Each year in the United Kingdom over 300 000 businesses have set up, and 300 000 have closed down. Half of these new businesses cease trading within three years of being created, lowering small businesses average life down to five years.
Among the failed businesses, only 10% close involuntary due to bankruptcy, and the remaining 90% close because the business was not successful, did not provide the return on investment desired, or was too much work for their efforts. Those shut-downs often put owners in difficult positions, mainly when they have resorted to borrowings, and have opted for unlimited liabilities status. As well as its devastating financial consequences, small business failure affects entrepreneurs' self-confidence and well being. Moreover, these impacts do not simply concern those who are responsible for the business; they have also serious effects on their families and relatives. Furthermore, those who decide to launch a new business following the shut-down of their enterprise, often tend to be considered with distrust, and face great difficulties to finance their new projects.
[...] Entrepreneurs when they decide to set up a new venture after the failure of their business are not only influenced by positive factors, indeed some factors just prevent entrepreneurs to turn back to a conventional job. Those factors were called “push factors” in opposition to the “pull factors” previously exposed. The principal push factor is the deterioration of the labor market. Nowadays, in the Organization for Economic Co-operation and Development (OECD), more than 7 million people are unemployed; moreover the unemployment rate has risen from in the early seventies up to today. [...]
[...] Those groups offer workers few perspective of ascension or possibilities of action, and they often encounter problems with bureaucracy or office politics. At last the income offered by the conventional labor pool tends to be temped with the globalization, and the competition with southern countries such as India, or Brazil. In conclusion, the pull factors that influence an entrepreneur's decision to start up another new venture following the failure of their business are the perspective to perform better, the pursuit of financial and social success, and the advantages of the entrepreneur's status. [...]
[...] On the other hand, the push factors that influence an entrepreneur's decision are the deterioration of the labor market, the difficulty for entrepreneurs to find a conventional job, and the disadvantages of the employee's status. Each entrepreneur's decision is motivated by both push and pull factors. Those two factors are indeed often related, the perception of labor constraints for instance, is favored by the aspiration for a greater autonomy, and similarly, the desire to manage our time is increased by the strategy of flexibility adopted by companies. [...]
[...] However, failure is not the only reason why entrepreneurs are rejected; they are as well victims of entrepreneur's myths. Entrepreneurs are first of all considered as hoppers”, a recent study showed that most of the successful entrepreneurs worked in large corporations before they started business and used the corporate structure to learn everything they could about the business they intended to establish. Entrepreneurs are also considered as deceptive individuals, ready to step on anybody who gets on their way. At last entrepreneurs have the reputation to be greedy, and motivated exclusively by money. [...]
[...] The main pull factor for entrepreneurs to set up a new venture after the failure of their previous business is probably the perspective to perform better. Entrepreneurs indeed believe that they have accumulated an important experience during the set up of their previous company, and learnt from their failure. In a survey realized in 2000 by Rundle on attitudes toward failure, all the respondents felt that their failure gave them lessons which could be applied to make subsequent venture more likely to succeed. [...]
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