For all their failings, entrepreneurs remain the meat in the sandwich

SEVERAL years ago I received an unexpected item in my Dáil post. It was a personal letter from Brody Sweeney seeking my advice whether it would be a good idea for him to embark on a political career.

Over subsequent conversations, I explained the unglamorous reality of political life: the relentless door-knocking, constituency work, unsociable hours and endless meetings. I explained the toll it would take on his business and family life. Politics requires total personal commitment to succeed. I did everything to dissuade him.

Political junkies are akin to heroin addicts – they just have to get their fix. Brody toiled hard for years in developing a political base in Dublin North East. Fine Gael’s organisation there was virtually non-existent. It was a no-lose scenario for the party to let Sweeney plough his own furrow.

Prior to the 2007 election FG decided to add to the ticket Terence Flanagan, a newly-elected councillor. The rest is history: FG got enough votes for a seat, Flanagan was elected. Brody quit politics.

Brody’s main fame is as the founder of O’Brien’s Sandwich Bars. This franchise had 85 stores across Ireland, with 800 jobs. The pioneering zeal of the company led to an international network of outlets across 13 countries.

More than 220 stores were opened across North America, Asia and the Middle East. Last week the High Court appointed an examiner to prepare a rescue plan for the parent company. An administrator was previously appointed to O’Brien’s sandwich business in Britain.

This comes a week after the founders of Setanta, Michael O’Rourke and Leonard Ryan, failed to save Setanta Sport Holdings Ltd. This novel venture sought to provide an international sports TV package to challenge Sky’s monopoly. Their success in obtaining broadcast rights to sports coverage and building an international customer subscription base was unrivalled. They started from humble origins in screening a sports match in a London pub with a door cover charge.

Previously, Robbie Fox had to seek a court appointee for his entertainment and catering businesses. Despite the renowned nightclub Reynards being part of the business, he was incurring unsustainable losses. The recession is equally relentless by day and night. These business stories have grabbed the headlines. Every day of this recession brings countless untold tales.

The ambitions of entrepreneurs are being shattered. For every corner store, convenience shop and high-profile outlet that is closed, there is a broken dream. Failed enterprises are becoming endemic. Industrial factory units, small construction companies, pubs, hotels, car dealerships are being wound up on a daily basis. It has become fashionable to deride business failure. Assorted customers told me last week, “O’Brien’s bread was too thick”... “I’m not surprised, they never reduced their prices in line with the downturn”... “there wasn’t enough variety in their fillings”. All of these criticisms may be true.

However, the extent of business collapse across all sectors of the economy is not because our best entrepreneurs have all become bad managers. The underlying causes are more profound.

From 1996 to 2006, virtually every sub-sector of the economy grew its capacity by around 40%. The number of coffee shops, pharmacies and convenience shops mushroomed. The 20% contraction in spending since 2007 means there is excess capacity for reduced demand.

Like government taxes, turnover is down. The key to survival is to cut costs in line with the revenue decline. For most retail outlets, the two greatest costs are payroll and property. Discretionary spending in the areas of marketing and training has already been curtailed. The majority of private sector workers have been a remarkably understanding. Painful reductions in pay, overtime and bonuses have been absorbed and accepted. 200,000 others have lost their jobs over the past year as labour costs have been ruthlessly reduced.

Unfortunately, sufficient reality has not yet prevailed on the property sector. It seems many landlords, in refusing to negotiate rents downward, would rather have their properties vacant. This denial and refusal by property-owners is one of the greatest causes of closure. It is remarkable that public sector unions are showing greater realism than many landlords. The cruel irony is that the Irish recession has been partly caused by the excesses of the same property speculators.

I fear the woes emanating from business collapses will do lasting damage to entrepreneurship. The resultant problems of unpaid creditors cause genuine hostility and bitterness. We should not throw out the baby with the bathwater. Ireland’s most successful businesses all had their origins with individual entrepreneurs.

Our largest company, Cement Roadstone Holdings, had humble beginnings in the cement and quarrying business. Our fastest growing business, Ryanair, would have failed in the 1980s but for the perseverance of its founder, Tony Ryan, and the brilliance of Michael O’Leary. Our largest private business, Dunnes Stores, was started by old Ben Dunne, with one shop in Cork.

In business, ducks do not swim in straight lines. Both in times of growth and retrenchment, cashflow difficulties can be acute. Profitability can be destroyed by the bullying competitive tactics of larger operators. They try to squeeze margins so tight that survival becomes a war of resources rather than customer service. The enduring passion, determination, fearless commitment and energy of the entrepreneur are often the key differences between survival and failure.

It is not popular to have sympathy for these entrepreneurs. Envy was always a common characteristic in the Irish psyche. We often begrudge success, unless it is achieved abroad. Their failure is deemed to be their own fault. Competitors gleefully gloat about their own prospects of success, given any withdrawal of capacity. I don’t share these sentiments. The human story behind the demise of these businesses has not been told.

RESTLESS nights, endless worry, fears for the future of employees, family responsibilities, local embarrassment, loss of dignity, public odium and a sense of disgrace are all contributors to an overwhelming feeling of loneliness and depression. Sadly, some have opted for suicide. Despite the fact that some entrepreneurs have lost all they will still be pursued for debts where they have given “personal guarantees”. Many banks and landlords only grant loans and leases where they are “personally secured”.

Weep not for the banks, property speculators and professional services. The recession has lowered their income. The transactions they fed off have dried up. Some of them, despite gross miscalculations and disastrous decisions, will be bailed out by the taxpayer because they are “systemic”. Setanta, Brody Sweeney and Robbie Fox don’t qualify for any bailout. No. The taxpayer must bail out the banks and property moguls through Nama. Ordinary businesses must die.

Entrepreneurship is an approach to life. It is inherently creative and risk-taking. It requires organisational skills and the ability to build a harmonious team. It is built on customer service skills to supply goods and services with a smile. It can be found not only in the workplace but on a board of management of a school or fundraising voluntary organisation.

When the international economic cycle turns, our competitiveness restored and public finances stabilised, Ireland will need entrepreneurship more than ever to get the country back to work.