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Vusi Thembekwayo on The Art of Pursuing Crazy Ideas And Turning Them Into Profit Machines

Vusi Thembekwayo understands entrepreneurship. Better known as one of the Dragons on South Africa’s Dragon’s Den, he’s had his fair share of entrepreneurial ups and downs.

Nadine Todd

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Vusi-Thembekwayo

Vital Stats:

  • 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.

Related: How to Be a Successful Entrepreneur in Your 20s

“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.”

Related: Vusi Thembekwayo on How he Financed Growth 

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.”

Related: 10 Life Hacks From a Millennial Millionaire

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.”

Finding a New DreamVusi-Thembekwayo

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.”

Related: How to Get People To Embrace Your Next Big Idea

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.”

Related: You Deserve to Be a Millionaire. Follow These 12 Tips to Get There

Nadine Todd is the Managing Editor of Entrepreneur Magazine, the How-To guide for growing businesses. Find her on Google+.

Innovation

Innovate For Change – Think Like A Social Entrepreneur

Why consider the social entrepreneurship model?

Nation Builder

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Social entrepreneurship is an exciting business arena that finds new, sustainable business solutions to long-standing problems. Social entrepreneurs see social challenges (such as poverty, homelessness, poor infrastructure or lack of quality education) as an opportunity for change.

This approach brings together the best that business practices offer and blends it with the best that civil society offers (a social mission, broader stakeholders involvement and the engagement of the community). By generating income from business activities and reinvesting its profits back into driving its mission, this approach generates both social value and economic value simultaneously.

Why consider the social entrepreneurship model?

1. Seeing social challenges as opportunities

South Africa’s social and structural challenges, from our poor ranking in health and education to the high level of unemployment, provide a myriad of opportunities for entrepreneurs that are willing to roll up their sleeves and work to build a better future.

The recent winner of the recent Nation Builder Social Innovation Challenge, Lungi Tyali, is a great example of this mindset.

Across Africa, there is a dire lack of provision for the electrification needs of the majority of the population, especially in rural communities. In South Africa, at present, there are 3.4-million households without a formal, metered electricity supply; 2.2-million in formal and 1.2-million in informal households. Lungi Tyali is the CEO of Solar Turtle who, with her business partner, James van der Walt, created a solar energy solution for rural and off-grid areas. Solar Turtle provides a solar-powered kiosk in a container that serves as a hub for renewable electricity. During the day, the solar panels are open to collect sunlight and at night they are enclosed and locked securely into the container.

Related: How To Be A Social Entrepreneur

2. Social entrepreneurship has low barriers to entry

Many of the most successful social enterprises start off small with an enterprising individual seeing an opportunity in their local community and building from this small beginning. There is no prerequisite for a university degree of formal training. Growing social enterprises can thus also offer employment opportunities to unskilled workers and youth without experience, addressing South Africa’s high level of unemployment.

One such story is that of Nonhlanhla Joye, the founder and facilitator of Umgibe Farming, Organics and Training Institute. Ma’ Joye, was diagnosed with cancer in 2014 and as a result, could not work to provide food for her family. She decided to grow organic vegetables in her backyard to feed her family. Unfortunately, the chickens ate all her vegetables and she had to come up with a solution.

She innovated a growing system using plastic bags. Before long Ma Joye was teaching other community members to use her growing system. A platform was born where poor communities started growing vegetables to feed themselves and collectively sell their surplus produce.

3. Corporate Social Investment, with purpose

Social enterprises also offer individuals and companies the opportunity to invest in lasting social change. Unlike traditional philanthropy, the impact of social enterprises has the potential to be much more lasting by directly providing affordable social goods and services, as well as employment opportunities.

Nation Builder, for example, is a platform* that brings like-minded businesses and civil society together in order to learn from each other and partner together for the greatest possible impact through wise and responsible social investing.

Related: Miss Teen Social Entrepreneur SA Is Making Its Mark

4. Personal actualisation

Perhaps the most rewarding advantage of being a social entrepreneur is the impact you can have on society, but this model also offers several personal benefits:

  • working to solve issues you care about
  • freedom to explore and create innovative solutions that can inspire change
  • the opportunity to turn passion into profit
  • working as your own boss.

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Innovation

Having The Perfect Product Isn’t Enough To Keep You In Business

The odds of the small business surviving aren’t stacked in its favour. It’s more likely to fail than succeed. That’s the bitter truth. However, once it’s able to shake off the niggling teething problems, watch it as it unfolds from a pupa to a beautiful butterfly.

Matthew Mordi

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There is a small bakery operates in my neighbourhood. It bakes bread; no cakes or other confectionaries. The best home-made bread that has your palates yearning for more. This is in sharp contrast with the bread produced by bigger bakeries. They also supply bread to the neighbourhood.

The bigger bakeries operate a model that is largely automated to the point that they lose a very important ingredient beyond flour, yeast and whatever goes into making bread. They lack the personal touch that gives it the home-made feel. This is why the neighbourhood bakery is preferred despite being pricier.

The small bakery isn’t without its flaws; avoidable flaws that may, sadly, sink the business. My view is more on the certainty of the demise of the business as observers would’ve noticed a slow yet steady decline in the output of the business. These flaws aren’t unique to the bakery, several other small businesses have share the same flaws.

Why would a customer who is willing to pay more for a product suddenly cease patronising the business. What other factor apart from higher price, in the absence of a drop in purchasing power, would make a customer buy bread of supposed inferior quality from the competition.

A couple of years ago when I moved to the neighbourhood the business was doing great. Even during a biting recession the shelves were always stacked with freshly baked bread of different varieties. Despite the excellent product on display, there was an unsatisfactory trend in the operation of the business.

For one, the sales personnel are rude. Having the right staff is necessary to grow any business, but when this very fundamental issue isn’t gotten right it will be fatal to the business. After all for how long would customers put up with poor service delivery in the face of stiff competition from bigger rivals.

Small business owners must realise that proper training of staff is as important as sourcing for capital and shouldn’t be overlooked as the survival of the business also rests on it. Bigger businesses in this regard always come out tops in comparison with their smaller counterparts.

Related: Why Small Businesses Are Unable To Pay Staff Salaries

Annually, big businesses spend billions of dollars on staff training for the simple recognition of the fact that having disgruntled customers, on account of poor service by personnel, is dangerous for business. Despite their size, big businesses tend to understand better the importance of the single customer. Also, how the discontent of a few customers can translate into poor sales which is detrimental to the business.

The mindset of a small business shouldn’t be different. Investing in staff shouldn’t be treated with levity to ensure the business not only stays afloat, but also grow it. Growing a business is in itself tough work, small business owners shouldn’t make it tougher by providing terrible service.

The neighbourhood bakery lacks this important feature and it’s been responsible for the steady decline in sales. I didn’t know the poor service rendered by the attendants had attained much notoriety until I was having a conversation with a group of individuals at a religious gathering and the issue came up. It’s a sad realisation.

For financial reasons small businesses aren’t known for recruiting the best personnel. Most employ the services of family members. While there is nothing wrong with this, it’s important to ensure such person is the best fit for the business. Employing family members may lead to a myriad of problems for the business. Therefore it will be in the best interest of the business not to employ an incompetent family member than have him ruin the business. This is a risky way of running the business.

The feeling of the customer towards the goods or services businesses provide is key to its success or failure. This is because customers can have the most unbiased assessment of the business rather than management and staff. Despite the poor service the bakery openly had on display, no one seemed to have bothered complaining to the owner of the business. So it may seem.

It will be in the best interest of a small business owner to leave an open channel for feedbacks from customers. This isn’t the case with the bakery and some other businesses face this challenge too which may lead to further problems.

The inability to provide an avenue for customers to channel their complaint to the proper individual creates a problem of inaccessibility. Accessibility happens to be an area of strength for small businesses because of their size. In larger businesses, despite creating channels for complaints there is usually no personal relationship between the owners and their customers. This is an area a small business shouldn’t be found wanting.

One would imagine that as a small business, the owner of the bakery should be easily accessible to interact with customers to in order to obtain feedbacks pertaining service and staff performance. This isn’t the case as the business clearly takes this important factor for granted. A lot of customers don’t know the owner of the bakery despite patronising it for years.

On paper the size of small businesses translates to easy accessibility. A closer look will reveal that the owners of small businesses tend to take a lot of things for granted. They fail to realise that they have to be consciously open to the idea and cultivate the habit of seeking feedbacks from customers. A small scale business has to maximise its potential for dynamism and flexibility. If it can’t take advantage of its unique qualities then it’s doomed.

There has been a reduction in the variety of bread baked and in addition to this is the equal reduction in the amount of bread on display generally. From observation it’s clear that patronage has taking a massive hit.

It’s painful witnessing the slow demise of a business with a good product due to its own failures. Having the perfect product won’t on its own keep the small business in business. The odds of the small business surviving aren’t stacked in its favour. It’s more likely to fail than succeed. That’s the bitter truth. However, once it’s able to shake off the niggling teething problems, watch it as it unfolds from a pupa to a beautiful butterfly.

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Customers Are The Heart Of Innovative Businesses

Keep your customer at the heart of your business.

Viga Interactive

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One of the main reasons start-ups fail is because they don’t create solutions that meet their customers’ needs. Failure is avoidable. Businesses that understand their customers feelings, challenges, expectations and motivations make themselves indispensable in highly competitive markets because they recognise that true innovation is led by customer insight.

An incredible example of a business that believes in innovation driven by insight is Netflix. They revolutionised the way people watch video content by listening to their customer’s needs. You’ve probably heard the story before: after paying a $40 overdue DVD fee, Reed Hastings co-founded Netflix. He was simply too busy to return his DVD. He recognised that this experience wasn’t exclusive to him, but that it was a problem that many people faced. He saw a gap in the market for receiving and returning videos more effectively, and that is how the $150 billion business was born.

If your start-up doesn’t fulfil a human need, then you’re setting yourself up for failure. It’s not enough to have a cool idea. Ask yourself, “What is the market need behind the offering?” and then test ways of delivering your offering in the most user-friendly manner. Talk to your consumers, understand their likes and dislikes and establish your business purpose before haphazardly allocating funds to R&D.

Related: How Netflix Is Now Disrupting The Film Industry By Embracing Short-Term Chaos

You can’t go from being a California based DVD-by-mail provider, to becoming the world’s largest online video streaming service without a business plan. It’s important to recognise the step-by-step process of success. Netflix didn’t go from delivering DVD’s to pouring capital into the production of video content within six months. That sort of development would have bankrupt the company almost immediately. It took 21 years for the business to become content creators.

  • In 1999, the company became a subscription service because they found that customers preferred paying a monthly fee rather than making a once off purchase.
  • Then, in 2009, the company used investor capital to expand their DVD collection because their clients wanted a larger selection of movies.
  • In 2010, the business expanded internationally because they saw a gap in the market across various countries.
  • Finally, in 2013, Netflix created its first original content series because customers craved fascinating content beyond the overused Hollywood archetype.

The point is: Progress didn’t happen overnight. The business had to set goals and objectives. They then had to fund their growth by presenting market opportunities, backed by customer insights, to their investors. Establish your start-up one step at a time and make sure every progression isn’t innovation for innovations sake – it must be inspired by a human need.

13-reasons-whyNetflix was founded by a computer scientist and a marketing director. While one partner focused on Netflix’ service development, the other focused on sales. Since the company’s origin, collaboration and balance have been the cornerstones of the business’ success.

Netflix is currently composed of a diverse team of tech-professionals and designers. They understand the importance of combining technology and design to offer customer-inspired user-experiences.

After conducting consumer research, Netflix discovered that series and movie artwork influences viewing decisions by 82%. This has resulted in the creation of more descriptive and provocative designs. Netflix is known for leveraging human-behaviour to revolutionise their service offering.

As an entrepreneur, you can increase your ROI by partnering with the experts that understand human-based innovation.

Keep your customer at the heart of your business.

Related: What These 5 Digital KPIs Say About Your Business

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