Amsterdam University of Applied Sciences

Struggling entrepreneurs wait too long to seek assistance

Twice the shame and stigma around failure

2 May 2019 11:09 | Entrepreneurship

Struggling entrepreneurs suffer twice the shame and the stigma around failure, because making problems the subject of discussion has direct consequences for cooperation and doing business. In addition, it is in the nature of entrepreneurs to expect things to improve tomorrow. If they seek assistance earlier when confronted with problems, and if it is more widely know where they can turn for this assistance, greater damage can be prevented.

This is the conclusion of Amsterdam University of Applied Sciences (AUAS) researchers Jeanne Martens and Juan Francisco Alvarado Valenzuela on the basis of their study into struggling entrepreneurs and the time at which they seek help, published in the Maandblad voor Accountancy en Bedrijfseconomie . The study was conducted using data from almost 900 cases of a non-profit organisation that provides assistance to struggling entrepreneurs.

Invisible

It is usually the success stories of entrepreneurs that attract attention. As a result, business failures, the causes thereof and the recovery or discontinuation of business operations remain underexposed, even in scientific research. However, as a result of the increased popularity of entrepreneurship, the number of entrepreneurs facing setbacks is expected to increase. 
 
“It concerns a substantial but largely invisible proportion of the total number of entrepreneurs,” says AUAS researcher Jeanne Martens. This is not only personally damaging, but also leads to social and economic costs. Martens: “For example, think of the personal impact on someone who has to give up a family business, and also the economic impact on suppliers whose bills are not paid, or on a family with children in financial difficulties.”

Problems

The researchers distinguish between four types of causes of problems among entrepreneurs: financial, administrative, personal and other. There is an interaction between the causes, and problems often accumulate at several levels. Problems in the personal (divorce, illness) and other (broken down taxi, damage in business) categories are not as easy to anticipate, but have repercussions on the first two categories and vice versa.
 
“In general, failure is hard to talk about. This applies even more to entrepreneurs, because it is difficult to do business or work with a company that is in trouble or at risk of going under,” Martens clarifies. “In addition, it is in entrepreneurs’ nature to believe that tomorrow will be better, to see opportunities and to move forward. They wait too long to seek assistance, which increases the impact of and damage caused by problems and reduces the chances of recovery.”

Support

Those in the entrepreneur’s environment, such as banks and auditors, can play an alerting and stimulating role. “They can help to stimulate the original, entrepreneurial thinking in terms of opportunities and scenarios rather than only looking at red figures and sealed envelopes. If entrepreneurs are already stuck and mainly trying to survive, advisors should help them to keep looking towards the future, or return their focus to it,” Martens explains. It is often unclear to entrepreneurs where they can find support at different stages of problems.
 
The Entrepreneurship professorship of the Amsterdam University of Applied Sciences is conducting research on the causes and effects of entrepreneurial failure and recovery with specific attention for the support (or the lack thereof) they receive from their social, professional and institutional network. Useful lessons are drawn for other and future entrepreneurs, other professional peers and policymakers.

To do this, researchers Jeanne Martens and JuanFra Alvarado are working on a large database of entrepreneurial failure stories in collaboration with AUAS students.