by Nick Ortner and Carlos Sanchez-Fuentes
One of the goals of the Entrepreneurial Actuaries Section is to assist actuaries with starting a business—to that end, we sought input from business creators to help guide fellow entrepreneurs. The following article synthesizes and summarizes the responses and feedback provided to a number of the questions asked.
A few questions were more of a factual nature. The results follow:
Did you go alone or work with others?
More than half of the respondents had no partners.
If you had partners, was their expertise of a similar nature or complementary to yours?
When partners were involved the expertise was always complementary.
Have you ventured into non-traditional actuarial areas, either with or without the assistance of additional experts?
The respondents were split almost evenly. It seems that actuarial entrepreneurs are willing to explore new frontiers.
Would you do it all over again?
No regrets. Everybody would do it again.
The second type of question delved into starting and sustaining a business, probing further on the use of actuarial skills in an entrepreneurial context, highlighting the upsides and downsides of owning a business, and facing current and emerging challenges:
How did you get started as an entrepreneur (drivers, motivations, etc.)?
The process of getting started encompassed the following:
- A passion for entrepreneurship that percolated for a period of time before opportunity and/or necessity (job change/loss, corporate structure becoming too redundant and/or stifling, and/or nearing “retirement age” but not quite ready to completely retire) drove the individual to action; and
- Repeated encouragement from clients, colleagues and/or family and friends to “start a business” (even if they just started something small on the side) and/or “go on their own.”
Was an actuarial background all that was primarily needed to become a successful entrepreneur, or did you discover a requirement for additional complementary skills (business or otherwise)? Please explain.
As you might expect, an actuarial background was merely one important element for success—other important elements in successful entrepreneurship include:
- Prospecting and networking—you must commit time and energy to the sales, marketing and people-networking process to keep the pipeline of business full and moving, with IT and website design cited by multiple respondents as being tied into optimizing the sales and prospecting process;
- Accounting/finance and administrative skills, coupled with familiarity with emerging software and technology, are important in managing the day-to-day business; and
- Actuarial analytic abilities were cited by multiple respondents in terms of using those skills to best assess whether outsourcing certain projects or tasks made sense, and where outsourcing made the most sense.
What have been the biggest upsides and/or pleasant surprises in being an entrepreneur?
Many of the responses here aligned with answers to the question, “Would you do it all over again?” focusing on the following themes:
- A sense of satisfaction and personal accomplishment;
- Flexibility and freedom to choose clients and projects; and
- The willingness of networks (including former colleagues and clients) to direct business their way.
What have been the biggest downsides and/or unexpected barriers to being an entrepreneur? What are your biggest current challenges?
Emerging themes to these two questions were along the following lines:
- Resources: In a new business, assistance with elements such as HR, IT and/or website development, legal, and day-to-day administration is often unavailable. Entrepreneurs routinely ask themselves, “Should I learn and do this myself (which will cost me time), or should I hire/outsource these tasks (which will cost me money)?”
- Demands of the sales process: entrepreneurs have to be prepared to commit time and energy regularly to business prospecting. They need to understand who the decision makers are and recognize that converting relationships to sales can take longer than might have been expected.
What looms as potential future challenges?
Common themes in response to this question included:
- The general economic environment represents an ongoing struggle as clients’ budgets are tight, even if there is an acknowledged need for work to be done;
- Specific challenges in areas of practice such as health (given the impact of reform) and pensions (with defined-benefit (DB) plans less prominent) loom, and how to adapt to changes in future demands; and
- Striking a balance between [i] growing the business/maintaining revenue streams moving, and [ii] recognizing that not every potential client/project is a good fit with your business and marketing plan.
What would you do the same? What would you do differently?
- Answers to the “same” question revolved around two themes: “I’d do everything, or pretty much everything, the same” and “Simplify processes and day-to-day administration as much as possible with selective outsourcing.” Additional feedback encouraged entrepreneurs to use a targeted approach to marketing that maximizes one’s unique expertise.
- Answers to the “different” question also primarily revolved around two themes: [i] Leverage the use of technology to manage your business without the need for additional manpower; and [ii] Invest more in branding yourself and your partners. A few responses also urged entrepreneurs to be cautious to fully separate from prior employers before kicking off notification and marketing efforts to potential clients and to seek legal assistance if you have unanswered questions.
With a plan in hand for how to run the business, coupled with a baseline understanding of your potential market and a commitment to the sales and relationship-building process, your chances for a successful plunge into the world of entrepreneurship increase. An actuarial education must be complemented with a strong and growing network, solid business sense, and additional and ongoing learning.
In the November 2012 edition of The Independent Consultant, we’ll discuss the results from the three survey questions that focused more specifically on the actuarial education system and what role that system does, could, and/or should play in the world of entrepreneurship.
Nick Ortner, FSA, MAAA, is product development manager—Group Markets for National Guardian Life Insurance Company in Madison, Wis. He may be reached at njortner@nglic.com or 608.443.5280.
Carlos Sanchez-Fuentes, FSA, MBA, M.S., is vice president and chief actuary at Delta Dental of Rhode Island. He may be reached at carlos_fuentes@aya.yale.edu.