Risky Business

All entrepreneurs face start-up problems. But in an industry where the clients face the hazards, these adventurers had to find insurance or head back to the land of the employed.
Magazine Contributor
7 min read

This story appears in the May 1999 issue of Entrepreneur. Subscribe »

Today, business is booming for Fulcrum Learning Systems Inc. in Redondo Beach, California. The company's organizational development seminars capitalize on cutting-edge experiential education trends, and Fulcrum's adventure-based learning programs cater to a steady nationwide clientele of Fortune 1000 companies, community and youth organizations, and sports teams. Building their company from the smallest of beginnings, Fulcrum's co-founders, J. Linwood Paul and Leslie Bourne, were bitten by the entrepreneurial bug a decade ago.

But the heady exhilaration of making their own way in a field they knew like the backs of their hands was tempered by administrative realities. In an industry where clients are regularly put in controlled-risk situations, qualifying for liability insurance would be no easy task--especially for a company with no track record to prove its safety. It's the single element that can make or break an adventure-training company, says Bourne: "Without insurance, there is no business."

Paul and Bourne were no strangers to challenges. By 1989, they had worked as independent contractors for more than five years for one of the nation's leading adventure-based learning companies. While traveling around the world, they'd learned the business from the ground up and successfully coached thousands of participants. The pair often acted as lead instructors or day captains in the absence of the company's owners.

Paul and Bourne's personal cachet was growing, and clients were wondering out loud if and when they'd start their own adventure-based learning business. But the realization that it was time to make their move came slowly. "On our fifth trip to France, when Leslie and I were leading a team, we looked at each other and said, `Hey, we can do this.' How did we know? Because we were [doing it]," remembers Paul, 44.

Bourne, 37, says, "It was what we were preaching to clients. We'd go out and assist groups of people in establishing their dreams and goals and values, and help them realize how big they were. Through that process we both [realized] we needed to take that step, too. It [became] important for us to push ourselves to another level."

But What Is It, Anyway?

Just what is experiential education--and why did corporations and small businesses pay a total of more than $500,000 last year to give their executives and employees the Fulcrum experience? "That is the question we're asked," says Bourne. "We create experiences that magnify real-life situations. Then we give a person or group an opportunity to look at that experience and see how it relates to their lives and how they might want to change something to [make it] work more beneficially."

Whether it's rock climbing, swinging across a river from one side of a cliff to another, or navigating a military-style ropes course, the training involves "a series of very difficult tasks that usually takes place at heights," says Paul. "When [participants] successfully face the fear and meet the challenge we provide, they discover tremendous strength within themselves, which they draw from to meet other challenges that are more familiar, such as expanding their business or negotiating a contract. Adventure is the deepest, most visceral, most easily integrated teacher on the planet. There's just no better way [to learn]."

Learning the Ropes

Ready to take off on their own adventure, the first hurdle for Paul and Bourne was getting the company they were working for to support their breaking away. "It was difficult," Paul says, "because we were dealing with people who were the best in the business, who knew they'd given us everything." But in the end, the company's owner gave the duo his blessing, Paul says. "He told us, `Congratulations. Most people only talk about doing this.' And he wrote us an absolutely outstanding letter [certifying our experience and expertise]."

Thanks to the sterling, no-loss reputation of the company they'd worked for (and the letter of certification), the fledgling partners' first application for liability coverage was approved by an A-rated company. The pair was grateful for the lucky break until they got the premium quote: It was in the $10,000 range.

Paul and Bourne's only available start-up cash, culled from their savings, was roughly $12,000--barely enough to cover one quarterly premium at the rate they were quoted. With no client base to speak of and minimal financial assets, the would-be entrepreneurs realized they couldn't afford the premium rates charged by an A-rated company. So after going through two brokers and applying with 17 insurance companies, the partners finally landed a B-rated company (a firm with less assets available for claims than premiere, A-rated carriers).

With policy in hand, Paul and Bourne were off and running. Within weeks of formalizing their partnership, the partners negotiated a large contract with the U.S. Department of Justice. Operating on a shoestring budget, they purchased equipment for the business in stages and paid themselves next to nothing. Word-of-mouth and referrals kept the duo busy. Their dream was unfolding on schedule.

But to their dismay, it was soon time for another lesson in Insurance 101: Their insurance carrier decided to abandon the adventure-training industry. "We learned that every year, some [B-rated] companies stop offering liability insurance to [adventure-based learning companies]," says Paul, because of the number of such companies that experience losses.

With only two months' notice before their coverage would be canceled--and trainings already scheduled for months ahead--Paul and Bourne scrambled to find another insurance company.

Returning to the drawing board, the partners trudged through the application process and finally found another B-rated carrier to issue them one year's coverage. They could control their own safety protocol, but what they didn't have any control over was whether their new carrier would stay in the adventure business beyond that year.

Here We Go Again

Entering their fourth year in business, Paul's and Bourne's lives as business owners seemed sweeter by the day--but the insurance predicament was destined to rear its ugly head yet again. History repeated itself: Their second insurance company jumped off the adventure-business bandwagon. The partners were disappointed, but they were also familiar with the painstaking, back-to-square-one application process. This time, at least, the insurance company had given them eight months' notice.

Over Fulcrum's next four years in business, Paul and Bourne watched as each of their B-rated carriers bowed out after a year, no longer willing to offer the liability protection they needed. Even A-rated insurance companies were becoming more discriminating in the adventure companies they were willing to cover, says Paul. But last year, thanks to their sparkling safety record--a zero-loss history spanning eight years--Fulcrum scored an A-rated insurer, now an affordable option for the flourishing company. And this time Paul and Bourne did it on their own merits rather than those of their former employer. "[There was] still a lot of nervousness [waiting for approval]," Paul says, "because without insurance going into our ninth year, what could we do? Quit? Even after nine years in the industry, we felt like rookies."

Mountain High

Hanging in there--with each other and with the company--has become its own reward for the two who dared to go it alone. As Fulcrum's momentum continues to build, satisfied clients often return to the company for follow-up and maintenance. "We see between 85 and 90 percent of the organizations we work with more than once," says Paul. "They come to us for the adventure learning, and then they find out [we also offer] interactive indoor workshops and corporate conferences."

With their insurance woes behind them--and having provided services to some 80,000 clients--the partners are forecasting close to $600,000 in sales this year. With a premiere insurance carrier finally on their side, Paul says, "Now the ball is rolling."

As Paul reflects on his and Bourne's leap of faith, he characterizes his industry as a stark metaphor for the wider, unpredictable world of business. "Let no one who works in this business think they have it all under control," says Paul. "Or else adventure shouldn't be part of the name for what they do. Adventure will kick your ass and mine."

Contact Source

Fulcrum Learning Systems Inc., (310) 452-7992, www.fulcrumls.com

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