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- Players: Mark Dowson and Jason Sive
- Company: First Health Finance
- Est: 2008
- Visit: www.fhf.co.za
In countries like the US, the UK and Australia, the concept of patient finance is successful and hugely popular with people who want to finance the procedures they require at a monthly cost they can afford.
Given that more than 23 million cosmetic surgical and non-surgical procedures were performed worldwide in 2013, according to statistics released by the International Society of Aesthetic Plastic Surgery, it’s a highly lucrative market to target.
South African entrepreneur Jason Sive thought so too – he spotted a gap in the market for specialist finance to pay the costs of procedures such as breast augmentation, rhinoplasty and liposuction after spending a year working for a specialist finance company in Australia, where he came across patient finance for procedures not covered by medical aid – anything viewed as elective or non-essential surgery.
On his return to South Africa, he rejoined the Transunion Group for three years before meeting up with Mark Dowson, an ex-banker, and the two decided to open a niche finance company focused on a few key areas: Cosmetic and reconstructive surgery, fertility treatment, dental procedures, corrective eye surgery, and a few others. Sive brought consumer finance and risk experience to the table, while Dowson added sales and marketing expertise, as well as a strong financial background.
It was a fantastic idea, but then the recession hit. The team’s focus on educating the market, fine-tuning customer service and being willing to adapt to fluctuating market conditions not only got the company through that tough time, but has also resulted in an exceptionally healthy business that today processes more than R170 million worth of applications for finance every year.
We asked him how he did it.
Why start a finance company?
People often asked us that. It’s true, our competitors were large and well financed, but the consumer lending space was very broad, we focused on a ‘niche play’. When we launched First Health Finance (FHF), we pioneered a new industry in South Africa.
This was a unique type of medical finance. Being first to market with a patient finance product meant that we could build strong relationships with medical practices, and be nimble and ingenious where big financiers could not be.
We were determined to improve on the existing consumer lending solutions by introducing an innovative product while taking advantage of a growing global demand for elective procedures. We service a niche market that continues to expand.
How did you finance the business?
In a start-up finance company, your stock in trade is your cash. You have to ensure the business is adequately capitalised to carry itself into the second phase of the funding process.
Our initial funding was provided by myself, Mark and four other private investors. That capital carried us initially, after which we secured finance from banks and hedge funds, once we had proven our business model.
You launched the business in 2008, as the recession took hold. How did you survive?
The global financial crisis was a terrible time for any business, let alone a start-up. Lenders were being battered. A few years before, an on-lender would have been able to raise funds against an existing debtors’ book, which would have been seen as an asset. By 2008, things had changed radically and that funding mechanism was no longer available.
People thought we were crazy to launch a consumer finance business at the start of a recession. But we had the advantage of starting with a clean slate, with no non-performing loans. We kept the business in holding mode for about two years while the market recovered, we recalculated our projected performance, managed shareholders expectations, and by years three and four, we were in a stronger position.
What were some of the early business challenges?
Our first task was to educate doctors about our product. We initially faced some scepticism. Doctors were concerned about exposing their patients to credit.
Before we hired a single employee we spent three months on the road, visiting medical practices, and understanding all the concerns that practices may have. We had to convince them that by helping their patients afford the treatment they wanted; they would increase their bottom line
In addition, FHF mitigates risk by paying the doctors directly, which they prefer. It was important that practices provided patients with all payment options, including a finance one.
As a result, we now have a database of more than 2 000 practices covering many types of procedures. Growing that database was critical to our success. We provide practices with a simple-to-implement service that allows patients to spread the cost of a treatment/procedure over time.
It was critical to get the doctors and practice staff on board because they provide the patients with an introduction to our services and add credibility to our business. It’s like a car dealership recommending Wesbank.
By 2010, the company had R130 million in applications, 30% up from 2009. How did you get this right?
Companies often claim that excellent customer service is their top priority, but for us it’s non-negotiable. Our customers are given access to finance for procedures that can be life-changing.
Vanity plays a role, of course, but looking good can often lead to feeling great psychologically. And the reality is that elective procedures are no longer the preserve of the wealthy; we live in an era where it has become very popular.
We’re well positioned to take advantage of that and meet people’s need to feel better about themselves. So in terms of ‘getting it right’, I believe it was a combination of improving our product, further educating the market, and growing with the increased demand. Mark and the entire sales team really understand the market we play in, and have done a great job.
A personalised and caring service is critical in this industry. Procedures such as IVF fertility treatment and breast augmentations are very intimate and people would rather not explain to a bank why they need to borrow money. Not only do our patients apply discreetly online, but the consultants are also trained to deal with patients in these situations and make them feel completely comfortable.
At first, we didn’t recognise that we’re really an extension of the practice, because the patient is referred to us. So our processes have to be absolutely streamlined to take this into account. The patient does not see us as separate from the practice; instead they view us as part of the value chain. We use certain communication tools, such as email ‘get well’ cards to let them know we are thinking about them. That personal touch differentiates us from just another consumer lender.
Related: Market Stifled? Create Your Own
How do you remain competitive when there are so many finance options available to consumers?
The banking industry is bureaucratic and highly regulated. The changes in banking regulations have had a positive impact on our business, as banks have modified their product offering over time.
Today, finance applications take a long time to process, and many are turned down. We are more flexible with our customers because we analyse risk slightly differently, and although sometimes we may not match certain banks on the cost of credit, we beat them on the personal service front. Our payment plans are designed to be conservative and affordable in line with the patient’s disposable income.
The business was unique when we launched it, but now we have one or two smaller competitors. However, the relationships we have developed with practice managers, doctors and receptionists are not easily replicated.
We’ve also kept the business small and nimble with a team of just 16. For workflow and systems, we outsource to the experts and focus on what we do best in-house.
How has the current economic climate impacted the business?
The unsecured lending crisis and irresponsible collections practices have not been good for us, as all consumer lenders have been painted with same brush. However, we are not a micro lender, and our aim is to educate our target market that certain types of credit are healthy.
Local consumers, for example, believe that buying clothes on credit is okay and many people are happy to pay over 24 months for items they will wear for only six. Surely financing a life changing procedure is much ‘healthier’?
What about bad debt?
We do our best to manage risk, and while we have had a few defaulters, our bad debt numbers are lower than those of other consumer lending players, mainly because of the lower risk profile of our customers who borrow money to finance a specific procedure. Credit cards are our biggest competitor in this space.
We have developed our own internal score cards to assess client applications to ensure we do not allow irresponsible lending.
Taking advantage of an evolving industry
We started off thinking we would be completely reliant on the support of medical practices, and that doctors’ buy-in was essential.
Over the last five years, as technology has progressed and the concept of self-service has become a consumer trend, people are doing their own research online and seeking out service providers.
That has worked in our favour and it highlights how important it is to have a great online presence, as well as the back-office system to deal with customer requests. A larger percentage of clients now find us online first, and then approach the doctors we recommend, instead of the other way round.
It also helps that South African medical practices have not had a significant web presence to date, but that too is changing as the medical profession begins to understand the value of an online presence.
Another interesting trend is the transformation of medical practices, from just ‘a practice’, into a business. Doctors see our product as a tool to help increase turnover.
Over the past year we have used the systematic growth of FHF to launch our second, allied business, First Asset Finance, which provides finance to medical practices buying expensive equipment. We think it’s a very exciting space right now, and a great extension to FHF.
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How To Increase Profits By Focusing On The Needs Of Customers
How a water softener company boosted sales with moves as simple as changing its ecommerce platform and hiring an AdWords advisor.
“Growing a small business is hard. If it were easy, everyone would have a business,” says Tom Tarasiuk, who knows first-hand the difficulties that small businesses go through when they try to succeed at online marketing.
As president and owner of Discount Water Softeners, Tarasiuk has helped his company streamline its efforts to provide an outstanding user experience and increase sales. This undeviating focus on the customer and a willingness to take risks have enabled the business to grow.
Here are those all-important strategies he’s used:
Customer-centric product development
Tarasiuk says that a key tactic in his company’s growth has been the work by leadership to keep overhead costs low. One way that’s been done is by eliminating the usual middle men and purchasing water systems directly from the manufacturer.
But even more important has been the company’s customer-focused philosophy. The company keeps its overall inventory minimal and develops products and features that will meet the needs of its clients. It’s done this by avoiding stocking merchandise that won’t sell because people don’t need it.
As Tarasiuk told me: “Happy customers are a critical part of our growth. We base our additional or new products on what customers are requesting or what areas of the market need a void filled.”
Improving the user experience
The company’s emphasis on the customer plays out in its online marketing strategy. Case in point is when managers decided in 2013 to switch ecommerce platforms. They had been using Volusion and transitioned to Magento.
Tarasiuk says they wanted a framework that would allow them to customize various types of content (images, videos, etc.) on any of their pages. Their goal was to improve the user experience and increase conversions. They did have some concerns about the switch, he says. They feared Magento would be less user-friendly on the back end. But without taking risks, an organisation cannot grow. The result? After changing to Magento, the company’s sales nearly doubled.
And it saw its organic SEO increase noticeably with almost no additional effort. At that time, the company completely redesigned its website. Again, prioritising the customer was key. The location of optional items and upgrades on the site was improved, for instance.
This allowed customers, Tarasiuk says, to “customise their orders and learn what upgrades would benefit them the most for their needs.” The site redesign, he says, increased company sales by as much as 15 percent.
Saving time with email
Another major part of refining the user experience and cutting costs at Discount Water Softeners entailed enabling customers to resolve some of their issues through email instead of over the phone. At one point, customer service reps were taking 45 minutes to handle each call that came through. Tarasiuk says he didn’t have enough employees to handle the volume of the calls. And hiring more workers would mean increasing overhead costs.
Instead, he solved the problem by allowing people to ask their most common questions through email. Through Magento, the company added PHP forms for people to fill out and used Crazy Egg to determine the best places on the site to put the forms. The company also increased sales by driving traffic to the forms by using Google AdWords. This solution cut, by 30 minutes, the time that its reps spent on each call, Tarasiuk says. It allowed the reps to handle a higher volume of calls without adding more employees.
Google AdWords has been crucial to growth.
Google AdWords has been crucial to the growth of Discount Water Softeners. In fact, Tarasiuk goes so so far as to call AdWords “essential to efficient performance and high ROI for sales.” He says he believes every company should have someone who is skilled at leveraging AdWords to its full potential.
Tarasiuk’s business has been using Google AdWords for over 10 years, and he describes learning how to leverage this tool as “pivotal in our growth.”
When the company first started using AdWords, it wasn’t selling much and was spending only $20 per day on the tool. But then Tarasiuk found Gail Gardner, an AdWords advisor teaching pay per click strategies at the now-defunct SearchEngineForums, and the situation changed. The advisor told him that if he wanted his company to be “discovered,” he should be spending at least $70 to $80 on AdWords per day.
Following that advice, Tarsiuk says, has revolutionized his company’s online presence and has been a decision he’s never regretted. At one point, when Gardner changed her work and switched to managing PPC accounts, the company had to go without an advisor for a period and instead rely on Google support. That situation wasn’t ideal because it wasn’t clear whether Google was prioritising the company’s campaigns or focusing on its own interests, Tarasiuk says.
Google did help keep Discount Water Softeners going, but it also didn’t see a marked improvement in its campaigns at the time. The assistance of an advisor was what really made a difference in itsprofits. So Tarasiuk contacted Gardner and asked for a recommendation for a new AdWords manager.
“That original AdWords advisor was essential at not only jump-starting our internet presence, [but] she showed us how to use and manage AdWords,” he says.
While there is no formula for growing a business successfully, there are principles that can guide you along that way. Take smart risks, and make your decisions based on what will help your customers. Because of the time and money Discount Water Softeners saved on strategies it adopted, it has been able to use the extra resources it gained to launch a new line of high-efficiency water softeners.
The company has also been able to diversify its merchandise, improve its product and benefit the environment, Tarasiuk says.
“You miss 100 percent of the shots you do not take,” he says, quoting hockey star Wayne Gretzky.
This doesn’t mean you should be reckless. It means to get good advice, and then take a leap of faith based on that information. If you don’t, you’ll never know what you could be missing.
This article was originally posted here on Entrepreneur.com.
Why Mitigating Your Risk Can Drive Up Your Fleets Profits
Business naturally comes with risk. How you mitigate that risk could mean the difference between a sustainable, profitable enterprise and a business surviving on the edge. Here’s how fleet management companies handle their risk.
“Whether your fleet consists of ten vehicles or 1 000 plus, it always boils down to the cost of maintenance, fuel and cost-efficient routes,” said Dr David Molapo, head of fleet management, vehicle and asset finance at Standard Bank, at a round table event hosted by Standard Bank to determine key impacts on profitability and growth in the fleet management industry.
To keep costs down and profits up, focus on:
- Mitigating fuel costs for business growth
- Implementing tools and telematics to save on transport and fleet spend
- Training and monitoring drivers to ensure driver and load safety
- Mitigating risks such as hijacking, driver behaviour and delivery delays
- Bringing services in-house
- Complying with legislation.
Attracting and training quality drivers
Attracting quality drivers is one of the industry’s main challenges. Businesses often have to recruit drivers and upskill them to become quality, reliable drivers.
“SAB has a programme where a driver will be sourced and run on a SAB truck for a year to 18 months,” says Con Conradie, country commodity manager: Fleet for SABMiller.
“He is assessed over a long period and once he meets the grade he can buy his own truck and receive a ten year contract.”
“We place our drivers on advanced driving courses and all our drivers are allocated to a specific vehicle, which has reduced our insurance costs,” says Dorin Charalambous, MD of DSC Transport.
Preparing for the risks
“We have branded our reps’ vehicles with a full body wrap,” says CEO of Nature’s Choice, Greshan Mandy. “Since then we have not had a single case of theft. It’s advertising for your business as well as an immediate deterrent.”
“We contracted with Driver Check to monitor our fleet and their behaviour on the road,” says Mandy.
“We also have cameras in the vehicle to watch the vehicle and the driver,” he adds.
“These can deter the drivers from driving recklessly. If your driver has not done anything wrong the camera can prove his innocence,” says Reinard Basson, financial manager for Shoprite Group Transrite National.
Delays in delivery
“A truck is scheduled to do a certain route and that whole route has been timed, from the moment it leaves the depot, when it stops at an outlet and the time it takes to offload,” says Conradie. “Each vehicle has a slot at the outlets and the vehicles have mechanised forklifts. We levelled the pavements and widened the doors at our outlets so that there would be no delays,” says Conradie.
“Sometimes we deliver palletised goods and the next day it is a delivery of cement bags. Often there is no one to assist with the offload, which results in delays while you wait for assistance,” says Hennie Engelbrecht, director of Kopano Fuel.
The need for specialist services
Transporting for niche industries is in demand, with specialist transport services required for niche products.
“Cost is important to us but delivering the product the way we want it delivered is also key,” says Carel Ganger, financial director for Ceva Animal Health. “We’re transporting a high value product and there’s a need in the transport industry to do something specific for cold chain.”
Bringing services in-house
“We used to use sub-contractors to get our product to the market as quickly as possible. Courier costs were becoming exorbitant and we were being impacted by the labour strikes in the transport industry,” says Mandy.
“We made a decision to bring transport in-house and we are now saving around R300 000 per month.”
Complying with legislation
“Our legislation and regulations are changing and many municipalities across the country are taking pride in maintaining their road infrastructures and ensuring that vehicles carrying abnormal loads have the right permits in place. This is beneficial to the industry,” says CEO of Matalana Transport, Comfort Padi.
“Customers are also ensuring that suppliers become compliant with the current legislations, such as ensuring that transport suppliers are ISO 9001 accredited and compliant.”
How To Maximise Real Returns For Your Shareholders
When you are both a shareholder and a manager of a company, it is all too easy to forget that, as a director, you have a responsibility to deliver returns and create value for your shareholders.
When you sit as a director on the board, you have to apply your mind to how the board and the wider team will deliver on the expectations that shareholders have or should have of the business.
There are many ways that directors can create tangible and meaningful value for shareholders and other stakeholders. Just having an effective governance process creates shareholder value. However, as a director here are some specific ways you can drive shareholder value creation.
Watch out for the illusion of success
When you are involved in day-to-day operations, it is so easy to fall into the trap of seeing all the good work that your team is doing as the reason to justify why shareholders are not getting the returns they should. In one of our companies, a shareholder once commented that ‘nothing seemed to be going on’.
I was initially taken aback and, as the excuse was about to pop out my mouth, I realised that he was right. If a shareholder does not get their return or some form of increase in value, then there is ‘nothing going on’ for them. When you wear your director hat in a boardroom, then understanding, agreeing and meeting shareholder expectations is a key area of focus.
Wear the ‘three hats’ well
As a shareholder-manager who also serves as a director on the board, you have to learn how to put aside your shareholder and manager hats and instead wear only your director hat. We have observed that the ability to wear the right ‘hat’ at the right time creates massive value for the board and the company as a whole.
Shareholder issues simply do not belong in the boardroom. They cloud effective decision-making and can, ultimately and ironically, destroy shareholder value even if the majority of those present are shareholders.
Independent directors are therefore pivotal in keeping everyone focused on just wearing the director hat well.
Turn risks into opportunities
Risk is inherent in every aspect of being in business. We cannot escape it, yet we can learn to mitigate the likely risks we face. Directors on a board should take this one step further – by finding ways of turning risks into opportunities. Perhaps a key risk for you is the availability of qualified and experienced employees.
A board might look at this risk and see the opportunity inherent in establishing a learning academy as a means of taking control over the quality and availability of critical human capital, which could even become an additional profit generating business in the short-term to medium-term.
Learn how to identify the right opportunities
Entrepreneurs tend to excel at drumming up new ideas and opportunities, yet they struggle to choose the right opportunities in the context of limited time and resources. The board of an SME or privately-held company adds value to shareholders by establishing a framework to separate the ‘wheat from the chaff’.
This accelerates the growth in value by choosing the right path at the right time and keeping the entrepreneur ‘on track’.
Never underestimate organisational culture
As Peter Drucker says, “Culture eats strategy for breakfast.” The best business model and strategy can all be for nought if the culture of the company is toxic or undermines the promise of the enterprise.
Directors on a board should never underestimate the importance of the collective values and behaviours of its team and how this directly enhances or destroys shareholder value.
Address the ‘elephant in the room’
And lastly, SMEs and privately-held companies are renowned for avoiding the tough conversations at a board or executive level, especially when there are personal relationships between shareholder-managers.
In wearing the director hat well, supported by candid independent directors, massive value can be quickly unlocked through decisively acting on the long-unaddressed issues that drain all the energy out of the team.
In short, directors have an absolute role in ensuring value creation for shareholders. However, this does not happen by accident, it happens by design. Have you designed your board to achieve this?
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