Home > community development, enterprise, enterprise coaching, entrepreneurship, operations > Why Making It Easy to Start a Business is a Bad Idea

Why Making It Easy to Start a Business is a Bad Idea


Not so small fortunes are being invested to encourage people, especially those living or working in areas of deprivation, to start their own businesses or to go self employed.  This makes lots of sense to economists, especially if people were previously ‘economically inactive’ or on benefits.  The ‘tax take’ goes up and the cost to the Treasury in benefit payments goes down.  Result!

So the public sector invests in ‘making it easy’ for people to start a business.  There are dozens of free training sessions and sources of support – many promising to turn business ideas into a reality.

Let me explain why I think making it easy for people to start a business is not necessarily a good idea.  Because when a business fails it usually  leaves a trail of destruction – debt, broken relationships, damaged mental health and occasionally suicide.

I have recently met with several people each of whom is now in a very difficult situation, at least in part, as a result of engaging with ‘business support’ and starting small businesses because it was ‘made easy’.  Because they were ‘encouraged’.  Because they could access ‘soft loans’.  Because they could work with a business adviser who would help them to put together a business plan that ‘worked’.  Each of them is now in debt and in extremely difficult personal circumstances which include:

  • dealing with bailiffs,
  • fighting to hold onto houses,
  • managing depression,
  • doubting their own abilities and
  • fighting to maintain relationships under the tremendous economic pressure.

This is part of the reality that has to be addressed.  Sure there are the success stories and we hear plenty about these as they get used as case studies to encourage the next wave of start-ups.  Small business can be a great way to make a living and a life.  But the ‘dark side’ of small business is very real and needs to be faced up to.  We need to be extremely responsible and cautious in the way we promote it.  It is a double edged sword with potentially massive consequences for wellbeing – both positive and negative. It can be a wonderfully powerful tool for economic and social regeneration.  But like any powerful tool it has to be used with care.

When we ‘make it easy’ for people to start a business it is relatively straightforward to get more business start ups.  However unless we are careful we also get an increase in small business failures and this can wreak havoc.  Not only to the entrepreneurs and their families who are left to manage the consequences, but also to the wider community.  Word soon spreads that enterprise is not such a good thing.  The trend of increasing start up activity is soon reversed as the real experiences of some entrepreneurs filters through.

So perhaps we should make it hard for people to start businesses.  Not by raising artificial barriers and increasing red tape, but by training our business support professionals to be brutally honest about the small business environment.  Success in small business is not about the logic of the business plan but the passion, character and indefatigability of the entrepreneur. Although just about anyone can do it – they need to go in to it with their eyes wide open to what the journey might, and probably will, hold. Someone making an informed decision not to start a business should be celebrated with as much vigour as a new start up.  If there are any choices other than small business perhaps these should be pursued first.

We should perhaps teach enterprise professionals to persuade clients not to get into small business because it is so tough.

‘If there is another way that you can be true to yourself and pursue your dreams please take it. If the only option left to you is to start a small business then so be it. We will help.’

This kind of approach, when well implemented, results in significantly higher survival rates. These high survival rates soon teach others that it can be done – with passion, commitment, skill and hard work.  And although progress on the ‘enterprise agenda’ may initially be slow it will accelerate as the successful entrepreneurs tell their stories and provide local role models.  And on the occasion when it goes wrong the entrepreneur won’t blame the enterprise professionals for ‘encouraging’ them. They will recognise that this is down to them pursuing their dream. Not down to ‘us’ using sticks and carrots to manipulate them in pursuit of a funder’s policy goals.

So instead of investing our money in ‘making it easy’ for people to start a business, we should instead invest in helping them to build their talents and skills, and to craft their vision of the kind of person that they want to become.  We should invest in giving them the skills that they need to create their own futures and to manage their own well being.  We should invest in developing communities that better understand the role of the entrepreneur and know how and why they can support entrepreneurs in their community.

This message is seldom popular.

I have met several policy makers and bureaucrats who have told me that I over dramatise.  That this is not a ‘life or death’ matter. That I am too negative and cynical.  I just wish they would spend some time with me talking to people whose lives have been damaged by the enterprise journey.  And this is not only entrepreneurs that ‘fail’.  I meet many ‘successful’ entrepreneurs who count the cost of their business success in broken relationships with partners and families.  Who feel trapped  by their businesses and robbed of their life.

There is an industry of business support providers who have a vested interest in maintaining the status quo.  In continuing to provide enterprise workshops with the feelgood factor.  Who rely on a steady flow of aspiring entrepreneurs so that they can tick boxes and claim payments.  They too would rather keep the dark side of enterprise under the carpet as it is bad for business.

But until we adopt an honest and balanced perspective on the nature of enterprise and entrepreneurship we are unlikely to be effective teachers and we will continue to watch potential go to waste.

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  1. June 26, 2009 at 10:21 am

    I believe in this, and I am grateful I read it.

  2. June 26, 2009 at 12:03 pm

    Starting a business is not easy. It involves a lot of risk and anyone who is aspiring to be an entrepreneur should be aware of the journey he/she is entering into.

  3. June 26, 2009 at 2:26 pm

    Following on from Sharon Wilsons post, starting a business requires money, but there are uk and eu grants available which are non-repayable.

    • June 26, 2009 at 3:49 pm

      Which to my mind contributes to the problem of people starting businesses on the wrong footing. ie they start them because they can – not because they must. If cheap money is the factor that tips you into starting a business then you may well be onto a loser.

  4. June 27, 2009 at 7:01 am

    This description of Enterprise Support is like the dieting industry. If their methods, training and support did actually work no one would be fat!
    Business advisers in my area are measured on the number of start ups they encourage and advise…… The agency is further measured by the number of business owners who endure the free training programmes – 3 hours on marketing and 3 hours on bookkeeping and finally business planning training culminating in a plan which can also give you a NVQ certificate!!
    Mike continue to tell it as it is.

    • June 27, 2009 at 9:54 am

      Many thanks Charlotte.

      I sometimes think that art of being a successful professional in the business support industry lies in being able to pretend that the vices of the industry are in fact virtues.

      You also touch on another pet hate of mine. That NVQs are not badges of competence (ie the holder can do this consistently well) but are increasingly badges of attendance.

  5. tashaharrison
    November 2, 2009 at 11:32 am

    Brilliant post, really thought provoking. You actually said this to me once, when I was thinking about setting out on my own. It made me really think about what I was doing and ensuring that I look after myself, had enough money at the beginning, had a sensible business plan etc.

    • November 2, 2009 at 11:39 am

      Thanks Tasha,
      I figure that anyone that I can put off through the power of persuasion I am probably doing a big favour! Real entrepreneurs are just about unstoppable!

  6. March 15, 2010 at 9:37 am

    Brilliant post and I totally agree about government and policy makers glossing over the dark side of entrepreneurship. When businesses (whether social or profit-maximising) fail there is a huge personal and social cost.

  7. March 28, 2011 at 7:11 pm

    Spot on Mike
    I’ve been running my own business for 10 years now. We have 10 employees. We’ve created jobs and income for the Treasury. But every year it gets harder and harder and I get really annoyed when the Government keeps talking about initiatives to encourage people to start up a business.
    The so-called business advisers, mentors etc at Business Link are usually failed bank managers who have no idea about the stresses of running a company or the red tape around NI, PAYE, VAT, H&SE, managing staff, dealing with cash flow.
    Then there are the banks! I wish them and the Government would shut up about how willing the banks are to support small business.
    All the business owners I know have no line to credit with the banks, all debt facilities have been withdrawn – so if they have a bad month they can pay their staff but not themselves.
    I always wonder how many companies Cable, Cameron and Osbourne have set up and run successfully.
    If you’re gainfully employed at the moment and, unless you have invented the perpetual motion machine, my advice would be to sit tight and forget about setting up a business. If you’re on benefits? Don’t go there.

  8. progpart
    March 28, 2011 at 7:19 pm

    As relevant now as it was when written.

    If you’re reading http://www.startupbritain.org.uk – then read this blog carefully before you act.

    Running your own business can be incredibly rewarding – but it’s most certainly a significant risk. Think carefully and if you still want to do it – go for it.

    But think carefully first – and then good luck 🙂

    @progpart

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