyze the comparison between failure among entrepreneurs and employees we have to acknowledge a couple of differences when applying these two people to the outcomes above. When discussing an employee’s treatment towards failure it is mainly coming from ‘higher ground’ while an entrepreneur faces treatment from subordinates and associates outside the small business. Because of this an employee has highly limited options on how to react to the treatment, whereas an entrepreneur has more freedom of choice on how to respond to the treatment. To put it simple, an employee gets paid if he/she does what is demanded and an entrepreneur gets do to what he/she wants (within legal frames) if the money that is demanded gets paid (to creditors and employees).

So what then is the difference in treatment of failure? I think none. It doesn’t matter what you do, (work or run a business) in what environment (different leadership) or with whom (different realities) you do it, the same kind of failure results in the same kind of treatment. The essential difference is in the magnitude of treatment. As an employee you are usually responsible of one person’s expectations, (the boss) while as an entrepreneur you hold the fate and faith of many in your hands. The key reason to different treatment is found in responsibility: With greater power comes greater responsibility.

Reference

Watson J. & Everett J: [1993] Defining Small Business Failure
Farson R. & Keyes R: [2002] The Failure-Tolerant Leader
Kiyosaki R. [2002] Rich Dad’s Retire Young Retire Rich

Related Posts:

• Overthrowing the Dreaded Business Failure Rate
• Measuring Wealth
• Business Succession and Renewal
• Tasks and Timing
• Introduction and Purpose

message
name email url

Notify me of followup comments via e-mail

Who is?

The Probabilist

Most Popular Articles

10 Most Misspelled Words in Blogs

Topography of Self Growth

Empathy or Equanimity?

Caring and Worrying

Impersonal Development

Faith and Belief

How to Blog - 8 Essential Steps to Effective Blogging

Polyphasic Sleep

Be - Do - Have

Agreeing with Everyone

Count Those Numbers

Expectations and Outcome

14 Lessons on Money

10 Challenges within the Educational System

Overthrowing the Dreaded Business Failure Rate

Get Paid to Surf

Join the AGLOCO Network for Free!

• Categories

  Select Category Abilities (26) Assets (10) Beliefs (41) Blogging (28) Business (16) Calculus (3) Carnivals (6) Commodities (3) Communication (21) Consciousness (46) Creativity (22) Doodads (1) Dreams (7) Emotions (12) Entertainment (7) Entrepreneurship (14) Exercise (6) Financial Literacy (10) Food (3) Games (1) Goals (30) Gratitude (8) Health (13) History (9) Independence (5) Innovation (3) Investing (10) Leadership (9) Movies (2) Music (1) Personal Growth (54) Philosophy (13) Politics (2) Productivity (25) Psychology (18) Purpose (21) Quotes (2) Reading (4) Relationships (18) Responsibility (19) Science (4) Sleep (17) Society (17) Speaking (3) Statistics (1) Studies (10) Technology (9) Time (7) Vision (23) Wealth (21) Weird (6) Words (5) Work (23) Writing (4) [Articles] (61) [Books] (15) [Links] (18) [News] (27)

• Archive

  Select Month February 2007 January 2007 December 2006 November 2006 October 2006

• Recent Posts

  • How to Blog - 4/8 Design & Tweaks
  • Carnival of Improvement 05
  • Taking Control of Your Life
  • How to Blog - 3/8 Plugins
  • Way of the Peaceful Warrior
  • How to Blog - 2/8 Go Online
  • Carnival of Improvement 04
  • It’s Your Fault That You Feel Bad!
  • 10 Reasons Why Agloco is Booming
  • Review Me Update

Advertisements

Feed & Search

• Feeds

• Full
• Comments

Search

Recommended Resources

Steve Pavlina

Zeal LLC

John Chow

Reality Seeds

Steve Olson

Universe of Success

Power vs. Force

The Richest Man in Babylon

As a Man Thinketh

Blue Ocean Strategy

Sponsored Links

ScooptWords & Copyright