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Jason Goldberg Asks Are You (Realistically) Ready To Scale Your Business?

You’ve built a solid business. The money is coming in. Now you’re ready to scale – to go big. But are you really ready? Are you mentally prepared? Being a start-up founder and a company CEO is not the same thing.

GG van Rooyen

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Vital Stats

  • Player: Jason Goldberg
  • Company: 10x-e
  • Founded: 2015
  • Background: 10X-e was created by Vumela and Edge Growth. Its aim is to help talented entrepreneurs succeed by offering a high-growth support system.
  • Visit: 10x-e.com

When Eric Schmidt stepped down as CEO of Google in 2011, he posted the following message on Twitter: “Day-to-day adult supervision no longer needed!”

He was referring to the fact that, after a decade as the company’s chief executive, the throne was being handed back to 37-year-old Google founder Larry Page.

Related: Don’t Let People Dissuade You from Following your Dream – Polo Leteka Radebe 

The comment seemed a bit, well, snarky. It wasn’t. But it had some backstory. By the turn of the millennium, Google was attracting investors, but these investors were understandably reticent about sinking millions of dollars into a company that was located above a bicycle shop and headed by two unruly Montessori alums.

The money men were willing to invest, but not without what Silicon Valley VCs referred to as ‘adult supervision’. Founders Page and Sergey Brin grumbled about it, but eventually agreed. They started shopping around until they found the perfect candidate: Steve Jobs.

Jobs wasn’t available. But Eric Schmidt was. And the Google boys liked Schmidt. He wasn’t just a businessman — he had a solid background in engineering and tech. In fact, he had become Sun Microsystem’s first software manager in 1983.

So Schmidt’s tweet wasn’t snarky at all. In fact, it was the opposite. It was a statement filled with genuine affection for the Google founders — a tongue-in-cheek declaration that a decade of ‘adult supervision’ had officially come to a close.

As the geniality of the message implies, the partnership had worked. Schmidt and the founders had worked well together. This isn’t always the case. It can be disastrous, which is why there has been a move away from replacing the founder of a company once it scales to a certain size.

“While replacing a company founder with a CEO is certainly an option when looking to scale a business, it has traditionally had mixed results,” says 10x-e founder and Edge Growth founding director Jason Goldberg.

“Because of this a VC firm like Sequoia Capital in Silicon Valley no longer expects a founder to be replaced when a business scales. When a company loses its leader, it loses a lot of its essence.”

You Need To Cede Some Control

The poster boy for the tech-founder- turned-Fortune-500-CEO is obviously Mark Zuckerberg. Despite still looking like a boy playing dress-up in his dad’s clothes whenever he dons a suit, Zuckerberg has proved to be exceptionally adept at growing Facebook through its various phases.

How has he managed this? While he certainly has more business savvy than initially given credit for, a lot of the company’s success can be attributed to Sheryl Sandberg. Zuckerberg hired Sandberg (then Google’s president for online sales and operations) as COO in 2008, and she transformed Facebook from ‘cool website’ into ‘profitable business’. But she couldn’t have done this without Zuckerberg giving her the freedom to do so.

It’s an important example founders should follow, says Goldberg. “Growing companies need to complement existing leaders with others who have real management experience. Entrepreneurs need to make a paradigm shift when they scale. You need to accept that, even if you stay on as CEO, you are ceding a level of control. It ultimately comes down to the maturity of the founding team. Do they have the maturity to adapt to the new management context? They must realise that they don’t all bring a lot of management know-how. If they can’t make the shift, they kill the business.”

Sandberg was a great hire for one simple reason: She was a seasoned executive with more experience than Zuckerberg himself.

“A lot of growing companies hire the wrong people. If you’re looking to scale aggressively, now is not the right time to hire young people that need mentoring,” says Goldberg. “You want to hire people who can do things five times better than you can. If you’re not comfortable handing off an important task, you’ve hired the wrong person.”

Related: Busy Cardiologist Dr Riaz Motara Works A 4-Day Work Week – Here’s How

Don’t Get Sucked Into The Vortex Of Day-To-Day

Growing a business is chaotic. Once you start scaling aggressively, a million things will demand your attention every single day. You will feel as if you’re drowning.

“We refer to it as ‘the vortex of day-to-day’. As the business grows, there will be more and more balls in the air, and unless you’re able to hand them off, they’re going to drop to the floor,” says Goldberg.

“You have to ask yourself: How do we, for example, have 100 sales meetings every week without the founder having to be in any of them?”

This requires that founders hire competent people, and allow them to run with things. But it also requires something else: According to Goldberg, it comes down to creating systems and processes that diminish the need for executive involvement.

At the same time, you don’t want to turn into that stereotypical organisation that depends too heavily on paper pushing and bureaucracy.

“As you scale, you hire more and more people who don’t actually care that much about the customer. It’s inevitable. At 100 people, you will have employees who never interact with the customer, and who will probably be implementing processes that irk them. A customer who used to deal with a founder will now get an email from a faceless accounts department. So you need to systematise everything from the focus point of delighting the customer. It’s very important to institutionalise customer delight.”

Strike a Careful Balance Or Risk Chaos

Jason-Goldberg-10x-e

Here is the reality of scaling a business aggressively: Your business will lose most of the advantages it had early on. As it gets bigger, it will get slower, regardless of the systems you put in place.

“You have to consider if your company can put its prices up by 20%. If you grow quickly, your costs will go up, but you won’t yet have scale. So unless you get a lot of funding, you’ll need to up prices.”

You will, at least for a while, be slower and more expensive than much of the competition. So what’s needed is a product that is so great that customers will keep coming back, even if you’re no longer the quick and agile start-up you used to be.

“You have to strike a careful balance. Build solid systems and a good management team too soon, and you’ll burn through cash too quickly. Wait too long, and your growing company will descend into chaos,” says Goldberg. “Scaling requires you to spend ahead of revenue — but not too far ahead.”

Related: 7 Up And Coming SA Businesses To Watch

Scaling the un-scalable

Not every business can scale. Can yours? You need to take an honest look at your company.

To paraphrase Leo Tolstoy: All successful businesses are alike. All failed businesses are unsuccessful in their own way.

Google and Facebook grew in different ways, but they were alike in one very important area: They both had businesses that were scalable.

Before jumping into the minutiae of scaling a business, it’s worth taking a moment and asking yourself how scalable your business model truly is. If your business isn’t inherently scalable, no amount of good hires or clever processes will allow it to scale.

“There are three kinds of businesses: Un-scalable, scalable and hyper-scalable,” says Goldberg. “Something like Dropbox or Facebook is hyper-scalable. Here the marginal cost of selling an additional product is virtually zero because delivery is automated.

“A scalable business is one that offers a blueprint for success that can be replicated. A franchise restaurant is a good example. Every restaurant is a profitable unit that can be operated in the same way as the previous one.

“An un-scalable business is one that doesn’t have a ‘saleable unit’ that can easily be rolled out multiple times. Many service businesses find themselves in this kind of situation. If you offer a high-level service that requires very knowledgeable (and expensive) experts, it’s hard to scale. There are many businesses like this with low barriers to entry that struggle to scale beyond 30 people because most of the skilled leaders they need would rather start and run their own businesses. Something like Uber is scalable because being an Uber driver does not require an expert skillset. However, there are exceptions. Advisory firms have managed to scale because regulation creates predictable demand, there is some regular supply of human talent and there are high barriers to entry for new players.”

Remember This

Taking a company from start-up phase to corporate level is a long journey that requires a host of different skills. Very few entrepreneurs have all the talents needed to scale a business successfully.

GG van Rooyen is the deputy editor for Entrepreneur Magazine South Africa. Follow him on Twitter.

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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.

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“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.”

Related: Small Changes that can Greatly Increase your Profits

Improving the user experience

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.

Related: 10 Ways You Should Invest Your Company’s First Profits

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.

Bottom line

Bottom line

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.

Related: Successful Entrepreneurs Limit The Downside To Maximise Profits In The Future

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.

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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.

Catherine Bristow

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“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.

Related: How TomTom Telematics Is Blurring The Lines Between Your Fleet And The Office

“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

risk-management-advice

Hijacking

“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.”

Driver behaviour

“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.

Related: How To Keep The Wheels Turning For Your Transport Business

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.”

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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.

Carl Bates

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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.

Related: Give And Receive: The ROI On Incentives

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.

Related: Today’s Incentives, Tomorrow’s Leaders

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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