Why we must talk more about failure in social enterprise
The Guardian, by Claudia Cahalane
Last year, in a live Q&A on planning for success and failure, some of the experts talked about using business failure as a valuable learning experience. One expert even said that in the US you’re more likely to get finance if you have the knowledge of failure under your belt.
But the sector rarely talks about failure in public. And, for every couple of hundred books on business success, you’re unlikely to find more than one on the subject of failure.
Dave Dawes, a nurse and serial social entrepreneur, is one of the few social entrepreneurs who will talk publically about his first-hand experiences of failure, and he wants to see others do the same.
"Plenty of social enterprises fail and more should share their experiences," said Dawes, speaking at the Good Deals social investment conference in London at the end of November. "Social entrepreneurs who have failed are likely to be more innovative, can be better at managing cash flow and even more attractive to certain investors."
His first social enterprise went bankrupt, but he learned so much from failure that he believes his other businesses wouldn’t have been as successful without the experience.
"I’m really interested in social enterprise failure and the process of it," said Dawes. "It’s hard to learn from success, it’s easier to learn from failure. And, I think if you’re not failing, you’re not innovating. Really successful social entrepreneurs fail multiple times. But one of my bugbears is that these discussions only happen in the bars at conferences, not on stage."
Dawes has set up four social enterprises – including Nurse First and Entreprenurses CIC, and has advised hundreds of other social entrepreneurs.
He also said that an angel investor was happy to give him £72,000 for his second social enterprise after the first one failed, based on the belief that his previous experience would have helped him learn about cash flow. No bank would let him open an account with the failure under his belt, though, he added.
Dawes was joined in the ‘When it all goes Pete Tong’ session by Anna Whitty, chief executive of community transport organisation ECT. She spoke about the problems the business had gone through in recent years when a period of intense growth and diversification resulted in trading difficulties.
Whitty listed over-diversification, mission drift, lack of due diligence, growth based on debt, an obsession with growth and being an organisation led by ego, as some of the reasons the social enterprise and charity had failed. The organisation had now scaled back and was "back on track" she added.
So why isn’t there more of an open forum for sharing useful stories of social enterprise failure? In another recent piece social enterprise consultant Rizwan Tayabali, who has worked with social enterprise across Africa and Asia, said the UK was far too intent on overplaying its successes rather giving the real picture of social enterprise, complete with the highs and lows.
And, in contrast to Dawes’ experience with the venture capitalist, Tayabali and others believe that part of the reason for not talking about failures in public is that most social enterprise supporters and funders are only interested in successful social enterprises. Tayabali said the sector wants to hold up as many shining examples as possible to bring more money in. Most funders were only interested in backing sure-fire bets, he said.
This is talked about in more detail in a lengthy and illuminating discussion on social enterprise failure on the Social Edge website. One poster comments: "Donors are generally giving for reasons of the heart. In many cases, it’s about the donor, and not about the social outcome. I give, I feel good. Don’t tell me it didn’t work: I’ll lose the good feeling and I surely won’t give you more money."
In the discussion, commentors – mainly anonymously – talk about their experiences of having to gloss over the problems in their businesses because they are constantly being held up as shining examples of social enterprise success and feel under pressure.
Dawes, who mainly talks about financial failure, said that there should be more support for social entrepreneurs to discuss their difficulties, and not "hide under a duvet and fall into a deep depression". He recommended talking to insolvency practitioners for advice, and on the Social Edge discussion, participants suggest talking to funders at an early stage to keep them updated and aware of any difficulties.
Perhaps the sector is still at point where it feels too fragile to discuss such issues openly, or perhaps Whitty’s and Dawes’ openness will lead to others feeling more comfortable about coming out with their stories.
Do you want to talk more about failure in social enterprise but feel uncomfortable about doing so? If so, you’re in luck. Today sees the launch of the Secret Social Entrepreneur – our new feature which allows you to write anonymously about issues within social enterprise. Click here to read ‘Secret Social Entrepreneur | Many social enterprises are critically ill’