1Do you have what it takes?
There are many successful South African entrepreneurs who would have reached millionaire status a lot sooner if they’d avoided a few mistakes.
Some that reached it, though, just as quickly lost it. This means you need money management strategies and tricks to reach the top faster than anyone else.
You can learn from their journeys to develop your own strategies about what mega money-savvy tips to employ in your start-up, and which pitfalls to keep an eye out for.
This will help you increase your chances of success and boost your business’ growth, allowing you to reach your goal of being a millionaire before 30.
Here are 12 mega money-savvy tips to make you a millionaire before 30 from a group of highly successful entrepreneurs:
2Don’t take money for granted
Despite how obvious this sounds, many young entrepreneurs fall for it. It is so exhilarating making that first million that many spend it all on fancy cars and overseas trips. Lebo Gunguluza, did just that.
By the age of 27, Gunguluza had made his first million, but he managed to spend it all in a year instead of reinvesting it into his business. By the end of 1999, he was completely broke, his car was repossessed and he was blacklisted.
“I hit rock bottom for a few reasons. Aside from the flashy lifestyle, I realised then that you have to choose your market sector carefully. Entertainment is a fickle industry and promoters can be unscrupulous. Often we would not get paid on time. I made up my mind that whatever I went into next, it would be in a space that pays well and has structure,” explains Gunguluza.
“At that time I was sharing a townhouse with my cousin, and I was so down and out that I would walk to the CNA and stand in a corner reading business books that I could not afford to buy. Often the staff would come and chase me away so I’d go home, change my clothes and come back. I read about Aristotle Onassis, Richard Branson and Donald Trump and realised that if I wanted to succeed, I would have to change my mind-set. These people had huge personalities which impacted their business lives,” says Gunguluza.
From here Gunguluza clawed his way back and today is a successful entrepreneur of multiple businesses, but how much faster would he have risen to the top if he hadn’t had this money management set back?
3Focus on income, instead of image
When Vusi Thembekwayo launched his business he already had seed money from when he worked in corporate and from his motivational speaking. However, he still made one of the biggest mistakes young entrepreneurs make when first starting out.
“I used that money to get set up in fancy offices, with a PA. I thought that was what you needed. And then it took eight months to get my first client.”
Eight months of no income and expensive overheads resulted in Thembekwayo sleeping in his car, fending off the bank who wanted to repossess it because he wasn’t meeting his payments.
Eventually, Thembekwayo captured his first client and his business went from strength to strength, but he could have avoided all that stress if he hadn’t gone for fancy, expensive offices, which actually set his business back. Keep this in mind when deciding where you’re going to base or relocate your business and if you’ve got customers ready to increase your income.
4Keep your business lean
Now this doesn’t sound glamourous, but starting up a business usually isn’t. This strategy paid off for Geldenhuys who was able to create a name for himself selling good quality supplements at an affordable price.
Even after his business took off, he continued to keep his business lean, but putting all revenue back into the product, which allowed him to ramp up sales until the income from his business grew to the point that it could support offices and product development.
Geldenhuys says: “I could only buy raw materials as and when I had the cash. Everything we made went back into product. We kept our overheads incredibly lean, and just focused on growing sales, and having enough product to meet demand. I was always stingy with money. I liked a nice healthy bank balance. We’d enjoyed massive growth without spending anything on marketing, and that was the way I liked it.”
Keep this in mind when formulating money-burning activations or growth tactics.
5Know how to work your own numbers
When Kerryne Krause-Neufeldt launched her business eyeSlices Manufacturing, she was so focused on customers and making sales, that she didn’t learn the inner-workings of her own company. “I wasn’t particularly good with numbers,” she says.
This would be her biggest lesson, and could be yours too if you leave your finances to someone who isn’t a partner with skin in the game. Krause-Neufeldt explains:
“It’s easy to leave the numbers to the ‘finance guys’, especially if you don’t have a background in finance. I didn’t even know we weren’t paying PAYE, and ignorance is no excuse. You need a basic understanding of numbers at the very least.”
Krause-Neufeldt realised her start-up’s finances were in shambles, and she needed to get a handle on what was happening within her own company.
“I did Accounting for Dummies, followed by financial management workshops. It was time consuming, but worth it. It was the only way for me to truly be in control of my own business. Now I can spot problems in figures at a glance.”
6Test it out, before you invest in it
They would run small experiments, keeping the risk low, but allowing them to get some initial data before they invested any more time or money into the strategy.
“Try stuff and if it works, keep on doing it; if it doesn’t, stop,” advises Robertson and Cronje.
One of these experiments happened to be the original Big Blue store in Rosebank. The concept was a hit and generated a flood of magazine and television publicity, along with a healthy increase in sales.
Keep this lesson in mind when trying something out, because not every experiment will become successful. Test it on a small scale with low risk to see how customers respond and then if it does well, invest in it. This will save you investing large amounts in a concept that isn’t going to go anywhere.
7Don’t fall for exposure when you already have a track record
Mongezi Mtati is the Founder and MD of WordStart, a word of mouth marketing firm that connects brands with influencers. He fell into the trap that many young entrepreneurs fall for. There are businesses that will try to convince you that they are doing you a favour by working with you and that they are offering you exposure. The only problem with that is exposure doesn’t pay the bills or keep the lights on.
“Your time is yours to pour into the business, not to use on non-paying efforts that present themselves as opportunities,” said Mtati’s mentor. His advice was not heeded adds Mtati: “Unfortunately, he was right.”
“The reality is that most of that exposure doesn’t amount to billable work. It ends up being a waste of time that could have been used to either make money or spent in the business waiting for the phone to ring or drumming up sales. It could even have meant going to SARS for an hour or two, which saves you pain and punishment later in the year. The rule is simple, don’t work for free, you’re there to make money, so do it.”
8Research your industry, before it costs you
Chris Ndongeni, co-founder of Twin Cities Cleaning Services says: “We should have done more research about the contract-cleaning business industry before we started. We’d landed out first contract with Man Truck and Bus, and on our first day we were shocked to find that there was absolutely no cleaning equipment or detergents and the previous contractor hadn’t left anything behind. We scrambled and made expensive purchases because of that.”
If Ndongeni had come prepared with chemicals bought weeks before in bulk or at a reduced, negotiated price, his business wouldn’t have had a significant cash flow problem to overcome in their very early days.
Ensure you know what is expected of you so you arrive at your first client with the resources you need. If your client has never worked with someone who offers your services, perhaps go above and beyond and let them know what you need from them and what you will supply so that everyone is on the same page.
9Money isn’t everything, if you have the skills
AMC Gold is worth more than R3 billion, but when the brother and sister team were trying to get it off the ground it was a very different story. Irfan Pardesi and Hina Kassam had to convince a South African platform operating in the UK to let them get new clients on the platform without paying the monthly premiums.
“After saving and losing my start-up capital, and then saving up again only to realise it wasn’t enough, we needed to find a way to bootstrap the business. My aim was still to reach for the stars, but first we needed to start building a brand, earning a good reputation and securing a client base. We needed to start small to become big,” says Pardesi.
“Hina approached Global Traders and negotiated a deal with them. She was already a client of theirs, plus we’d been working with them for over a year. They knew us, and we were always aware of how important relationships are in business, so we’d fostered the relationship we had with them.
“We told them we’d be trading in Pakistan and getting them new clients in an emerging market, but we needed their platform for free. Their model was to charge monthly minimums to businesses that used their platform, but we couldn’t afford those fees, so this negotiation was essential to the success of our start-up.
“All trades would still go through their offices in London, and they’d make the commission, of which we took a small percentage. We were working off low margins, but we needed the platform to get started, and eventually they agreed. We were in business.”
10Be cautious about over diversifying, it could take you years to recover
Over diversifying is when you offer too many different services or products and stretch your resources so thin that you can’t perform anything very well. It’s a case of performing everything at half effort and not shining in anything.
“Urbantonic was a successful, growing business, but I’d been building it for almost a decade and I thought it was time to branch out. My ego was sky-high. I thought I could do anything, in any industry.”
It took Ross Wilson, founder of Urbantonic, 20 months after buying a joinery business, to close it down, and it would take a further three and half years to pay off the debts associated with that business.
Wilson says: “I kept thinking about that Top Gun quote, ‘Son, your ego’s writing cheques your body can’t cash’. We built up Urbantonic slowly. We offer incredible customer service, because we’ve never overextended ourselves, so our growth has been organic and self-funded. We’ve never spent what we don’t have. And most of all, we know this industry inside out. The joinery business was none of those things.”
11Trust your gut and invest in your future
George Sombono, Chicken Licken, assisted his father in managing a roadhouse restaurant. He went to the US in 1972 with a mission to learn more about the industry. In Waco, Texas, he found an amazing chicken outlet, but the recipe would cost USD5 000. He managed to negotiate for a different, untested recipe with his last USD1 000 in travellers’ cheques.
He sneakily introduced the recipe in his father’s restaurant and their sales rocketed. The demand was so high that he secured a consistent supply for Rainbow Chicken, and had to import wings from Brazil. In the quick-service industry, great taste and good value for money is everything. Getting that right and you’ll strike gold.
“At about that time Kaizer Motaung of Kaizer Chiefs fame and his gang started eating at the roadhouse. When people saw Kaizer eating at our place they wanted to eat there too. And regardless of the Apartheid laws, we served everyone, no matter who they were. My father thought I was mad and that we’d lose our licence, but my grandfather told him to keep quiet and count his money and leave the selling of the food to me. By changing the recipe and giving people some dignity, we went from taking R25 000 a month in 1972 to taking R200 000 in 1978.”
However, just because it worked out for Sombono, doesn’t mean every gut feeling will be right and sky-rocket your business. So, it’s always better to be cautious and test it out before spending capital on an idea and introducing it to your customers.
12You can’t plan for everything, but once it happens manage the situation
“When we made the decision to convert from a product-based business to service-based business. We lost R1.8 million, we owed SARS half a million rand, and grossly under-estimated the complexity of the change and planning for it. What we thought would take six months actually took two years.”
“We recovered through management pay cuts, we froze salaries, cancelled outsourced providers, managed expenses like crazy, managed to get clients to pay upfront for a small discount, and convinced shareholders to give a little bit more money,” says Yossi Hasson.
“Now we always get advice and manage expectations before we start, so we have a realistic timeline of how long something will take.”
It’s always good to plan in advance, but if you can’t, then manage your cash flow and finances to the best of your ability. This will help mitigate any stagnation and continue your business’ growth.
13Develop a track record by offering limited free work
“As long as you work with integrity and deliver on your promises, you’re consistently building a great brand,” says Bokang Seritsane, founder of Under35Mavericks, SA’s first entrepreneurial awards programme that exclusively celebrates young entrepreneurs.
When you’ve just started out you have no track record, customers don’t know if you’re trustworthy or even good at what you do. This is when you can do your first few jobs for free in order to build up trust and experience with customers.
When Jerusha Govender started her business, Data Innovator, she also needed to do initial work for free, as she was a new business owner. She had a track record in the industry, but not as a business owner.
“It was important that I was upfront and transparent about what I was willing to do. I had spotted a gap, and I needed to prove it, but going forward I would be charging. As long as I was straightforward, my clients accepted being charged down the line.”
“It might sound counter-intuitive, and it’s important to not set a precedent of doing work for free, but often that first ‘no’ is because you lack a track record. If you can prove yourself in a risk-free way, you can turn that ‘no’ into a ‘yes’,” says Seritsane.
14Next slideshow: 15 Wise Money Quotes From Millionaires And Billionaires