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Viewing Challenges Positively Can Help Company Budgeting Process

The way that companies and entrepreneurs view failure varies between different regions, and how these market participants perceive failure can impact crucial elements of their strategy and planning including their budgeting process.

Widespread Business Failure

A report titled "If at First You Don't Succeed…Mapping Global Attitudes to Adversity," noted statistics produced by Shikhar Ghosh, senior lecturer at Harvard Business School. In a 2010 academic paper, he estimated that between 30 and 40 percent of businesses will experience total failure - meaning that all initial capital invested in the venture will be lost. In addition, between 70 and 80 percent of these businesses will not succeed in generating a satisfactory return on investment.

Tolerance of Failure 

The report notes the need for entrepreneurs to not let failure hinder their efforts. When these small business owners do not succeed, if gives them a chance to discard old ideas, practices and technologies. The inability of businesses using these outdated tools allows new methods to be introduced to society.

Looking across all regions polled, the fraction of entrepreneurs who think that having a positive perception of failure is crucial to success is 74 percent. Also, 51 percent have stated that their future business ventures were more likely to succeed as a result of the old ones failing.


The report noted the importance of persistence, and said that entrepreneurs are more likely to have this trait than non-entrepreneurs. Whereas 55 percent of entrepreneurs said that the financial crisis created opportunities to create profit, only 42 percent of non-entrepreneurs saw it this way. Persistence is something that can come into play during the budgeting process, as the trait makes entrepreneurs more likely to keep going when things are going poorly than to close up shop completely.

Varying Tolerance of Failure 

The participants in the survey had more or less favorable interpretations of failure varying by region, with 71 percent of high net worth individuals in the United States stating that in order for an economy to grow, its failure needs to be viewed as positive in some way. In addition, 44 percent of these U.S. survey participants indicated that the financial crisis had provided them with business opportunities in some way.

There were many regions that displayed a more positive view of failure, with 91 percent of Middle East respondents and 80 percent of those in Asia saying that a positive view of failure is key to success.

Entrepreneurs in the United States and Europe have generally been the most successful in the past, but the results yielded by the survey paint a picture of a changing global dynamic. Various emerging market economies have made substantial progress, and are coming close to these more established regions, Steve Alper, managing director, head of market development, Barclays Wealth and Investment Management, Americas, said in a statement.

He added that "a culture that tolerates risk and experimentation is crucial to supporting entrepreneurship. As governments across the globe look to grow their economies, understanding the psychology of failure and embracing the ability to learn from setbacks are important factors in creating a vibrant entrepreneurial culture and increasing the chances of a sustainable economic performance."

Companies might benefit from noting the relative optimism of the entrepreneurs in their countries. This information on business sentiment may provide them with a barometer they can use when making decisions including creating important strategies and also when engaged in the budgeting process. Being aware of data on the persistence of business owners in their nations might be helpful to their efforts as well.

How could your budgeting process benefit from a more informed sense of business sentiment in your region? 

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