1How do you turn a medium-sized business into a powerhouse?
These companies have taken things to the next level, and the entrepreneurs involved describe how they managed to grow their companies to eight figures… and beyond.
2Successful businesses need to be trading — money in and money out
- The player: Albe Geldenhuys
- The company: USN (Ultimate Sports Nutrition)
- Turnover: R1 billion
- Launched: 1999
- Visit: www.USN.co.za
“Initially, I had my finger on everything: Stock, our warehouse twice a day, finance. I even stuck labels on bottles if I had to. But as we grew, our team had to grow,” explains Geldenhuys.
“At first this meant sales people, but soon I needed to pull people into other roles as well, create a management structure and eventually even hire a CEO.”
And then the entrepreneur had a major wake-up call. In 2010, based on USN’s market presence and massive sales figures, investment firm PSG approached Geldenhuys with an offer to purchase. While he had no intention of selling, Geldenhuys did invite PSG to conduct an audit and evaluation. The results were devastating.
“They discovered R12 million in stock losses. At the time, our turnover was R300 million, with a projected profit of R28 million, which I was already unhappy about — where had our great margins gone? Then PSG came along and said, sorry, you’ve actually lost R12 million in stock, and you’re making no profit.”
“I realised how badly I’d taken my eye off the ball. We had employed managers from big corporate backgrounds, but they didn’t run a tight, lean ship. They weren’t focused on margins and efficiencies. For example, we had started out with service levels of 95%, which meant that 95% of our stock reached the shelves where they were meant to go. Under the helm of a new logistics manager, this had dropped to 72%, which I was told was standard. I don’t believe that’s good enough.”
Instead, Geldenhuys took the business back to basics. “We’re not a logistics company. We never will be. We need to focus on what we’re good at, and outsource the areas that we’re clearly not good at. Today, we focus on developing products and marketing. As soon as we went back to our roots, we started making more money and more profits.”
3A great business is the result of great people working together
- The players: Sam and Rob Paddock
- The company: GetSmarter
- Turnover: R128 million
- Launched: 2008
- Visit: www.getsmarter.co.za
According to brothers Sam and Rob Paddock, the two biggest lessons they’ve learnt while building their business are people-related. “The first is that if you want buy-in from your staff, you need to be communicating with them all the time. Everyone needs to understand and embrace the business’s strategy. The second is that performance management, particularly in a growing company, keeps everyone focused,” says Sam.
“It took us a while to realise that some employees can’t be coached into better performing team members. You need to be honest and clear up-front. If you’re not clear on good performance or bad, how can you expect your team to know what your expectations are?”
And then the brothers received invaluable advice: They were told to read Mastering the Rockefeller Habits, by Verne Harnish, and to implement the learnings from the book. “Implementing the Gazelles system was a complete game-changer for us,” says Sam.
Gazelles follows a clear and regulated path. “First, you need to clarify the performance expectations of each and every role in the company. The performance criteria follows a 90-day cycle and includes five priorities.
“These priorities are evaluated every three months according to competence and alignment to the company’s six core values. Because the priorities are in black and white and agreed on up-front, managers can have honest discussions with their team members and credible reviews. Each review is rated on competence and attitude.”
4Understand the power of disruptive thinking
- The player: Steven Kark
- The company: Paycorp
- Turnover: R1,2 billion
- Launched: 1999
- Visit: paycorp.co.za
If you want to make a mark in an established industry, you have to be willing to disrupt the market — and fail a few times in the process. This is how Steven Kark approached his start-up, and how he continues to look at his R1-billion business.
“I’ve always called it ‘changing the game,” says Kark. “In every market there are incumbents who aren’t adequately prepared to service the new market that innovative disruptors create. That’s why we were able to launch and capture market share with our ATMs — we focused on under-serviced areas and customers. Because the incumbents can’t adapt their business models quickly enough, the new guys on the block move up, compete in the existing market share and create new ones as they go.”
The problem is that disruptive innovators who do their jobs properly end up becoming incumbents themselves — which just opens them up to becoming casualties of disruptive innovation in turn.
“This is such an important point for sustainable businesses today – first, how to get there, and then, how to stay there,” says Kark. “We’re a non-traditional company in a traditional banking environment. We started out life and built a business by being disruptors. But you need to be careful, because you don’t want a new disruptor to catch you.
“A lot of businesses run into problems because they can’t scale. For example, running one fish and chip shop is very different to running ten. With ten there’s ten times the complexity. But 1 000 stores isn’t 100 times as complex. It’s a million times more complicated. Scale and complexities are exponential. You need to invest in people and the right technology to deal with this. Part of building and maintaining a sustainable business is having the right infrastructure to do so. And then of course you need to stay flexible and keep a close eye on the market.”
Related: Paycorp’s R1.2 Billion Success Story
5Colleagues first; everything and everyone comes after
- The players: Gil Oved and Ran Neu-Ner
- The company: The Creative Counsel
- Turnover: R700+ million
- Launched: 2001
- Visit: www.creativecounsel.co.za
While this is one of The Creative Counsel’s six core pillars, it’s not something that came to founders Ran Neu-Ner and Gil Oved naturally. “Clients come first, that had always been our motto. So much so that in our start-up days Gil was called our ‘doctor on call’. It didn’t matter what he was doing, if his phone rang he’d answer the call and see to the client. Nothing was more important,” says Neu-Ner.
“As we grew though, we realised that it wasn’t just the two of us anymore, and you can’t deliver to clients without a happy family. That’s why this pillar is so important,” adds Oved.
“If you walk out of a meeting and have two calls, and one’s a client and the other’s a colleague, your first instinct is to call the client first. That’s the wrong response. You don’t know why your colleague is calling. It could be to warn you about something related to the client. It could be because they have three clients waiting on an answer or input only you can provide. Family must come first.”
“It’s also important for everyone on the team to know that their managers, colleagues and Gil and I have their back,” adds Neu-Ner. “Once you know that you’re supported, you’re more likely to make key decisions on your feet, and those are generally the decisions that drive the business forward.
“Of course we try not to lose clients, but the reality is that there’s no real client loyalty. It’s the nature of the industry. You’re always pitching for your next campaign, and the client will choose what’s right for them, not for you. But your team should be here to stay, so care about them and look after them.”
6Focus on what you know best and understand your market
- The players: Irfan Pardesi and Hina Kassam
- The company: ACM Gold
- Turnover: R400 million+
- Launched: 2005
- Visit: www.acmgold.com
Irfan Pardesi has built ACM Gold based on two core principles: First, the best businesses aren’t masters of everything — they’re specialists in one key area, and invaluable to their clients as a result. Second, localisation is everything. You can be a big, multi-national company, but always take your current, on-the-ground clients into account. Design your business offering with their needs in mind. And remember that what works in one market won’t necessarily work in another.
Pardesi and his sister and business partner, Hina Kassam, learnt the trading environment in London, launched in Pakistan, and then moved the business to South Africa. These are three very different markets, with different consumer needs.
“I think one of the single biggest lessons I’ve learnt in business, and one we’ve carried through to every decision we’ve made since, is the importance and power of localisation,” says Pardesi. “Entrepreneurs are problem- solvers. That’s what we do. But that doesn’t mean much if you’re trying to solve a problem that’s not your target market’s main concern.”
The key to this shift is not trying to change the social behaviour of clients; instead, you must adjust your offering to suit their behaviour.
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