Sir Richard Branson’s done it. Simon Cowell’s done it. In fact, pretty much every entrepreneur in history has done it. Dealt with failure, that is. Ask any business expert and they will tell you that failure is an integral part of making it in business. With only one in three start-ups making it to the end of its third year, what separates successful entrepreneurs from the ones who never made it is that true entrepreneurs never give up.
“A lot of entrepreneurs have failed,” says business psychologist Dr Mark Parkinson. “Virtually all of them have tried all sorts of things which that have subsequently crash-landed, but the key thing about entrepreneurs is that they have perseverance. They have this self-belief that they will make it one day.”
Dr Adrian Atkinson, chief executive of business psychology company Human Factors International, warns: “Never use the word failure to an entrepreneur. You will just get a blank stare. They can’t cope with the concept of failure - they read it instead as a learning experience, something that they decided not to carry on with and so they stopped. But the concept of failure, as we would understand it, is impossible for them to grasp.”
Adam Pritchard, 34, left school at 16 with only a handful of GCSEs and, after a few years travelling, decided to set up a car brokerage called Motor Resolve. Despite investing about £30,000 in the company, he never sold a single car. His next idea was a premium-rate telephone counselling service called Get It Sorted. After four months, he pulled the plug, losing another £30,000. “That was a disaster, too,” he says. “It was a sobering experience. I had to move out of my flat in Islington and get a one-bed flat in Hackney.”
It was only when a friend called him from Pakistan to tell him about a new fruit juice, pomegranate, that Pritchard finally made a business work. He spent a year finding suppliers and perfecting the taste, before Pomegreat launched in 2003. Though he admits that the business was on the verge of collapse several times in its early days, by the end of the year it was achieving sales of 150,000 litres a month. Nowadays Pomegreat is the fastest growing juice drink in the country, selling nearly 2m litres a month, with a turnover of £33m this year.
“It taught me a lot about business, but also myself and what I was able to withstand,” says Pritchard. “I do have a certain amount of bloody-mindedness and I’m sure that comes from wanting to prove to myself, and to other people who may have doubted me, what I’m capable of.”
A typical way that successful entrepreneurs deal with a setback is to recognise it as such and move on quickly, thus limiting losses. “Entrepreneurs often know when to quit,” says Parkinson. “They will not stick around flogging a dead horse. If it doesn’t work, they will stop and get out, unlike a bad gambler who chases his losses and throws good money after bad. The business might be their baby, but they would still sell it if it wasn’t working. There is a certain ruthlessness that goes with being an entrepreneur.”
“Entrepreneurs are often irrational, and often have a lack of insight,” says Atkinson. “It is a necessary part of an entrepreneur to be resilient, to have a great amount of self-belief in a crisis, but it is not entirely rational to refuse to admit when you have failed. Entrepreneurs are rarely paralysed by fear of failure. They just get on with it.”
Martyn Dawes is the founder of Coffee Nation a company that sells 750,000 cups of coffee every month from its self-service machines, with annual sales of about £24m. He has also experienced his share of setbacks, but, like any good entrepreneur, sees them instead as learning experiences.
“In my experience, a lot of what I did when I was starting out was not wasted, even though I did hit some dead ends, because it got me where I needed to be eventually,” he says. “It is a continual learning process.”
Dawes had the idea of putting coffee machines into corner shops and convenience stores so that people could buy coffee while they were shopping. Walking through Peckham, southeast London, one day, checking on his business, he suddenly wondered what he was doing. “It was a bloody disaster,” says Dawes. “It was the wrong product in the wrong shops in the wrong location. There were not enough people coming through and some of the sites were quite grubby. But fortunately I could see that I was flogging a dead horse.”
He started putting his instant coffee machines into convenience stores but the business was still not taking off. “I kept on saying, ‘It’s got to work’. I really believed in the business.”
Then he had a eureka moment. What customers really wanted was proper coffee, with real milk and quality coffee beans, else they might as well just go back to the office and make their own.
Unfortunately, by this time, Dawes’s money had run out. He went to see an insolvency practitioner to get advice about winding up the business. But while he was there he bumped into an adviser who thought he might be able to find some investors in the business. They went for the idea and the business took off.
Dawes still believes that it was a valuable experience to have. “We learn a lot by our mistakes,” he says. “The thing is, you have got to be clear about what made it a mistake. A lot of time, when you’re building a business, you are going sideways or backwards, and a lot of this is not in your control. The key thing is to worry about what you can control.”
Andy Thornton thought he couldn’t lose with his business, which bought architectural salvage from buildings in the UK and sold them at auctions in the United States, where there was a huge demand for it. For the first five years he went to auction, he made a “phenomenal” amount of money. “I never thought about the possibility that things could go wrong,” he says.
However, in 1980 everything did go wrong. Andy Thornton had just borrowed £200,000 from the bank to buy a huge warehouse and sent a large shipment of salvage to the annual auction. Disaster struck. Demand for his goods had disappeared and he ended up losing £220,000.
Thornton developed a stomach ulcer with the worry of how to save the business and his home - and what to do with the empty warehouse - but managed to trade his way out of it by paring overheads down to the bone while aggressively buying and selling in the UK market.
“I got completely carried away with the business and I definitely wouldn’t do that again,” he says. “I’m much more cautious now. I look at the downside as well as the upside and it has been a good lesson for me to learn.”
But what about the effect on families during the difficult times? Pritchard freely admits that his business failures put a lot of pressure on his relationship with his former fiancée, but argues: “You have got to be obsessed with the business, otherwise you will never succeed.”
