How to cope when your business goes bust

WHEN Jeremy Harbour’s first business, an amusement arcade and takeaway-food operation, failed after 18 months, swallowing his entire life savings of £60,000, he did not take it well.

“I stopped eating for weeks,” he said. “I went very pale and gaunt and my weight fell to about eight stone. I had to move back in with my parents and I pretty much stayed in my room for three months and didn’t talk to anyone.”

It was Harbour’s first experience of failure and – at the age of 19 – it was a bitter lesson. He had run a market stall from the age of 14 and left school at 15 to make a living buying amusement machines for pubs, and up to that point had succeeded at every business venture he had attempted. But the amusement arcade proved a step too far.

“I made every mistake in the book,” he said. “I signed the lease in my own name, not through a limited liability company. I had taken on staff for the first time. I was promoting direct to customers for the first time. I had gone into something that was a complete unknown and I lost everything I had built up since I was 14.”

With one in every three start-ups in the UK doomed to go under, learning how to deal with failure is one of the most vital lessons an entrepreneur can learn.

Tony Walford at Results International, a business consultancy, believes that taking some sort of a break after the failure of a project is no bad thing.

“It’s probably a good idea to take a bit of time out to lick your wounds and dust yourself down,” he said. “If you are going to start up again, you need to learn from what has happened so that the situation won’t be repeated. Also, it is quite a good idea to understand where it went wrong and formulate a strategy for next time to avoid the same thing happening again.”

What happens next depends on how badly you have been bruised by the experience, said Walford. “Some people bounce back. Some people go off the radar for a bit and then come back. And some people don’t come back at all from it – they decide they would rather go and work for somebody else. It depends on the individual.”

The speed with which you are able to bounce back, he said, will depend partly on how much the failure is your own fault.

“If it is because you had a bad financial controller who wasn’t monitoring the cash flow properly and the whole thing went wrong, it is easier to pick yourself up and say, well actually I have learnt from this and the next time I employ someone in that role I am going to do a lot more stringent checking.”

Bryan Wilsher, finance chief at Loewy, a marketing-services group, said that the feeling of having failed could be worse than the reality. “A lot of people can’t get over the stigma of failing. They feel dirty and tainted by it and might find it psychologically difficult to get back in the saddle.

“Others are quite resilient and shrug it off and say, what the hell, you are not a proper business person until you have failed two or three times.”

He said people were often willing to give you another chance. “If you can show potential backers you have learnt from your mistakes and you are therefore older, wiser and tougher skinned, it is not a foregone conclusion that you won’t get anybody to back you.

“You can turn your failure into a positive, provided you don’t repeat the same mistakes and don’t kid yourself. You might just have to be more realistic about it and temper your passion with some discipline.”

To do that, said Wilsher, it is vital to analyse what went wrong. “You have to be cool and honest about it. If you don’t learn from it, you are going to get the same outcome.”

For Harbour, the collapse of his amusement-arcade business was not to be his only experience of failure. After briefly going to work for someone else, he started up a telecoms company that he grew ambitiously for eight years. But the business was always undercapitalised and had to be rescued by an outside investor, with the result that Harbour lost £1m. When this business failed, however, he was much better equipped to deal with it.

“I had a clearer head because I knew it doesn’t hurt when you land and that gave me the clarity to constructively put together a deal to rescue the business and turn it round and not have to walk away with nothing,” he said. “It gives you clarity of thought when you have done it before.”

Proving the old adage that if at first you don’t succeed, try, try, try again, Harbour did not give up on his dream of owning a successful company. He now runs a group called Unity Group, which, in a nice twist, helps to turn round other failing businesses. Primarily a telecoms company, Unity has a turnover of £8m, employs 120 staff and also has a health-club business.

“Failure taught me that the downside isn’t actually as bad as the thought of the downside, so the juice is probably worth the squeeze,” said Harbour.

“Failure is all part of the journey of life. Life has its ups and downs but there is no way I’d want to wake up in the morning and do something safe. You’re only on the planet for a finite amount of time and so you might as well spend it doing something you enjoy.

“You have to quantify what failure really is. Emotionally it might tear you apart, but when you rationalise it, failure doesn’t really mean anything. It’s not tangible. It’s not like you’ve lost a leg.”

Next week: how to deal with failure on a practical level