- Player: Vusi Thembekwayo
- Company: Motiv8 Advisory and Watermark Afrika Fund
- Launched: 2009
- What they do: Strategy advisory firm & private equity firm
- Group turnover: R140 million+
- Visit: mtv8.co.za & www.mygrowthfund.co.za
At 23 he had a fall-out with a partner in his first business, only to find himself living and sleeping in his car to make ends meet while he built his second business.
He’s made mistakes and learnt hard lessons, but he’s also built a R140 million plus business before his 30th birthday, and he’s managed to do it without killing the proverbial chicken. This is his story.
Related: Show Me the Money – Vusi Thembekwayo
At 24, Vusi Thembekwayo was living out of his car while he tried to build his business. You wouldn’t know that he’d built (and sold) a multi-million rand business already, or that his latest venture was funded with the proceeds of that sale.
All you’d see was a young guy waiting for his first big deal, and for his business to take off. It took eight months to get his first client. Five years later, he has a healthy turnover of more than R140 million, and he’s still reaching for the stars.
You’ll also want to read Vusi Thembekwayo’s Winning Lessons For Success
21 and Taking Charge
But let’s back-track a few years. Thembekwayo paradoxically began his entrepreneurial career within a large corporate business.
He’d landed the job after having the balls to tell the middle-aged, white male exco running a R17 billion business where they were going wrong, and how they needed to change to get ready for the future. He was 21 years old.
A motivational speaker at the time, with a background in finance, Thembekwayo had been hired to speak at a function for FMCG-giant Metcash’s exco. As someone who prides himself on the research that informs his talks, he delved deep into the company he was presenting to.
His research revealed a company in trouble, and so he decided to offer some real advice, rather than the usual ‘ra ra’ of motivational speakers. While many of the board members dismissed the young upstart, the CEO spotted something else: A young guy who potentially wanted to shake up the business world. A fresh approach for a stale environment.
“And so he offered me a job,” says Thembekwayo “It was a crazy idea. I knew nothing about the industry, and I wasn’t going to get any upfront support. I was basically given a six-month window to come up with some incredible, earth-shattering idea. I’d report to the COO, but other than that I’d have a lot of autonomy.”
He soon realised that he hated the corporate structure, the cumbersome processes and redundant reporting lines that impede innovation. Here he learnt his first and most valuable lesson.
“Bigger doesn’t mean better in business,” he says. “Bigger means more complex, more rigid, less agile and less responsive.”
Fast Fact: Vusi Thembekwayo started his career heading up a business unit at FMCG giant Metcash.
Not one to leave a task incomplete though, he stuck around.
“I agreed to the position because I knew it would be an incredible challenge, but also because it was the ideal opportunity to learn to operate, manage and lead, all under one roof. I stayed on because nothing is a better teacher than an uncomfortable space. If you aren’t challenging yourself, you aren’t growing.”
Six weeks passed, and no grand ideas came. “I was given this blank page and I just couldn’t figure out how to fill it.”
It was starting to look like the CEO’s experiment on an opinionated young jockey was a waste of time. And then Thembekwayo had a stroke of inspiration.
“A family member fell ill and was checked into Chris Hani Baragwanath Hospital. At the time, the local government branch that ran the hospital was having major issues with its food suppliers, which meant there was insufficient food for patients. The realisation struck me. Metcash is a bulk food wholesaler.
“We had begun developing retail and were poor at it. Why weren’t we servicing these guys? The next day I started working on my business plan.”
The idea was a hit, and the board made R2,6 million available in operating expenses for the idea.
“I could draw stock off P&L. All that was left for me to do was get an office, employ sales and admin people, and start selling like hell. In our first year we had a turnover of R16 million. Four years later we’d grown that to R463 million with the highest EBITDA in the group. The growth was nothing short of stratospheric.”
Payments are About Relationships
Of course, this created new challenges. If your business is built on offering credit, you need to ensure you get paid (which is one of the reasons Thembekwayo dreaded the treasury MD).
“I had to learn that payments are all about relationships. The surest way of getting paid is to understand who your customer is, and what drives them. In my specific sector I learnt a few things. For example, they hated golf games. They played golf, but they didn’t like it. What they did like was a hospitality suite at FNB Stadium when the Pirates were playing the Chiefs. So, I made sure we had that and regularly invited my clients. Now I’m not having a conversation with him about the fact that he’s in the red by 60 days because his people haven’t paid me.
“I’m not going to phone or email him. Instead, in a social environment, I tell him I have a cash flow issue. He’ll ask me what the problem is, because he’s now relating to me as a peer, and I tell him that I think his accounts department hasn’t paid me. By Monday everything is sorted, and the money is in the bank. You just need to learn to talk to people in their language.”
Thembekwayo soon had the highest EBITDA in the group and the highest rate of growth. And then everything changed.
“Our CEO left, and the new CEO and I didn’t see eye-to-eye. He wanted to take the business in a retail direction. We were wholesalers. He also didn’t like the way I conducted my hours. I’m not an eight to five guy. I get in early, and stay late. I also spend a lot of time out of the office – business is out there, and I should be out there getting it, not in the office, behind a desk.
“We both soon realised that the business I had created didn’t belong in his new vision. I spent tireless hours convincing the board and shareholders to allow me to ring-fence the business. We did a valuation. I raised my own equity and risk-funding and then we bought it. On the day the board approved the sale, I felt like I was ascending to heaven. I love the thrill of doing deals.”
Learning to Let Go
“There are some things start-ups do better and others that big businesses do better, and this was one of them. Strategically, the business looked good. We made a gross profit of between 30% and 40%.
Turnover was growing exponentially. But, customers paid late, suppliers demanded payment upfront, and too much cash was tied-up in stock. This was fine when we belonged to a R17 billion business. Stock was never a problem given their balance sheet. Doing it yourself is trickier. The economies of scale don’t work.
We couldn’t purchase at the same price. Overnight suppliers wanted us to pay upfront – they knew and liked me, but they couldn’t take the risk of us not being able to pay them. I had lines of credit with my customers, but needed to pay my suppliers higher prices upfront. The commercial model no longer held.
“I’ve seen how many entrepreneurs hang on to an idea long after it’s feasible. If you’re really going to be successful, you need to know when it’s time to say thank you, but no thank you. I could see that our prospects for controlled growth were limited and I like growth companies. If it doesn’t grow and cannot disrupt, it won’t peak my interest. We eventually sold the company to a large listed conglomerate.”
At 24, Thembekwayo now had a nice tidy sum of money that he could use as seed capital. “I’d spent four years learning about business,” he recalls. “I really felt like I was ready to start something on my own, from scratch.” But of course, the journey is never that simple.
“I’m a big believer in betting on yourself, so I put all of my money into me,” he says. “I started a small speaking company, and a strategic consulting business.” The logic went like this: Thembekwayo ultimately wanted to end up in the private equity (PE) space.
Fast Fact: By 25 Vusi had cashed out and launched a business of his own, only to realise that even with his background, start-ups are tough, and building clients takes time.
He had a finance background, was passionate about business and loved valuations. PE was the ideal space to be in. In order to enter that space however, he needed board exposure, both for his own CV, and to start making the necessary contacts to build his portfolio.
“I thought that I could use the speaking business to network and meet people, and the strategic consulting business to grow my reputation in the boardroom.”
There were two problems. He didn’t get a single speaking gig in eight months, and no one was banging down his door for him to mediate their next strategy session.
“In the beginning the speaking business actually hurt my strategy business,” he says.
“I went to potential clients to flight the idea of facilitating their next strategy session and even helping them to roll it out. No one cared. They didn’t want it, and they certainly didn’t see the value I could bring. I was branded as a speaker; no one saw me as a strategist.”
Meanwhile, Money was Running Out
“I thought I’d paid my dues at Metcash. As it turned out, I was still right at the beginning of my journey. I’d taken my savings and signed the lease of an expensive office in Centurion, furnished it and hired an assistant, because I thought that that’s what you do.
“I’d also heard somewhere that you should never answer your own phone. Turns out, none of those things actually helped me to land clients. I used all my savings on the business’s rent and salaries, which meant I couldn’t afford personal rent, to pay my car off or even food half of the time.
“The bank kept trying to repossess my car and I kept fending them off. I needed that car to drive around and drum up business. Plus I was sleeping in it, in my office park’s basement. It was the dead of winter, so I had to start the engine every few hours to warm myself up, but it was a place to put my head down. I ate my meals at my girlfriend’s house.
“What got me through? Entrepreneurs are crazy. Certifiable. If you’re not crazy enough to think wild things, and have the courage and will to pursue them, you’re not going to make it, because start-ups are tough. The only way to do it is to remember that everything you’ll ever need to achieve your wildest dreams, you’ve already got. I had that mantra printed on my wall, and I looked at it every time I wanted to throw in the towel. It helped me refocus and carry on.
“Then one day, after a long day of those cappuccino meetings where things are discussed but never executed, I got back to the office after 6pm and my PA was still there. ‘You won’t believe it,’ she said. ‘Somebody just called. They’re going to book you.’”
Don’t Kill the Chicken
“From there, business started steadily coming in for the speaking business, but the strategy side was still not taking off. I realised I needed to rebrand, and bring in a partner who complemented my skills set. I approached very talented people to be part of the business and gave them the tools and mandate to build the advisory function. I created the opportunities and the team would monetise them.
Fast Fact: Today Vusi has built a R140+ million speaker, strategy and consulting business, and is busy building an investment fund.
“I anchored the team with a key individual and together built the business. I used money from my speaking engagements to finance the business. I am intimately involved in this business, from strategy to client engagements, partnerships and product development. My focus is giving the team the vision of what we seek to do, creating the opportunites and ensuring that we remain true to our culture.”
It’s a good lesson for other entrepreneurs: Play your role and get the best people to play theirs. Allow other people to do their thing. “Steve Jobs couldn’t build Apple alone. He was a marketer and salesman, not an engineer. Teams build businesses, not lone rangers or heroes. Building a business is ultimately about building a team. Great entrepreneurs hunt in packs.”
It takes time and talent to build a business. Thembekwayo admits that his speaking business is the most valuable part of his eco-system.
“I spoke in 21 countries in 2014 and am the only speaker to speak by invitation at the World Bank. My speaking talent has given me access to amazing leaders, capital and opportunities. People ultimately trade not on skill, but reputation.”
Today, Thembekwayo is building Watermark Afrika Fund, his private equity firm. “We’re not just financiers, we’re entrepreneurs, so we know how to build a business to scale and do it quickly. Our real strength has been the access to the transactions that we get and our strong Africa network.” Both of these, Thembekwayo acquired through his public speaking.
“Our next step is to build our own fund, and we’re busy with that now, but first we had some lessons to learn. I’ve made mistakes, but I’ve made them without being a fund manager, which basically means that I didn’t kill the chicken. I could learn from them and grow, without betting the farm. Now we’re ready for our own fund.”
The Art Of Pivoting: How To Know If The Time Is Right
Keep the vision, change the strategy to serve the market according to what they really need.
The word “pivoting” has become as over-used as the phrase “disruptive innovation”, but much like innovation, businesses have been pivoting for many decades (if not centuries) before the word became an everyday verb. You only need to look at Twitter, which started as a podcasting business, or Nintendo, which started by selling vacuums, or even Youtube, which was supposed to be a dating site for some inspiration.
These businesses may have all changed their product, service, or even target market in a major way, but they survived and have been thriving ever since. They kept their vision of achieving successful sustainable businesses, despite a change in strategy. And that, my friends, is pivoting: Keep the vision, change the strategy to serve the market according to what they really need.
Ask the right questions to your market: Are you solving a problem?
If you haven’t done user testing, user interviews, focus groups, or called anywhere between 10 and 50 of your highest value possible clients, you might want to take a step back and get that done to define if you actually have a problem to solve.
Many founders start by speaking to a handful of family members, and a handful of friends about their business idea, and are met with unbridled excitement and encouragement that you would expect of people in your life who unconditionally love you.
The reality is, these people have to live with you everyday – they don’t want to risk offending you and shattering your dreams. They basically have to tell you that your idea is great. Get tangible proof from real-world customers or clients that they see the problem you see, and that the problem is as big as you think it is.
Set your vision
What are you really trying to achieve in your business? In other words, what is your “why”? If you set this in a very clear one liner, you will quickly realise that there are many ways to achieve that vision, if you are able to take emotion out of the equation.
This will take you away from the detail to the big picture. For example, a vision along the lines of “To save people time” could be achieved in hundreds of different ways, and your current offering could be tweaked to increase your market size and save people much more time than your current offering, even if it wasn’t that idea you initially got so excited to tell your dog and three cats about.
To paraphrase Eric Ries of Lean Startup, pivoting is simply a change in strategy, not a change in vision.
How do I know when to pivot?
If you’re going through difficult times in the business, I would recommend going back to the most important people in your business – your clients / customers. Get their thoughts and opinions on what’s working; what’s not working; is your offering solving their problem adequately; what would they like more of, etc.
Finding out how to improve your offering from your existing client base will almost certainly not only help you retain your existing client base, but also grow a new client base by helping you solve the problem more effectively. This process can also reveal if your clients see something in your product that you didn’t – ie.to help you pivot. You will find out what your target market really wants and what your product could be if you weren’t so attached.
This requires extreme open-mindedness, and willingness to implement your learnings, even if what your market wants isn’t as “sexy” as your initial offering. On the flip side, if you can keep improving your current offering without changing direction, and if you still have cashflow and clients in the pipeline, it may not be necessary to pivot yet.
Pivoting is often necessary when the current offering reaches a glass ceiling, it’s impossible to close sales, and when cashflow becomes a problem. However, if you realise that your offering is so far removed from what your customers want that you would have to change your strategy and your vision – that, my friends, could be the time to quit and apply the learnings to the next venture. The key lesson from that eventuality is to do more extensive product-market fit research in the beginning next time, and make sure your product is meeting an actual market need.
What if things were different?
I have an experiment for you to apply within your own business. Remember, open-mindedness is essential to break through the glass ceiling:
- What if you kept the exact same product / service, but changed your target market? What would the new target market be?
- What if you changed your product / service, but kept the same target market? What would your new offering be?
- What if you kept the exact same product / service and the exact same target market, but pursued that market in other cities or countries? If your market were the whole of Africa / North America / Europe etc, would that make a difference? Is it feasible? What would have to happen for it to be feasible?
- What if you changed your business to a social business? Would partnerships with NGOs open new opportunities in the market?
- What about the impact you could have and the exposure this could bring to your business?
I highly recommend creating a “what if” business model canvas or pitch deck based on this alternate reality for each of the questions above. This could be a fun activity to do with the team on a weekend away over multiple cups of warm coffee. Good luck, and remember, there is no shame in adapting your business to provide people with what they really need.
An Innovative Culture Absolutely Requires This Unique Capability
What you need is a ‘chaos pilot’ on board at your company. If you don’t have one, think about adding one.
In my line of work, I have the privilege of mentoring and working with start-up entrepreneurs who often offer unique and remarkable ideas that, in my opinion, have the potential for significant commercial impact.
Unfortunately, many of these ideas end up in the dust heap of forgotten businesses that never get traction.
Why do so many great ideas fail? The reality is that many promising new ideas are derived from products or services or systems that have yet to be considered. They are disruptive in nature and typically exist only in the abstract.
Dealing with these ideas therefore demands a unique set of skills that differ from general management capabilities typically associated with running a company.
In a recent article at Harvard.com, Nathan Furr, assistant professor of strategy at INSEAD and coauthor of Leading Transformation: How to Take Charge of Your Company’s Future, explained that a critical, and often missing, element for innovative teams is the capacity to function in the abstract. Furr referred to this capacity as negative capability.
To understand the concept, consider what Robert French of the Bristol Business School has called “positive” capabilities. These skills, as they pertain to new ideas, have been connected with successful general managers, because they can:
- Understand the complexities of new ideas
- Understand and manage the process by which new ideas are executed
- Understand and manage the necessary roles within an organisation or team needed to execute on new ideas.
These characteristics are typically technical skills that involve structure and discipline. They are valuable for managing any company, especially one operating in a business environment requiring constant innovation. Such innovation is needed to iterate new and bold ideas, but these skills alone are not enough.
The reason is that, to stay ahead and execute on a regular basis, new ideas, especially disruptive ones, often take a team and the entire organisation into unchartered territory where there exists no precedent, historical structure or “road map” to guide them. In these cases, positive capabilities based on structure fall short of execution.
As French explained, this type of change “always arouses anxiety and uncertainty,” and teams that are unprepared tend to move toward avoidance tactics – defaulting to known structures, which then lead to the collapse of the new project.
For that reason, it is critical to have members on the team who can handle uncertainty and unknown outcomes and also have the fortitude to pivot when necessary. These types of leaders are what Furr calls “chaos pilots.” To be an effective chaos pilot yourself, you need more than technical management skills. Here are the three other skill sets he lists:
1. Divergent thinking
To think divergently, Furr explains, individuals need to be able to synthesise a multitude of information and “uniquely connect new information, ideas, and concepts that are usually held far apart.” This skill requires the ability to stay constantly focused on a mission while constantly processing new information.
Leaders who operate as divergent thinkers often surround themselves with talented individuals who can handle the day-to-day operations; that capability frees up the leadership team to collaborate and collect valuable data.
2. Convergent action
According to Furr, great chaos pilots do more than just take in new information. They “execute on new ideas in order to create something tangible.” In other words, they synthesise all the information and leverage it to effectively execute on new ideas.
Far too often, entrepreneurs fall short here, getting consumed by FOMO (fear of missing out) and failing to prioritise, or at least balance, output time with input time. Doing so creates an entrepreneur with a wealth of information, but ultimately provides very little value.
3. Influential communication
Finally, thinking divergently and being able to “connect the dots” are great skills, but if a chaos pilot is unable to communicate new ideas effectively and, as Furr states, “inspire other leaders and decision-makers to believe, support, and act on a novel idea or opportunity,” the idea will stop short of execution, no matter how well synthesised.
Over the years, I have been a part of innovative teams (at times leading them) whose sole priority was developing new ideas for clients. I recall a few times leading those teams through a comprehensive mind-mapping process meant to spark new ideas. In these situations, we inevitably would stumble on a truly remarkable idea or two, but like our team, those ideas weren’t rooted in a stable and established process; sometimes they weren’t comparable to what we were already doing.
Our ideas would also sometimes get lost in the insecurities and anxiousness of the group and never even be presented.
Great management skills are clearly needed to lead a company and execute ongoing operations effectively, but to consistently generate and see great new ideas through to execution, it is critical to have an effective change manager – or chaos pilot – on your team. And while these skills cannot be taught, they can be learned and nurtured through experience and an environment that encourages and supports risk taking and failure.
This article was originally posted here on Entrepreneur.com.
How I Built A Company The Lean Way – By Using The Scientific Method
Starting a company is one of the most irrational acts you can do as a human being. That’s why employing hypotheses and experimentation is crucial.
In the past five years, the cloud management company I founded has grown from a one-person business into a global employer of over 300 people. Recently, VMware, the most important provider of infrastructure and technology in our industry, purchased us – an exciting milestone as we look to the future and continue to execute on our vision.
In spite of all the twists and turns I’ve experienced, there’s been one thing I did right in the early phases of building this business: Committing to continuous experimentation.
When I left my previous company, I had an idea of where I could bring the most value in the market, based on my previous experiences in cloud computing. But I’d also been inspired by Stephen Blank’s The Four Steps to the Epiphany and indirectly by the Lean Startup movement. As a result, I knew I would start my business from the top down: By devoting myself to a market (cloud management) and to the scientific method for entrepreneurship – dispassionately testing all assumptions and hypotheses, and following where they led.
So, where did I begin? And where do you begin? Here are the steps.
Develop your initial hypotheses
The process of entrepreneurship starts with a set of hypotheses to identify the product or service you will bring to your customers. A good hypothesis is that it answers critical questions regarding your initial business concept that can be proven only through experimentation.
I started my own journey by putting a poster on the wall and using sticky notes to capture the critical hypotheses I needed to test. Every two weeks, I selected a set of hypotheses and designed experiments to prove or disprove them.
En route, I thought about the ecommerce company Zappos – a supporter of the Lean Startup movement – and its initial hypothesis that people would buy shoes online. For the file-sharing company Dropbox, the hypothesis was that users needed a radically simplified way to share files. For the coffee retailer Starbucks, it was that Americans would embrace the Italian coffee culture.
Design an experiment
Next, choose a set of hypotheses to test, and design an experiment to test them. A good experiment should eliminate all ambiguity from the hypothesis to the answer. It should also prove or disprove the hypotheses with the least possible investment.
I was inspired at this stage by stories from entrepreneurs like Dropbox’s Drew Houston, Zappos founder Nick Swinmurn and Starbucks’s Howard Schultz. To prove his hypothesis, Houston didn’t invest in building yet another file-sharing app; he instead created a video that demonstrated the ease of use of his idea for Dropbox and how it could be a differentiator.
Similarly, Swinmurn didn’t choose to buy inventory for his new online shoe store, instead, he took pictures of shoes. He posted them on a website and purchased the shoes from the store only after receiving a customer order.
Schultz, meanwhile, chose to cram his early concept for delivering Italian coffee culture to American consumers into 300 square feet, inside another retail store.
Experiment and observe
My experiments ranged far and wide – from driving an advertising campaign, to creating an A/B test website, to performing customer interviews with large financial institutions, to delivering professional services.
For example, one of my sticky notes asserted simply that, “Cloud cost management is a feature and not a market.” The experiment I designed to prove or disprove this statement was built around helping five local businesses optimise their cloud costs.
As an early-stage entrepreneur, you have to be willing to conduct these sorts of tests to determine what works, what doesn’t and how you can identify real and durable problems in a market. You need to to take risks, to be willing to fail and understand that you’re always learning.
Dropbox’s own critical video experiment resulted in its beta user requests growing from 5,000 to 75,000 users, validating critical hypotheses without investing in a single line of code. Starbucks’s first store attracted 1,000 visitors per day to a location that had previously never seen more than 200. Zappos’s website resulted in actual sales of shoes, which were fulfilled with purchases – at list price – from a local store.
Discuss results with advisors
Before starting the company, I created my own informal board of advisors, who included a venture investor, two technology CEOs, a business development executive and a technology founder. All were dedicated to my success, with no strings attached.
I met with them for coffee throughout the experimentation process, and always discussed with them what I was learning. Having talented colleagues to provide feedback and advice frequently produced new insights.
Rinse and repeat
Once you secure answers to your first hypotheses, it’s time for you to go back to the drawing board and create new hypotheses, design another experiment and test it. A hypothesis without an experiment does no good. You gain the most knowledge when you’re testing the ideas you propose.
Start the business
I equate the start of my company to an experiment I called “the sale.” After several months of developing hypotheses and running experiments, I had a good sense of where I could add strong and durable value for customers in the market. But what I hadn’t tested was price.
I hypothesised that a prospective customer would need to be willing to spend $50,000 annually – roughly the average price required to sustain the business model – on my product, to support the inside sales-driven model I was projecting. So, I designed an experiment around cold calling a handful of prospective customers and trying to convince them to purchase my minimum viable product for $50,000 per year.
In the process of being rejected, I hoped to learn about the additional features these companies needed to justify purchasing a product at that price point.
As part of the exercise, I first spoke with the CFO of a fast-growing technology company. While the CFO understood the problem I was addressing, he had almost no input on features, and no interest in paying for a solution. But then he surprised me by asking for another call the next day with his vice president of engineering and members of his team.
The assembled team not only had deep knowledge in the area in which I had built my MVP, but had already built many of my features themselves.
By the end of the call, the vice president of engineering made the surprising statement: “Sure, we’ll buy.” When faced with the potential for a sale, the first instinct of every good engineer is to do exactly what you shouldn’t: keep talking. Instead, I proceeded to explain how the CFO was hadn’t been convinced the previous day, and that maybe the engineering VP should talk to him before agreeing to a purchase.
“Our CFO is in the room right now,” the VP said. “We’ll buy. Just send us the contract.”
As I hung up, my excitement at having a first customer was tempered by the reality that I had no contract to send, nor a business entity under which to extend it. Since my experiment had been designed for failure, I hadn’t given much thought to what to do when confronted with success. Thus began my next challenge: Creating a business entity and onboarding a first customer – fast.
Reach a conclusion and communicate it with peers
Starting a company is one of the most irrational acts you can do as a human being. You are taking great personal and professional risk for an unknown outcome. While there is no foolproof way to manage this uncertainty, there is a way to minimise the risk: cContinuous experimentation in the presence of customers. My company exists as a direct result of a commitment to experimentation, a route you should seriously consider when you start down your own entrepreneurial path.
This article was originally posted here on Entrepreneur.com.