More than 10,000 businesses go under every year and, for most owners, it’s the most difficult time in their lives. Isolation, shame, guilt and even mental illness take hold – it’s a lonely and terrifying time.
Wayne Toms, executive chairman of the Rebuild Foundation, knows exactly what it’s like because only a few years ago he was living it. His family business specialising in customer service and satisfaction information fell victim to the GFC. He spiralled into a depression that led to his admission into a mental health institution.
His experiences led him to found a not-for-profit charity organisation that seeks to help people whose business has failed rebuild their lives and get back on their feet.
“Despite the vast array of support mechanisms for business owners while they’re in business, once their business fails, there’s very little support. And one of the things we find is that a lot of the people feel very isolated and left alone to deal with their circumstances, says Toms.
“Owners tend to try to stick it out as long as they can. They’ll keep throwing time, effort and money at what is probably a lost cause. And that puts them under an enormous amount of stress. When the business does finally collapse, in many cases it can tip them over the edge in terms of their mental health.”
He has met Bruce Billson on more than one occasion, and while the new small business minister and former small business owner has been “very supportive” of the cause, that has yet to translate into any funding.
“It’s interesting,” says Wayne, “you’ll see the money that the government will throw behind, say, the Ford factory workers to rehabilitate them because their factory is closing and yet 10,000 small business owners lose everything each year and there’s no means of support to rehabilitate them.”
The foundation operates mostly through word of mouth at the moment rather than embarking on an awareness campaign for the simple reason that it doesn’t have the money to open its doors to everyone that it would like to.
“Even though 10,000 businesses fail per year, statistics show it takes three to four years for the average person to get over a business failure, which means at any given time you’ve got 30,000 to 40,000 people (or families) per year that are trying to rebuild their lives after a business failure.”
The foundation, established almost 12 months ago, doesn’t bail out owners or offer any financial aid. Instead, it focuses on the emotional toll on the individual and family.
Bill Buckby, head of corporate recovery services at KordaMentha Queensland, says that the majority of failed small-business owners lose their family home because of the way the business was set up and guaranteed.
In the short-term, loss of income will hit living standards and, in the medium and long-term, filing for bankruptcy means the owner can’t run a business for three years. Not to mention the affect on credit ratings.
“The most common mistake is going into the business on the basis of buying yourself a job. The other is managing the business based on cash – which means there’s not enough visibility as to the performance.”
These, plus an over-reliance on debt, are what bring down the majority of businesses.
Alarm bells should be going off when owners can’t complete business activity statements on time, according to Bill.
But if it happens, the thing to remember is that so many famous entrepreneurs have been there. Bill Gates, Henry Ford, Thomas Edison and Walt Disney have all had businesses fail, just to name a few.
All good businesses have a contingency plan. Knowing what to do when things get tough will give you peace of mind.
If the absolute worst is facing you or a friend's company, here are Wayne’s five lessons for how to turn adversity into triumph. It worked for the greats and it can work for you.
1. Understand that a business failure does not mean you are a failure
Richard Branson once said "Learn from failure. If you are an entrepreneur and your first venture wasn't a success, welcome to the club!"
2. Seek financial guidance
Many failed business owners find it difficult to secure another income in the short term, which places significant strain on the household budget – often for years. Far too often, business owners feel that there’s nothing they can do about their debt situation. This is often not the case!
3. Seek mental health advice
When a business fails, it rarely happens overnight. Many owners experience depression as their business is struggling and the loss can trigger even greater mental health issues. Loss of confidence and self-esteem, shame and guilt, a sense of losing your identity and direction are all common. Sometimes you may not even realise the mental health issues exist or that they’re impacting the people around you.
4. Stay fit and healthy
Weight gain, tiredness, lack of energy and motivation can follow a business failure. Research shows that staying active can have a dramatic effect on reducing depression, maintaining motivation and staying focused. This doesn’t mean you have to become a gym junkie, but be sure to eat well and stay active. Just taking a good walk every day out in the fresh air is a good start.
5. Regain direction and purpose
Your dream does not have an expiration date. Take a deep breath and try again.