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The Entrepreneurial Exchange

'This Explodes Myth Of Business Failure'

A FALSE understanding of why new businesses fail is preventing young people from becoming entrepreneurs, according to a major new study from the Hunter Centre for Entrepreneurship at Strathclyde University.

Dr Jonathan Levie, the centre's director, blamed the "climate of timidity" promoted by doomsayers and insolvency accountants for "raising fears of bankruptcy" that are not borne out by the facts.

He said: "There is a myth that most businesses fail in a short period, whereas all of the data is telling us that it's not true."If you count up the number of people who go bankrupt within a year of starting a new business it is actually 0.3 per cent, while many people think it's about 50 per cent. That's a very big perception problem."Businesses close for many positive reasons other than business failure, such as selling the business to start new ones or retirement."

The 42-country Global Entrepreneurship Monitor (GEM), released yesterday, claims that young entrepreneurs in Scotland are less positive than their counterparts in other parts of the UK, being "beset by fears of failure, of a general lack of opportunities, and society's view of a career as an entrepreneur".

But the report's authors point out that only one in five businesses in Scotland that closes does so because the firm is not profitable, and only 5 per cent shut because of insolvency or bankruptcy.The Hunter Centre claims that "destroying the myth of business failure" could lead to a rise of 25 per cent in the number of start-ups.

Sir Tom Hunter, Scotland's richest man, who helps fund the centre and wrote the introduction to the report, urged Scotland's leaders to encourage the upward trend.He said: "Many of our young entrepreneurs question just how committed we are to becoming an enterprising society."Scotland is becoming more of a 'can do' society. We need now to emphasise the other part of the equation: 'will do'."To do this, we need leadership from the business, political and academic worlds."

Levie described the in-depth report as "good news and bad news". The study finds that fear of failure is a barrier to start-up to 42 per cent of Scots who are thinking of starting a business, yet more than half of these over-estimate new-business failure rates. The start-up rate has declined in other high-income nations, but not by as much, and Scotland has thus slipped down the rankings in the bottom quartile of the 42 nations monitored by GEM.

John Anderson, chief executive of the Entrepreneurial Exchange, added: "This survey explodes the myth of business failure which is put about by people who have a vested interest in failure."

By Colin Donald

The full article contains 744 words and appears in The Scotsman newspaper. Last Updated: 14 December 2007 9:20 PM

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