Best Advice: Protect the Downside
This post is part of a series in which LinkedIn Influencers share the best advice they’ve ever received. Read all the posts here.
Last year I wrote about my best advice coming from my mother. This year, I wanted to share the best advice my late father gave to me. When I was 15 and wanted to leave school to start a national Student magazine, I remember him telling me that I couldn’t do so until I had sold £4,000 worth of advertising to cover the printing and paper costs of the first edition of the magazine, so we knew the sales would be all upside. I worked out of the phone box with even more determination to try to get advertisers to support us. Once I’d got the advertising sold I went to see the headmaster and told him I was leaving school. He told me I would either go to prison or become a millionaire! While it was a big risk to leave school, I knew I had a good idea and knew I had the downside covered, so I was confident I was making the right decision.
When I decided to go into the airline business, we were the hottest independent record label in the world and were as profitable as we had ever been. I remember having to sit down with my fellow directors at the record company and tell them that I was thinking of starting an airline. You can imagine their reaction! There was a serious danger that friends for life were going to change to ex-friendships rapidly!
One can fully understand why. The idea of putting 20 years of building a record company at risk – they just couldn’t understand where I was coming from. The airline industry at the time was absolutely awful. You were lucky to have a cold bit of chicken dumped in your lap during a flight, there was no such thing as in-flight entertainment, the cabin crew never smiled and the experience was dreadful.
I really felt if we could create a really fun, high quality airline that got all the details right, we’d have a chance to survive and even flourish. You can never be sure until you’ve tried it. So, once I had negotiated the price for a second hand 747 from Boeing, I said to them that if Virgin Atlantic wasn’t successful, then I wanted to be able to hand the plane back at the end of the first year – therefore protecting the downside. It was the most difficult thing to negotiate, as Boeing wanted to be sure that the plane was off their balance sheet and a successful sale. Fortunately for me planes weren’t selling all that well. They decided they would take a risk with me as they wanted a competitor to British Airways in the UK, so BA couldn’t hold them to ransom every time they negotiated on a plane.
When I sat down with the directors at Records, I was able to say at the absolute worst we would lose six months’ worth of profits. But if it went well, we would then be able to buy a second and third plane, build another successful business and something we could be really proud of. Because I had the downside protected, they could see the logic of my decision. While they didn’t welcome it with open arms, they gave me their blessing.
I’ve written this sounding incredibly sensible. The truth is, rules are made to be broken. There have been many occasions, especially early on in my business career, when I’ve had to ask my ever-understanding wife to sign a sheet of paper with me to put a second mortgage on our home in order to get a business deal done! However, the theory is sound: trust your instincts, but protect the downside. And, of course, remember to listen to your mum and dad’s advice!