In early 2007 we were working a huge convention with nothing more than a big idea and a lot of nerve. We were hot, and we were flaunting it. We had extraordinary talent and our product was immediately perceived as best in class. Through a flashy presence and sheer force of will, of which I had great reserves, we convinced the market we were the next big thing. Our customers were so engaged with our ingenuity that 20-minute sales calls turned into two-hour brainstorms. At our launch party, our customers came in Lamborghinis and our investors arrived in Bentleys.
Then the first economic tremors hit in early 2008 whenfuel topped $4 a gallon and Wall Street wrote off its first round of toxic billions from the bursting of the mortgage bubble. But we seemed to be alright.
The mood in our market remained well short of panic, although our customers delayed spending and started focusing on 2009. We fell behind projections, which was understandable for a start-up in its first year of operating. The picture right around the corner looked pretty damn rosy. By fall we were able to forecast substantial sales for 2009. We were set to have a profitable, scalable business if we could bridge operating capital – which we did – until the revenue started flowing.
We attracted a new group of individual investors from around the world, each with a stratospheric net worth. We went through intensive due diligence and structured a deal. Then the global financial markets quaked and collapsed, again and again, day after day, and the investors vanished in an instant. One minute we were a sure thing, the next, we were under-funded, over-committed and unable to hold on.
In the months that followed, I hunkered down into economic survival mode and shook off the emotional devastation of failure a layer at atime. I edited the summation of my entrepreneurial adventure, deleting any sense of victimisation. Now my story reads like this: I ran a business. Now it’s gone. I failed as a manager. I bet the house. Now it’s gone. I failed as an investor. The End
Anyone can fail – once. Fail twice and you transcend into a failure. What I’ve learned is that in the face of failure the only thing that matters is to live to fight another day. The tough-love survival tactics are best extracted from the lessons of failure.
Here are mine…
1. In order to survive, we must dedicate the totality of ourselves to it. This is very difficult to do. Concentrating on survival, instead of focusing on success, runs counter to the motivations and self-confidence that led us to be entrepreneurs in the first place. Yet it takes selfless dedication to strip away accommodations we’ve made to the realities we face.
2. Make a stone-cold assessment of the situation, no matter how unbearable the conclusion. This is essential to survival. There can be no tolerance for denial, no sustenance in victimisation, no excuses required.
3.We must be able to strip the truth as we have rendered it from the reality that confronts us. To let reality in, we must get out of its way. And survival is very much about what is real.
4. The means to survive are always before us. We must make ourselves able to see them by embracing the inverse of what we are doing.
5. We must be willing to change completely, even if the business that survives no longer resembles the business we started. We need to abandon what we hope or believe could happen – especially anything that would absolve us from the need to consider mere survival. Nothing else matters.
6. We are managers of our companies. And managers manage risk. In the end, we are judged on nothing else. Good times can obscure the cost of delusion. Bad times, like these, expose it for the lethal vulnerability it is. Had I not failed at this, I would have a business of some kind today. It’s that basic.
Here’s an easy test to determine if you should be taking survival strategy very seriously: Have you made any of these statements in thepast 30 days? “If we can just get around this corner, then things will pickup.” “If this one deal comes through, then others will follow and we’ll be all right.”
If we can hang on until we feel the impact of the economic stimulus bill, then things will work out.” “If we just pour some more money into get us through the tough times, then we’ll end up being successful.”
“If you’re overly confident or helplessly hopeful, you can substitute the word “when” for the word “if” in any of those or similar statements, but you’re still in jeopardy of being unable to respond to what you have to do to survive.
I used every one of those “if” propositions, and in my analysis every “then” had some miraculously positive outcome. Nothing contributed to my failure more than my unrelenting dedication to my original concept of success. It almost worked, but it didn’t.
7. Act on the Worst Case While You Still Could Be Wrong. If everything goes completely wrong, can you survive? If everything gets even worse than you can imagine, can you survive? Have you calculated what seemingly desperate manoeuvres you would have to take to survive, and precisely when those changes should kick in? Are your survival weapons locked and loaded? Have you eliminated anything that could muffle the blare of the alarms?
8.The key to survival is staying ahead of the need for it. No matter what state your business is in right now, its cost structure has to be amended. Renegotiate everything. Leases and loans have to be brought to a sustainable level, or the business must be restructured without physical location or need of capital. Obligations must be sub-let or abandoned. Cut sales commissions. Eliminate every job you can, and then eliminate almost every job you think you can’t live without.
We all tend to put off making drastic changes because we consider consequences. Cut commissions or salaries and we could lose our best people. Give up our location and we would look bad and no one will want to do business with us. Or we might think that we’ll never be able to get another location as good once things turn around. Or so we tell ourselves – and we’re wrong. Talent is a cost, not a dependency, and it must be measured against return.
A location grander than its return is vanity.
9. The biggest mistake we make is to become paralysed by our sunk costs. We’ve all put alot into our businesses. We can’t just walk away from those investments, certainly not without fundamentally weakening the business as we know it and, more emotionally, because it would make us look like we’ve been damn fools. But that’s exactly what we need to do. Money spent is money gone. We need to dedicate ourselves to the money that’s left. We have to measure every move against its contribution to survival.
Look To The Future
By protecting your employees, their future and their income, you’re also protecting your business says Walter van der Merwe, CEO of Fedgroup Life.
It’s proven that staff members perform better when you show them how valued they are. But, investing in your staff members’ futures goes above and beyond the bottom line.
Staff members value recognition for the contributions they make to the business. However, this does not necessarily need to take the form of financial rewards or incentives. As an employer, you can demonstrate your employees’ value to the firm through appropriate insurance cover in the form of comprehensive employee benefits, which show that you’ve considered their long-term wellbeing and that of their family.
Of course, there is a financial commitment on the part of the employer to contribute towards insurance cover, but this goes towards the future prosperity of staff members, rather than an immediate financial benefit. Employee benefits offer security against the possibility that something detrimental will happen, and in instances where the benefit is needed, will have a lasting effect on their lives.
Ensuring that staff members have the financial means to get the best standard of medical care and treatment following injury or illness, will increase the likelihood that they will make a full recovery, and within a shorter period of time. This will enable them to possibly return to work sooner, with full capacity to continue contributing meaningfully to the business and adding value. In this way, employee benefits demonstrate to staff members that they are a significant and considered part of the business, not only at the present point in time, but also for the long term, and they also ensure a degree of business continuity — particularly key employees.
Loss of income
The biggest risk for every employee is a loss of income. Whether their incapacitation results from an injury or illness, an inability to generate an income to support their lifestyle and their family will severely impact an employee’s quality of life. This loss of financial security is therefore the most consequential risk that should be protected against through appropriate forms of insurance, such as lump sum or annuity income protection products.
Another pertinent risk that business owners should address is the need for adequate life cover. Should an employee, who is possibly the primary breadwinner of a family, pass away, their surviving dependents may be left destitute without their financial support. Employee benefits that include a life insurance component will ensure the financial wellbeing of family members left behind in the event of an employee’s untimely death.
Another important risk factor to consider is the threat of chronic or severe illness, and the high costs generally associated with treatment. As employees age they become more susceptible to various types of illnesses. In instances where they fall chronically ill, they require the financial means to cover their medical costs, and generally require time away from work to recover. This is why dread disease or critical illness cover is another vital component of a comprehensive employee benefits scheme.
Choosing the right provider
When structuring employee benefits there are certain principles that should be applied, regardless of the size of company, or the income of the staff and their socio-economic circumstances.
Foremost among these is the selection of an employee benefits provider, along with the appropriate products and the associated cost implications. This role is best fulfilled by qualified, experienced and independent financial advisors who can offer unbiased advice. These trained and certified experts are able to advise employers on how best to support their staff members through the implementation of suitable employee benefit schemes by recommending the most appropriate solution structure, based on factors such as the gender, age, role and income of employees, and their financial responsibilities. This information helps advisors to select the best mix of products that offer suitable cover to meet the unique needs of the employer and their employees, while also considering affordability.
From a personal perspective, every employee gets peace of mind knowing they are protected should they no longer be able to work, or get sick, and that there are financial provisions in place for their family should they pass away. While they contribute a small premium, they will receive an outsized financial benefit should they claim in comparison to the immediate cost.
As it relates to the business, providing comprehensive employee benefits positions the company as an employer of choice, because the organisation shows that it cares for its staff. It also demonstrates that the employer considers their staff to be valuable, which is a powerful means to attract and retain the best talent.
Protect the future
The human psyche is hardwired to choose instant gratification over receiving a potentially greater reward or benefit sometime in the future. People generally tend to discount the value of rewards they’ll receive in the distant future due to a disconnect between what the present self believes will benefit the future self. In this model there is an opportunity cost involved in relation to what someone could afford now by rather spending the insurance premium on items or services that satisfy their more immediate needs.
This is the fundamental reason why insurance is considered a grudge purchase. We ultimately pay a premium every month towards an intangible benefit that will only be realised if and when a claim is made. And, in the case of insurance, that benefit is only realised when something horrible happens — another reason people shy away from examining this basket of products.
The best way to combat this innate psychological reasoning is through continued education, which can help people understand the purpose and the prolific impact that insurance will have on their lives should they ever need to claim. This requires contextualising the possible implications for an individual five to ten years from now, illustrating in real-world terms how different their situation could be in a worst-case scenario, both with and without appropriate insurance. This is a stark but effective means to demonstrate the need for adequate cover.
How To Choose The Right Group Risk Cover For Your Business
Your clients and business partners are likely to be your main focus when you start out as an entrepreneur. But as your venture grows into a fully operative business of scale, your employees will matter just as much. That’s why it’s important to ensure you provide adequate employee benefits, and when it comes to group risk cover, it’s becoming increasingly important to find a solution that matches the needs of everyone in the business.
It’s no secret that the world of work, as we know it, is changing. In a 2017 employee benefits study, US insurer MetLife found that 58% of employees surveyed “want customised benefit options based on their personal information”. And according to the same study, 73% of employees believe their employer is responsible for employees’ health and financial wellbeing. And in spite of this expectation, modern employees are unlikely to stay with the same employers for very long, because technology continues to create new opportunities.
It is within this context that it’s important for you, the business owner, to make your business as attractive as possible by offering your employees benefits that truly match their needs. Start by thinking of yourself as a custodian of their financial security. And in terms of group risk cover, the financial security not only lies in the cover itself, but in offering benefits that add real value to your employees’ financial planning – especially when you consider that it is your employees who are contributing towards their cover.
Why do you need group risk cover for your business?
Employers buy group risk cover for the people in the company to cover their future pay cheques in case something happens where they can’t work before they retire.
But this, unfortunately, is not the case with traditional group risk products, which typically offer blunt amounts of cover that is equal to, for example, three years of pay cheques for everyone in the company – irrespective of how many pay cheques they have left before retirement. As a result of this approach, younger people in the company have less cover compared to what they need, relative to their older colleagues who have fewer pay cheques left
Traditional group risk products also offer very little flexibility, leaving employees with little, or no option to buy more cover above what employers secured. They also don’t offer a choice between lump-sum or recurring payouts when members claim, or always secure the ability to take their cover with them, should they decide to leave the company.
So how will you know you’ve selected the right cover?
Start by asking your financial adviser to look out for a product that works out how many pay cheques each employee needs to cover, and then gives every person in the company the same level of cover in proportion to the amount of pay cheques left until retirement. By following this approach, your employees’ cover will provide more people in the company with much more cover. There already are forward-thinking group risk cover providers in the market that manage to offer up to 50% more cover by following this approach.
Secondly, ask your financial adviser if your employees will be able to buy more cover over and above what you secured. There are innovative products on the market that offer up to double the cover free of underwriting, which enables your employees to benefit from the insurability you’re providing them, and to close gaps in their insurance.
And – in the spirit of the modern world of work with a more mobile workforce – these innovative products enable employees to take the cover with them when they decide to leave your company.
It’s also important to ask your financial adviser if your employees will be able to choose between a lump sum and recurring pay-outs when they claim. Traditional group risk policies tend to expect employers to make one choice between lump sum or recurring payouts on behalf of all of their employees when they take out the cover. Forward thinking cover providers have turned this approach on its head, offering employees the option to choose between recurring or lump sum payouts when they claim.
The importance of claims certaintly should never be understated, starting with obtaining a clear picture of the clinical conditions the group risk cover actually covers. There are new players in the market that provide extensive and transparent lists of clinical claims conditions for additional expense needs, covering more than 200 conditions.
And exactly how permanent does the insurer view a claim for a permanent condition? For example, if an employee is to be diagnosed with Stage 4 cancer, will he or she receive a 100% payout on diagnosis, without the prospect of ongoing reassessment? A needs-matched product offering would never require the reassessment of permanent expense needs claims.
In conclusion …
You wouldn’t expect your employees to work under dangerous conditions. So why would you select a group risk product that will not serve in their best interests when they need it most? That’s where needs-matched group risk cover comes to the rescue – not only for your employees, but also for your business by providing security and benefits offering real value in the modern world of work.
How to Take Risks That Win (Almost) Every Time
Knowing which risks to take, and how to take them, can be extremely helpful in stacking the odds in your favour.
Looking 13,000 feet down out of an airplane, parachute pack secured, your heart beating in your throat, must be one of the most terrifying experiences imaginable. Though not all risks are life-threatening, all risks are frightening. As humans, we’re constantly afraid of failure, of doing something wrong and of having to deal with the consequences. Yet, at the same time, there is nothing more rewarding than reaping the benefits of a risk gone right – of landing safely ground, to build the earlier metaphor.
For entrepreneurs, risk taking is a necessity of the job. After all, we’re never quite positive that things are going to work out the way we envision. We make choices daily which affect our business, and we can never be absolutely sure that we’re making the right ones.
Knowing which risks to take, and how to take them, can be extremely helpful in stacking the odds in your favour. While risks are unavoidable, approaching them strategically can be the best way to decrease your parachute’s chances of failing, so to speak, and to produce measurable results that you would never have achieved had you avoided the risk in the first place.
In order to hone your risk-taking skills, here are some guidelines:
1. Information is your friend
The more knowledge you have about any given topic, the less risky your endeavours will ultimately be. For example, many of the most steadily successful brokers on Wall Street are those who understand the patterns of the market better than anyone else. While there are always going to be those people who make millions off a risky uninformed bet, they are the same people who most likely will lose all their earnings on a single trade. Traders who build a sustainable career for themselves are the ones that have deep knowledge of the industry.
Similarly, you should be an expert in your field. You should know your industry well – your product or service you are providing. You should understand the buying patterns of consumers, their motivation and pain points. What drives them to buy your products? Where and when do they buy? What makes them stop buying?
As an entrepreneur – or in any profession that requires risks, really – you’ll want to have as much information as possible. The more you know, the fewer unknowns there are. The unknowns, ultimately, are what makes an action risky.
2. Assess the risk carefully
While risk is a reality of life, there is also something to be said for strong assessment skills. Being able to look at a risky situation and decide whether or not it’s worth taking is a hallmark of a good businessperson.
Venture capital investors, for example, spend their entire careers deciding which companies are worth risking time and money on. Those who throw their money around recklessly, while admirable for their risk-taking, are not necessarily the most successful investors.
Being a good risk-taker involves using the information you have to assess a situation and decide whether or not the risk is worth it.
3. Learn from failure
Appreciate that all risks are learning experiences. Especially those that don’t pan out.
On some accounts, failure is actually more valuable than success. While failures may not lead to an increase in your bottom line, you can use the opportunity to glean important information about what you’ve done wrong, where you misstepped and how you can move forward in the future.
The biggest mistake many people make is seeing failure as a measure of who they are, rather than a measure of where they can go. We’ve all heard that failure is feedback. Most successful entrepreneurs failed at many ventures before they created that million-dollar offering. Most overnight successes took many years to make. If you take a risk and fail, learn from it. Ask yourself what you can do differently next time, and then move on. The only failure is not learning the lesson that it provides and using it to hone your next endeavour.
According to Mark Zuckerberg, “The biggest risk is not taking any risk. In a world that’s changing really quickly, the only strategy that is guaranteed to fail is not taking risks.”
Taking risks is the only way to go from here to there. Even failed risks move you closer to your goals if you can turn that failure into valuable learning and a plan for improve your results next time.
This article was originally posted here on Entrepreneur.com.