Lack of support fails entrepreneurs

Analytical studies on entrepreneurial difficulties and failure are rare, both in Ireland and internationally.

Poignantly, many Irish entrepreneurs find themselves either heavily in debt, or out of business, and in many cases, both.

The economy has been in a deep recession since 2008. A look at the Irish economy from 2008 to 2012 indicates the extent of business failure and difficulties in Ireland.

Stress tests carried out by the business and credit risk company Vision-net in 2012 report half of all Irish businesses are on the verge of collapse (Molloy, 2012). A question this study tries to answer is: “Can Ireland deal with large numbers of failed, indebted entrepreneurs?”

For instance, can Ireland afford to lose entrepreneurs to bankruptcy? Many Irish entrepreneurs are moving to the UK due to more favourable bankruptcy laws there. But entrepreneurs are people who create jobs and they form the backbone of Irish business. If they are made bankrupt, this effectively bans them from creating new employment (Stafford, 2010). Substantially, proposed changes to bankruptcy laws may not stem the flood of Irish “bankruptcy tourists” to the UK.

The new Personal Insolvency Bill allows banks to reapply through the courts to add an extra five years on to the initial three-year bankruptcy term. This effectively turns a three-year bankruptcy into an eight-year term. In the UK, the bankruptcy discharge period is 12 months (Keenan, 2012).

Another question this study endeavours to answer: “Is Ireland doing enough to stop businesses from failing?” For instance, businesses and entrepreneurs are finding it very difficult to obtain credit to run their businesses. The ISME Quarterly Bank Watch Survey, issued on June 2012, states that the refusal rate for bank credit has risen again to 54%, (ISME, 2012). The association called on the Government to intervene at board and management level in both rescued banks to ensure that they are lending to viable SME businesses (ISME, 2012).

Leading entrepreneurs and mentors in the Cork, Kerry and South Tipperary area, were interviewed for this study. A major finding is that there is no jobs retention strategy in Ireland. So funding for existing businesses is minimal.

One participant said: “A huge part of why businesses fail in Ireland is solely from a lack of support.” Another said: “If there was a job retention strategy as well as a job creation strategy, perhaps all of these companies that are going out of business wouldn’t go out of business.”

The biggest finding from this study is that, as a result of the scale of the collapse of the Celtic Tiger, attitudes to entrepreneurial failure are starting to change in Ireland. “It is no longer a failure to fail.”

There were two reasons identified for this: firstly, the recession has affected so many people. One participant said: “We are four years into a hugely difficult period in the history of our state and you would have to say that we have all taken a hit financially.”

Secondly, many Irish role models, who before the Celtic Tiger were seen as people to admire and aspire to, are now publicly experiencing their own entrepreneurial failures.

Another contributing factor to this recession being so destructive is the age and experience of the Irish state. One participant said: “We are 90 years old (as a state); we have never experienced booms to that extent in this country.”

Failed entrepreneurs are virtually ignored in Ireland. They are left to cope with problems of debt management, poor bankruptcy options and perceived public sector stigma. And the report found a lack of awareness or understanding of “risk” in the public sector.

In essence, this study finds a lack of understanding, trust, and awareness between key elements of the public sector and entrepreneurs themselves, with the exception of the Enterprise Boards and The Revenue Commissioners.

The main recommendation of this study is building trust and co-operation between the key public sector authorities and the entrepreneurial community in Ireland.

* Dr Angela Wright is a lecturer and research supervisor on the MBus programme, School of Business, at Cork Institute of Technology. Eddie Keogh has just completed his MBus at Cork Institute of Technology.