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How Ephraim Mashisani Rose to the Top of His Industry

Ephraim Mashisani has built a R50 million company in four years. He reveals the challenges of operating in a highly commoditised industry and the smart tactics he’s deployed that have resulted in profit on every single project since inception, and ongoing sustainable growth of his business, Nyalu Communications.

Tracy Lee Nicol

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Vital Stats:

  • Company: Nyalu Communications
  • Player: Ephraim Mashisani
  • Launched: 2009
  • Turnover: R50 million
  • Contact: +27 (0)11 402 8546
  • VISIT: nyalu.co.za

 

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The Challenge

Nyalu Communications is a marketing and communications company that has expanded its printing capabilities to incorporate outdoor advertising, PR and promotions, branding and design, print advertising, brochures and any other kind of printed supporting material for campaigns.

Related: Why Your Product is Not the Solution

The print industry is deceptive; from the outside it looks like an easy, low barrier to entry industry, but the reality is that it is highly technical, extremely cash intensive, the equipment costs hundreds of thousands, sometimes millions of rands, and there are just a handful of big players who are well established.

All of this makes it a difficult industry to break into. It’s also highly commoditised, and very price dependent. This means price (and the lowest price) is a common but poor differentiator, and difficult to build a sustainable business on.

The Solution

Despite all of these challenges, Ephraim Mashisani has built a thriving company using very smart tactics that centre on monitoring every single cent, and knowing his industry – competitors included – inside out. Having launched in 2009 as a part-time, bootstrapped company, he’s had to be specific and smart every step of the way. This is how he’s done it.

As a BEE level 1 company do you go straight for big tenders?

No, we don’t participate in all tenders, we select the ones we can have an upper hand on because the processes are difficult and time consuming.

What we do find is that we supply to companies that have secured tenders but don’t have the expertise or facilities to fulfil their obligations – that’s where we come in. But we do have some contracts with government departments and some corporates.

Historically, we’ve found corporate very difficult to break into because they’re not held to the same procurement processes as the public sector – a corporate can easily say they’re happy with their supplier, but the public sector is dictated to by the PFMA, meaning they need to mix up their suppliers from time to time or face an audit query. That’s where you get your chance to pitch for business and prove yourself.

Nyalu Communications is incorporating more and more functions rather than going niche. What is the rationale?

Growth has been a fine balancing act of deciding which functions to outsource to small businesses and which to bring in-house. It all depends how the numbers work out and how reliable my supplier is.

Growth relies on having control of production and I learnt some hard lessons to that effect as an SME: I’d take information from my supplier at face value and take it to client, only to be caught between a rock and a hard place.

The supplier would run over deadline and say, ‘You’re welcome to take your business elsewhere,’ knowing I’d go to the back of the queue if I did. Whatever decision I made I’d still have to go to client with a story about why their delivery would be late.

Another problem with outsourcing to multiple suppliers is that consistency may be compromised – one supplier’s purple may be different to another’s.

So coming back to Nyalu and its growth, equipment is purchased, functionalities added on, or smaller businesses purchased so that we become a one-stop-shop with as much control as possible. As a recent example, I purchased a litho printing company (Xanadu Printing & Graphics) because I realised I was spending in excess of R1 million per month just to outsource magazine print work.

Related: 4 Money Mistakes Made by Businesses That Are Always Short on Funds

I already had 51% shares in the company to secure priority, but realised 100% ownership would bring in more revenue, work towards our one-stop-shop goal, and ensure quality and consistency across different printing systems.

As part of our growth strategy I also recently purchased CMT Machinery for custom-made corporate wear, bags and protective wear after I realised I was spending R200 000 a month outsourcing this work.

How do you avoid value leakage with increased functionalities?

I’ve made sure that I’m qualified in my roles and responsibilities. Where I don’t know things, I hire the best people in those fields.

The danger with embracing all things is that not having the right people will result in more damage than good to the company’s reputation. Here’s an example of how I avoid that: Car branding is very specialised and outside my expertise and you can’t just get anyone to do it, but it’s part of our offering, so I’ve taken on a company that specialises in car branding and I send them on regular training to ensure they’re up to speed with new techniques and materials.

Related: Win Customer Loyalty With an Unexpected Experience

But when I bring in a new division or buy a new company, there’s the inevitable uptake period to recuperate that initial investment. To weigh up the decision I check how much I spend in the particular field, and if I spend more than enough, I research the costs of buying these machines and bringing on the expertise.

I then have the option to continue outsourcing (provided they’re cheaper and reliable), to buy equipment and recruit employees from the field, or to purchase an existing small business. Whichever decision I go with, it’s always with long-term growth in mind.

Outsourcing can be cheaper, so how do you justify the higher price of bringing things in-house and what you can realistically charge?

Obviously you have to know your competition and how much they’re charging, but my pricing always hinges on quality. There are competitor prices I can’t compete with, but it shows in the quality of the final product. We did a job where we were asked to compete with a well-known competitor who I know uses a Chinese model machine that costs around R300 000 and his inks cost next to nothing, whereas my machine is a latex printer that costs around R3 million and three litres of ink cost R5 000. But it’s clear which is which.

I don’t get into price wars. When giving a quote we always offer a sample made at our own expense which inevitably forces the competition to do the same. When clients say our prices are too high for them, the minute they get the mock-ups in their hands and they know what we’re charging them for, they know who to give their business to. Yes, our prices are a little higher, but they’re informed by what’s involved.

Even when competing against inferior quality, we don’t overcharge. In fact we cap our margin at 30% and most jobs fall into 15% to 20% because we work on volumes. We’re more expensive than some, but more competitive than when middlemen are involved.

You’ve made a profit on every single project since you started. How have you achieved this?

I’m exceptionally careful about tracking costs and touch points to complete a project. Every single quote and invoice comes through me before it goes to client and because I’ve been in the industry so long I can pick up errors or anomalies at a glance. I also always have the invoice from the supplier at hand when checking as it prevents mistakes.

But from an internal perspective, you have to consider the time and labour that goes into a job and what it’s costing you. It’s the little things like the time taken for folding and bagging a T-shirt that adds up as you need to buy the plastic bag and pay for the labour.

We had an instance where a client brought in his own T-shirts, wanted them branded, put in plastic bags and then in nice branded boxes (which are expensive, around R5 to R6 each). He then told us we were being unfair to charge for the boxes! By working out every touch point of a project I’m able to determine what it’s costing the company and factor in a 15% to 20% margin.

Even if I’m doing a job for free as a favour, I’ll let them know how much it would have cost – from designing to printing, packaging and finishing – and that goes into our books.

How do you leverage your finances to grow the business?Ephraim-Mashisani

Like a lot of young businesses, I battled to get finance from banks, so most purchases were made in cash. I’d identify a machine, save for it and then buy it a year down the line.

There’d then be a lag time of up to nine months before I had enough capital again to fund big projects that would pay for the machine. Fortunately, we now appeal to banks and it’s easier to access finance. So we finance our purchases and retain our capital to put the machine to work immediately or have it earning interest elsewhere.

It’s critical we have strong working capital as often orders come in on a Monday with a Friday deadline. We’d miss the deadline if we had to apply for finance, especially because some clients can’t even pay a deposit for their jobs.

Related: Why Your Self-Imposed Limitations are Blocking Innovation

For example, a client can give us an order for R5 million without a deposit and then we still have to wait another 60 or 90 days after delivery for payment. This is another reason why we finance the big machines and keep working capital at hand.

With such a long wait for payment, how do you manage your cash flow and ensure payment?

It’s so important to chase and check. Very few clients are ever on the ball and pay on time. We’ve hired a person whose sole responsibility is to chase clients from the 15th of each month by following up on invoices, sending statements, and getting verbal confirmation that they’re on track for payment.

This helps the business because we get a better understanding of our financial status for the month, which then determines whether we must source money elsewhere for salaries and suppliers. We then look to our creditor’s book to see who owes and collect enough money to cover all the costs of the month.

How do you decide who your clients will be, especially if they’re late payers or default entirely?

We don’t want those kinds of clients as it costs us time and money to keep chasing them for payment, so we’re managing our existing debtor’s book and have implemented a policy of putting all new clients through a vetting process with a credit controller company called Credit Guarantee.

They vet new clients on our behalf, determine the client’s credit limit and insure it. If a client defaults, at least we’re covered and it becomes Credit Guarantee’s problem.

How this tactic also helps is that if Credit Guarantee covers a client for R100 000, we then only do jobs up to R100 000 for that client. If their order is larger, we request the excess in cash up-front.

As your company grows how do you manage staff to maintain production quality?

With unskilled labour, you can get those who don’t care that they’re not sticking a label on a bottle straight, so to ensure the quality of all our jobs we’ve got a tiered system of leadership.

My operations manager oversees everything and reports directly to me – she’s very experienced and acts as my eyes when I’m not around. She has a team of production managers who manage their departments. We meet with them daily to look at workloads, challenges and outputs. Every production manager also has a team leader who serves as quality controller, checking quality and quantity.

Once the quality and quantity check is done at a departmental level, it gets sent to dispatch. Here we have a dispatch manager who’s very strict and stubborn as a result of past lessons with clients who would question why their delivery of 50 T-shirts actually amounted to 45. So this dispatch manager literally counts everything going in and going out.

It doesn’t matter if it’s 5 000 water bottles – he’ll count them until he’s satisfied and then records it in Pastel. He then gets the client to sign. This brings all the departments together and ensures the final order is correct. I believe that quality checks and quantity checks go hand in hand. Leakage of 15 shirts per 1 000 doesn’t sound like much but it adds up.

How do you find the time to plan for growth in your company?

All industries operate in cycles, and printing is no exception. But instead of scrambling for business when times are slow, I take that opportunity to think strategically about what operations I can bring in-house.

I always like to be challenged, to tell you the truth. In quiet times I’m able to identify where we have gaps in our offering. The minute you sit and relax, you get used to the situation and things become normal to you.

How do you market your new purchases to drum up business that will pay for it?

Whenever we buy a new piece of machinery, whether it’s bigger, faster or completely new, we send out emails to clients to show off our new acquisition and what it can do. We then invite them to come over and take a look at it. It’s fascinating how that alone drums up excitement and turns into business.

What does the future hold for Nyalu’s growth?

We’re in a great position now that we’ve developed a sound reputation, have the expertise and capital to take on big projects, and are established enough and able to leverage our BEE status to target the sector.

Related: 6 Secrets to Making Business Decisions That Get Results

Tracy-Lee Nicol is an experienced business writer and magazine editor. She was awarded a Masters degree with distinction from Rhodes university in 2010, and in the time since has honed her business acumen and writing skills profiling some of South Africa's most successful entrepreneurs, CEOs, franchisees and franchisors.Find her on Google+.

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Business Landscape

Customer Control For Entrepreneurs

How can small companies exert a degree of control over their customer base and help ‘guide’ them in such a way that they remain loyal and continue purchasing from them?

Gary Harwood

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No organisation, irrespective its size, industry, and geographic location, can succeed without customers. And given how the digital environment has made it easier for competitors across sectors to emerge, entrepreneurs are especially under pressure to balance customer needs and desires, with value propositions that still make them money.

There is clearly a fine balancing act to manage.

On the one hand, you have people who (thanks to technology) are aware of the power they have over product development and pricing. After all, if a competitor sells a product or service at a lower price, who is the customer going to go with? Add to this, the ability to customise solutions according to data analysis of specific end user needs, then you have a situation where many entrepreneurs feel they are facing a never-ending struggle.

On the other, small to medium businesses must be able to produce products and services in such a way that cash flow is maintained. As any entrepreneur can attest to, not having a reliable cash flow is tantamount to business failure. So, how can small companies exert a degree of control over their customer base and help ‘guide’ them in such a way that they remain loyal and continue purchasing from them?

Related: How English Language Skills Play An Essential Role In Building Trust With Your Customers

Managing expectations

One of the most important elements in this regard is managing customer expectations. The emergence of social media and the power it has to influence people’s buying decisions, cannot be overestimated. Today, more than ever before, the likes of word of mouth, marketing, and public relations as a direct result of social networking can often grow or sink a burgeoning business.

It has also created a dynamic where customers feel that if they leave a negative comment or ask a question, they expect a response almost immediately. For entrepreneurs already trying to do everything themselves while managing the business, this can often be a major cause of frustration. But it does not have to be the case.

By setting parameters up front with customers in terms of response times, queries, and even experiences, small businesses can start leveraging the power of social networking and other digital communication technologies for their benefit.

Being pro-active and taking charge of these expectations puts the organisation in more control than if a hands-off approach is followed.

Being open

Openness and transparency might sound like luxuries no entrepreneur can afford, but these concepts build strongly from managing expectations. Having open discussions with customers on aspects of support, product requirements, and even their (the end user) own expectations can greatly assist a small company to provide a more bespoke approach to products and services.

Related: 5 Techniques To Leave Customers Grinning And Vowing To Return

In addition, by providing customers with various resources (think troubleshooting or ‘self-help’), the entrepreneur is empowering them to take control of their own experiences with the company. It also means they are not as reliant on company resources if they were to phone the organisation or email a complaint. The added benefit to this approach is the customer can manage their own experiences when they have the time to do so irrespective of whether it is 10:00 or 22:00.

Granted, the path to customer control (perceived or otherwise) is not an easy one to take. However, no entrepreneur can afford not to take notice of these requirements and put the customer at the forefront of their thinking.

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Business Landscape

What Can Businesses Expect From The Future Of Work?

While the future of work will always be a constant process of innovation and change, here are a few things that business today can expect in the near future.

Josh Althuser

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The phrase “future of work” is something professionals have been talking about since the birth of the traditional workplace in the late 19th century.

Once defined by cubicles that were arranged neatly side by side with meeting rooms and, of course, the head office with an amazing view of the skyline, today’s offices are strikingly different.

Over the last decade, there has been a surge in the development of open-plan offices, and more and more companies are moving their employees to co-working spaces and experimenting with remote work. For businesses that are still straddling the traditional office, but looking to embrace the future of work, it could be overwhelming at first. While the future of work will always be a constant process of innovation and change, here are a few things that business today can expect in the near future.

Expect flat hierarchies

In 2017, most companies have recognised that employees, especially younger ones are turned off by the conventional hierarchies that once dominated the world place.

Related: 5 Inexpensive Workspace Improvements That Boost Productivity

Start-ups and small businesses often pride themselves on their “flat” workplace culture, which aims to give both leaders and employees the chance to give input on an equal level. In theory, these structures aim to make room for more innovation and also to help workers feel more appreciated in their roles.

Yet, it doesn’t come without its issues. There have been various studies showing that egalitarian workplace structures can be disorienting and can potentially result in higher turnover rates, as employees feel lost in their roles. Thus, it will take time for the workplace to strike a balance between structure and equality, but so far it seems we are well on our way. 

The architecture of the office space is changing rapidly

Chances are you’ve heard of open-plan offices. With corporate giants like Facebook and Google companioning the flexible workspace, company around the world are breaking down literal walls to create airy and open offices that encourage collaboration.

Again, much like the flat workspace, open-plan offices need to be considerate of individual needs. While many workers appreciate the chance to work in a more informal setting, the open office has also faced criticism for introducing new distractions by not including enough private areas, which can lead to a downturn in productivity. As a result, more companies are turning to co-working spaces, which offer both workspace and community space.

Co-working spaces differ from open-offices in the way that they provide community management, structure, and flexibility, ensuring that workers have their needs met, whether that means a private office for the whole company or a hot desk for workers who just want to come in a couple of times during the week. 

Related: Workplace Evolution 2.0: Are You Ready For The New Era?

Remote work will be commonplace

Allowing employees to work remotely has proven to be successful. Companies have been introducing remote days over the last five years, and some even allow their staff to telecommute on a full-time basis. In the early days of the freelance ecosystem, remote work was considered to be unprofessional, but we have learned over the years the allowing employees to telecommute, even on a part-time basis can make them more productive and satisfied in their roles.

There’s no doubt that advancements in communication tools, such as Slack, have allowed workers more freedom, but there are also enormous benefits for businesses as well.

Companies can save on overhead costs by moving teams into a co-working space, or take out a flexible lease in combination with allowing workers to work outside of the office, even if it’s just a few days a week. By saving on rent and utilities, leaders can make room in their budget to invest in employees, by offering educational workspaces or purchasing new equipment.

Overall, these changes have a long way to go before they become permanent fixtures in the workplace. In fact, many businesses are now experimenting with various workplaces trends to find what works best for them and their employees.

Yet, even if you are not ready to grant your staff remote days or turn your office into a single shared space, it’s vital that your business is aware of these trends so you can keep up with the rapidly changing future workplace.

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Business Landscape

How Investors Can Take Advantage Of The Rand’s Currency Trading Rates

Negative sentiment is likely to be pervasive with the SA economy, and it will take more than a new figurehead in government to right the wrongs of a mismanaged economy.

Harald Merckel

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The USD/ZAR currency pair is trading in the 13.65 range heading into mid-December 2017. Over the past year, the 52-week low was 12.3126, and the 52-week high was 14.5742. As one of the more volatile currencies in the trading spectrum, the ZAR is closely associated with the political shenanigans taking place in South Africa.

The year to date return for the currency pair is -0.50%, after having started 2017 at 13.7351. Much of the activity taking place with the ZAR is speculative. Futures contracts are largely responsible for the whipsaw movements in prices.

Wilkins Finance strategists stress the importance of credit ratings agencies on currencies:

‘Whenever credit ratings agencies such as Moody’s and Fitch downgrade their assessments of the South African economy, this has a negative impact on the ZAR. The impact is not always predictable however – towards the end of November 2017, the USD/ZAR had appreciated after the recent ratings downgrade of the economy.’

Moody’s Investors Service downgraded South Africa’s economy to a rating of Baa3. This is the lowest rating level for Moody’s. Further ratings will be announced in February next year. Fitch has already downgraded the foreign currency and local currency to BB +, but has offered a stable Outlook for the ZAR.

Related: The Business Of Anxiety In Business: Giving Heroes Permission To Feel Vulnerable

That S&P also downgraded the South African economy to sub-investment grade is an important decision, and one that will have negative ramifications for the South African bonds market. Now, the Barclays Global Bond Index will no longer feature South African bonds. That South Africa’s bond market will be excluded from the World Government Bond Index will also be a bugbear to any hopes of the ZAR appreciating.

Interest Rates in the South African Economy

The South African interest rate is highly attractive to foreign investors, given that the UK, US, Canada, Japan, and European bank rates are at historic lows. There is little to be gained by investing cash in fixed-interest-bearing securities in these economies. The current interest rate in South Africa is 6.75% (as at November 23, 2017). The interest rate has dropped to expand economic activity in the country.

Overall, South Africa’s inflation rate for the year is expected to remain at 5.3% dropping to 5.2% in 2018 and rising to 5.5% by 2019. Global investors remain concerned about the risk/reward environment in South Africa. The country has experienced significant capital outflows in recent years, driven in large part by uncertainty regarding future prospects. The USD/ZAR was trading at 14.60 in late November, and current ZAR strength is being attributed to USD weakness.

Related: Offshore Business Opportunities Abound For South African ‘Oldpreneurs’

Factors on Both Sides of the Atlantic

One of the major economic events affecting exchange rates will be the reconciliation of the House and Senate bills on US tax legislation. Any major overhaul of the US tax code will invariably result in a dramatically boosted USD, and a weakened ZAR. For traders, it appears to be short-term call options on the local currency and long-term call options on the USD.

It is evident that currency traders are hedging against the ZAR over the long-term. The fundamentals of the economy are structurally unstable. The power grid infrastructure, water supply problems, and political instability at the highest echelons are but a few of the many problems plaguing South African growth prospects.

However, the ZAR will draw strength from the election of a credible leader, and this will be particularly noteworthy with Cyril Ramaphosa’s appointment. Overall, negative sentiment is likely to be pervasive with the SA economy, and it will take more than a new figurehead in government to right the wrongs of a mismanaged economy.

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