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How First Health Finance Profited From the Hottest Market Trends

First Health Finance pioneered the patient finance industry in South Africa and the results have been stunning. Here’s how co-founders Mark Dowson and Jason Sive saw the gap and took it.

Monique Verduyn

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Vital stats

  • Players: Mark Dowson and Jason Sive
  • Company: First Health Finance
  • Est: 2008
  • Visit: www.fhf.co.za

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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.

Related: Paying Attention To This Will Generate You More Profit

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.

Related: Adapt or Die: 3 Business Strategies for Thriving in a Recession

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.

Related: 4 Steps to Being Market Focused

Monique Verduyn is a freelance writer. She has more than 12 years’ experience in writing for the corporate, SME, IT and entertainment sectors, and has interviewed many of South Africa’s most prominent business leaders and thinkers. Find her on Google+.

Increase Profitability

Leon Meyer GM At Westin Cape Town Shares 4 Experience-Driven Tips On How To Keep Your Team Productive

Productivity is a fundamental requirement for an organisation – it’s the seed that builds a business and contributes to higher profit margins.

Leon Meyer

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Productivity is a fundamental requirement for an organisation – it’s the seed that builds a business and contributes to higher profit margins. But what’s the best way to ensure employees remain productive, and happy in their day job?

The answer is simple and highly effective and I choose to sum it up with three short phrases – respect, trust and teamwork.

In partnership with my management team, which consists of about eight staffers across various disciplines, we strive to tick these boxes.

Related: 5 Surprising Elements That Boost Your Productivity (One of Them Is Colour)

In total we’re ultimately responsible for managing roughly 500 employees.

Five hundred employees across several departments is a mighty job. But with teamwork, good listening skills and the right attitude from the top to filter down, any business can run like a well-oiled machine.

I’d like share with you the essentials for building and maintaining a productive workforce, and these apply to all industries, not just the hospitality sector:

1. What’s your definition of a productive team and how do you achieve that?

We need to keep in mind that productivity is a result, one that CEOs and managing directors strive for with their teams. But what happens beforehand in order to achieve that result determines whether it will be achieved at all, and is equally important. I suggest the following to ensure a productive team:

Define roles and responsibilitiesDirection is incredibly important; everyone needs to know exactly where they’re going and how they need to get there, so KPIs are essential.

Often when roles and responsibilities are unclear, things go pear-shaped. I am an advocate for setting clear KPIs, it’s a good way to steer us in the right direction, and in turn helps to grow the business and the individual in his/her role.

Be flexible: Rigid environments are the worst kind, allow your employees some flexibility and the opportunity to be themselves in the workplace. We spend so much of our time at work, we need to be ourselves there.

Celebrate the team: When there are achievements, celebrate them, single out individuals who are excelling and living the company values. This builds morale and is indicative of appreciation, which is fundamental when running and building a business.

2. What has and continues to be your philosophy since managing a large team?

Know your strengths and weaknesses, as well as your team’s and leverage off that. Be prepared to learn from others, no one can operate in isolation, regardless of the level on which you operate. Accept criticism and don’t bulldoze someone’s ideas, that’s how you build trust.

3. What in your view are the top characteristics the team look for in a leader?

  • Be consistent – inconsistency screams bad leader
  • Provide guidance – this is key, don’t turn a blind eye, give input and council
  • Listen – always listen intently
  • Be impartial – always be fair
  • Give credit – it builds morale and shows you recognise good work
  • Be patient – Rome wasn’t built in a day, and remember not everyone thinks the same as you do

4. What’s your view on an open door policy and how does it assist with managing a team and ensuring everyone remains productive?

I believe in an open door policy. It’s essential to build and develop trust. I’m the first to admit that it takes a while to build that trust, but once the team (on all levels in all departments) know your door is always open, and that they can trust you implicitly, half the battle has been won.

I host a GM’s roundtable every two months, just to establish how everyone is feeling and where everyone is at. It gives staff the opportunity to bring their challenges to the table, and I deal with them the best I can.

It’s 100 percent confidential and line managers are not allowed to attend. During this meeting we try reach common ground, and I commit to addressing and ultimately solving the problem(s).

Related: 10 Ways To Make Your Employees 10x More Productive

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Why Purpose Drives Profits

If you want to succeed, it’s time to start engaging where it matters.

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Over the past two years, many clients have been extending brand positioning exercises into purpose-driven expressions.

When we look at it, it makes sense given the country’s demographics. With many of our fellow countrymen struggling to make ends meet, brands have stepped in to provide them with a picture of a future worth striving for.

Global customer-centricity study, Insights 2020, led by research firm Kantar Millward Brown, has attempted to understand how brands could drive customer-centric growth as well as the factors that really make a difference. The research surveyed 10 495 individuals in 60 countries, and there are some significant efforts worth investing in if brands want to engage where it matters most, in consumers’ hearts.

The research uncovered that for market-leading companies and brands, traditional value drivers such as quality, packaging, or distribution are necessary, but no longer provide a competitive advantage; most brands are capable of providing these drivers. What is important, are a few critical approaches.

1. Purpose-led brands

The study found that when companies or brands linked to a purpose, 80% of them outperformed the market. Only 32% of non-purpose led brands managed to perform better than the market. 

Related: How To Calculate Gross Profit

2. On the ground

It’s important to engage with consumers in their space and on their terms. Through the use of memorable campaigns, experiential events and activations it is critical to engage with consumers on their turf.

3. Be truthful and authentic

Consumers can smell something inauthentic a mile away, especially when it’s coming from a brand. This forces brands to strive for authenticity in everything they do, especially when it comes to marketing. Building values and principle-based attributes into your brand as a guiding tool is essential.

4. Helping consumers commit

By allowing individuals to attach themselves to a brand with a purpose, it helps consumers personally commit to a cause that they consider important. When a consumer is personally invested, the link between the brand and product or service deepens.

Related: Profit Share for Increased Performance

5. Balancing heritage and modern relevance

There is a continuous tussle in balancing the traditional market, transitional market and the new consumers brands are trying to attract. Keeping the heritage and roots of the brand true to itself, while creating relevance for the new market, is a battle marketers are still fighting.

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Need To Trim The Fat To Boost Profitability? Listen To Your Clients First

Jeff Bezos believed that once you win the client over by doing this, everything else will follow – not least profitability.

Marc Wachsberger

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Finding the balance between offering the extras that set you apart from your competitors and keeping things ‘lean and mean’ to minimise wastage and maximise return on investment is a tricky balancing act.

I’ve noticed that many businesses try to attract or retain customers by offering what they think their customers want, rather than finding out what they really need, and then delivering that. That’s an expensive mistake to make – and it’s not going to achieve the business results you need.

I’ve also observed that now is the age of the new entrepreneur – the game changers who disrupt the status quo long set by big bureaucratic competitors who think that their customers will just accept an inflationary (or slightly larger) increase every year, just because they always have.

While Amazon has been around for a while now, there’s also an important lesson to be learned from its launch goal, which was to bring the price to the client. Jeff Bezos believed that once you win the client over by doing this, everything else will follow – not least profitability.

How have I applied these lessons in my business?

Firstly, we design our hotels backwards – we focus on the needs of our clients, very aware that what hotel guests wanted years ago is not what they want now. That’s why we don’t offer thing like a turn-down service with chocolates on the pillow. Nobody eats the chocolates, and nobody uses the toiletries – so why should we include the costs of these unwanted extras (and the cost of the staff required to implement them) in the final bill to our clients?

Related: 7 Steps To Optimise Your Cycle Of Customer Service

We do, however, offer free WiFi internet connectivity, free parking in our buildings, free laundry services and either bed-and-breakfast options or self-catering rooms.

Simply put, we’ve cut the fat that nobody wants anyway, and added the value that our guests have said they expect.

Our clients have said that they expect the whole hotel to be a workstation, and not just the business centre in a dark, unwanted corner. So, we’ve put a workstation in every room, with always-on access to the internet. Our hotels are designed with beautiful work spaces that cater for nomadic entrepreneurs and double up as comfortable meeting spaces, again – gone are days of boardroom only meetings, our spaces are primed for work and play in one integrated space.

Our clients have pointed out that they’re already paying for their room – so why should they pay for parking?

Many of our clients stay with us for days or weeks at a time, and have said it would be helpful if we did their laundry. So, we do that for them – and we don’t charge them for it.

Related: Good Customer Service Is About Relating At The Same Level

It’s true that many of our old-school competitors offer a broader range of products and services than we do, but we’ve built a successful business on adding the value that our clients need, removing the costs and extras that annoy them, and keeping costs (theirs as well as ours) under control by cutting out unnecessary frills.

It’s an approach that’s worked for The Capital Hotels and Apartments as a disruptor in the hotel and long-stay accommodation industry, and I’m confident that its principles would apply to any other industry that’s ripe for disruption.

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