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Performance & Growth

How Andrew Cook Took His Business To R8 Million And Beyond

Want to take your business to R2 million? Andrew Cook believes he has the answers with his company Smoke Customer Care Solutions as proof.

Nadine Todd

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Andrew-Cook

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Vital stats

  • Company: Smoke Customer Care Solutions
  • Player: Andrew Cook
  • Est: 2007
  • Contact:  +27 (0)11 462 9881
  • Visit: www.smokeccs.com

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What would it take to double your turnover? The answer to that question depends on where your business is in its growth cycle, and how focused you are on growth.

Smoke Customer Care Solutions doubled its turnover in 2012, and again in 2013. It’s still growing by at least 12% per month. But as founder Andrew Cook will tell you, it’s easy growing from R2 million to R4 million, and even from R4 million to R8 million. Where it gets trickier is taking a business from R8 million to R20 million and beyond.

Related: 9 Things Rich People Do Differently Every Day

So what’s his secret to success? A laser focus on growth, which follows a plan that was meticulously designed from launch.

1. Design a solution that customers want (and need)

Andrew Cook left a successful career at KPMG because he believed that South African companies either didn’t take customer service seriously, or they didn’t know what their customers thought of them.

He assembled a small team of developers who were able to put his vision into practice through simple-to-use electronic surveys that highlighted key performance indicators that businesses could act on.

“We created a customer platform that any company could use. It needed to be cost effective for the customer because our ultimate goal is to make the world more customer-centric – if a product is too expensive, it becomes a ‘nice to have’. We wanted to create a ‘must have’. Once it’s running, it proves itself.”

2. Spend on early development

Even though the business was bootstrapped, all revenue was poured back into development for the first two years. It meant the business didn’t show a profit, but it also meant that the product was getting better and better with each iteration, based on client feedback.

Today feedback can be given through 11 different channels, from SMS to email and phone surveys. The question Smoke’s engineers consistently ask themselves is: Is this the quickest, simplest way for customers to give our clients their feedback?

3. Give your market what it wants

Smoke-CCS

“When we created the business model, it was focused on creating a user-friendly product (called Eyerys) that customers could literally plug and play. We wanted to sell licences, not man-hours, which meant we didn’t want to be consultants. A consulting model is extremely difficult to scale, and it’s much more expensive for clients.

“Eyerys collects an enormous amount of data and distils it into simple dashboards, reports and spreadsheets that our clients can then use to improve their customer service models. The problem is that many of them weren’t using the data.”

It was a key insight that Cook could have ignored. Instead he chose to pivot the business. “We had worked on the assumption that to save costs our clients would want to analyse the data themselves. When we actually evaluated this assumption, we realised that 60% didn’t want to do it – they wanted us to do it.

“The result was that either they weren’t using Eyerys to its full potential, or, in the case of many key clients, the account was costing us money. At the beginning, helping big clients analyse their data was a value add until they were able to do it themselves. We didn’t charge for the service, which meant we didn’t immediately realise how much time our brains were spending on ‘non-core’ work.”

Many businesses don’t track the time their employees spend on accounts, and the result is that key clients actually become a revenue drain rather than a revenue booster, with no one understanding why profits aren’t higher when business is so good.

“Because we track everything, we were able to show our clients that our consultants were spending up to 50 hours over six months working on their data, and that we could no longer shoulder that cost. Our clients were very happy to pay for the service – as long as they continued to get it.”

This meant a new decision for Cook, because it was taking the business towards a consulting model, which was not where he wanted to be. Until he evaluated all angles of the business model shift.

“In situations like these, three things can happen: The business owner can refuse to do something that’s not in the business model; he can take on anything that brings in revenue and lose focus; or he can carefully determine how many resources to give the new division, and find a way to make it work for the original business model.”

This is what Cook chose to do. “This will never be a big revenue generator for us, but we realised that it could be used as a pull factor for clients who want the product, but also want the analytical support to use the product effectively. Don’t ignore what your market wants, or you’ll lose business – but charge accordingly. At the end of the day, keep clients happy in a way that works for both of you.

Related: What the Power of 10% Rule Can Do For Your Profits

4. Focus on sales

Eyerys has been recognised as a leading ‘Voice of the Customer’ solution. Years of pumping money into development has paid off, and while Cook will never cut down on development costs, even great products don’t sell themselves, which is why focus needs to be shifted to sales.

In addition, because the product’s development costs have already been paid for, the business’s margins grow exponentially as sales grow.

“We have a very specific sales model, which is to focus on channel partners rather than direct sales,” says Cook.

“Infrastructure companies speak to customer service reps and decision-makers, so it makes sense for them to recommend us when they’re fitting or maintaining enterprise infrastructure systems

“We could be seeing all the same companies and trying to close deals, but working through channel partners means we’re approaching clients through trusted service providers. It cuts out cold calling, and promotes good relationships.”

For partnerships like this to work though, three key elements need to be in place. Cook and his team only approach telecoms companies with good reputations that they know and trust – adding your product to a business that isn’t delivering good customer service itself will hurt the brand; they understand that they need to always deliver great service so that their partners can trust them – after all, it’s their recommendation that’s making the sale; and a revenue share is crucial to make the partnership worthwhile.

“It means our margins are smaller on each sale, but the volumes are much higher.”

5. Hedge your bets

While business in South Africa is doing well and the brand is steadily gaining recognition, Cook’s main focus for growth is the international market.

Related: Healthy Cash Flow. Great, Now What Should You Do With It?

“I spend a lot of time travelling overseas, visiting trade shows and conferences, and making connections with channel partners in the US and the UK. Because we’re a rand-based business, we’re extremely competitive, and this side of the business is growing daily.

“It’s a licence agreement deal, with no consulting work, so when the rand does well our local business strengthens, but when the rand is weak our international business does well. After all, growth is the name of the game.”

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

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Performance & Growth

Alan Knott-Craig Answers: How To Build A Debt-Free Business

It’s tempting to go the debt route when building your business or asset base, but be careful — debt can kill your business just as quickly.

Alan Knott-Craig

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I’ve been offered debt secured against my shares. I can use the debt to buy a house or buy more shares in my company. I really believe in my company, it’s growing fast. What should I do? — Bob

There’s no such thing as free debt. It always has a catch. In this case, the catch is that if you don’t pay back the debt, then you lose all the shares in your company that you’ve worked so hard to build.

In other words, if your share value doesn’t go up, then you will lose the shares you have.

Maybe you don’t think that’s possible, and maybe you’re right. But you never know what black swan is swanning your way. The president could be assassinated. Russia could declare war on America. North Korea could send a nuclear missile to Japan. There could be another credit crisis.

All of these things would have massively negative impacts on the economy and sentiment.

The economy affects your profits (sales drop). Sentiment affects your ability to sell your shares (no confidence = no buyers).

Suddenly you find yourself staring down the barrel of a debt repayment deadline, and BOOM! You’ve lost your company and your wealth.

That’s not to say you should never take risks. When you’re young you have to gamble a bit. Roll the dice. Just beware of debt. Debt kills.

Related: Dealing With Debt As An Entrepreneur

The only legitimate reason for taking debt to buy shares is if your partner wants to exit the business. Maybe she’s met the love of her life and wants to move to Tahiti, and if you don’t buy her shares then someone else will and you’ll find yourself in bed with a stranger.

If you don’t have the cash then you need debt. Fair enough. But be very careful. Debt kills. I can’t emphasise this enough.

It’s best to live life imagining the shares in your company are worth nothing. That way you won’t live beyond your cashflow. And you won’t take debt against your shares.

If you’re still tempted to get debt, ask yourself, “Do I love what I do?” If the answer is “No,” then definitely do not take any debt. Debt will simply yoke you to something you don’t love. Debt will make you a slave.

Generally speaking, debt is driven by greed. Greed, greed, greed.

And greed always ends in tears.

I want to build a property empire, but every time I buy a new property I’m forced to sell my existing property because the bank refuses to give me two bonds. At the moment I’m struggling to cover my bond repayments with rental income. Advice? — Phumlani

First thing first, read Rich Dad Poor Dad by Robert Kiyosaki. This book will tell you everything you need to know.

In summary, it’s about using the bank’s money to make you rich. Borrow money, buy property, use rental income to pay off mortgage, you’re left with asset and income stream. Boom! What could possibly go wrong?

Here are some rules of thumb:

  • Buy commercial property. A tenant that relies on his premises to generate income will look after those premises more than a simple residential tenant. In other words, you’ll spend more money maintaining your residential property.
  • Location, location, location. Pick an area with low risk of property prices failing. It might be more expensive but your first priority is always “Don’t lose money.”
  • Yield is everything. Divide the annual rental income by the property value. If more than 7%, go for it. If less, don’t. You want the yield to be close to prime rate.
  • Don’t take more than 50% debt. You never know what will happen. If the tenant misses her rent for a few months you want to have a safety cushion so you don’t get caught short of cash when your monthly mortgage repayments are due.
  • Never sell. The transaction costs for buying and selling properties will eat away your profits. Buy to hold. Never sell.

Remember, there’s nothing wrong with growing without debt. Many property moguls never ever used debt to grow their empire. It’s slower, but safer.

Debt is a shortcut. Sometimes it works, but most times it ends in tears.

Related: 7 Ways To Be Debt Free For The Rest Of Your Life


Read this

13-rules-for-being-an-entrepreneur-coverAlan Knott-Craig’s latest book, 13 Rules for being an Entrepreneur is now available.

What it’s about

It’s easy to be an entrepreneur. It’s also easy to fail. What’s hard is being a successful entrepreneur.

For an entrepreneur, there is only one important metric of success: Money. But life is not only about making money. It’s about being happy.

This book is a collection of tips and wisdom that will help you make money without forgoing happiness.

Get it now

To download the free eBook or purchase a hard copy, go to www.13rules.co.za.  To browse Alan’s other books, visit bigalmanack.com/books/ 

Ask  Al

Do you have a burning start-up question?

Email: alan@herotel.com

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Performance & Growth

South African Investors And Entrepreneurs, The World Needs You

With governments and corporations across the globe constantly on the lookout for innovators and entrepreneurs, time is most certainly against those who remain constricted by their limited citizenship portfolio.

Amanda Smit

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malta

Citizenship-by-investment (CBI) was once seen as something only reserved for the ultra-wealthy, but it is now also becoming the new normal for business investors and entrepreneurs wanting to expand their reach. We live in a highly globalised world where the flow of goods, people, and ideas means that the freedom to move and do business internationally has never been more important. With governments and corporations across the globe constantly on the lookout for innovators and entrepreneurs, time is most certainly against those who remain constricted by their limited citizenship portfolio.

How can citizenship-by-investment benefit South African investors?

First of all, entrepreneurs with multiple passports or residence permits are able to take advantage of the benefits and best practices of all the countries to whose jurisdictions they belong, while also being less vulnerable to a single country’s risks, shortcomings, and unexpected changing fortunes. The more jurisdictions an investor can access, the more diversified their assets will be and the lower their exposure to both country-specific sovereign risk and global volatility. By acquiring a higher quality nationality, one obtains greater global access and is better prepared for an uncertain future.

Nations within the EU, for example, offer citizens and residents access to all 28 member states, as well as to a number of other countries associated with the EU’s freedom of movement charter. In addition to expanded global mobility and a reduction in sovereign risk, alternative residence and citizenship also offer individuals access to career, educational, and cultural opportunities on a global scale.

Related: Funny Thing Happened On The Way To Global Expansion: We Met Our Doppelgänger

The benefits to governments and citizens of host nations

st-kitts-and-nevis

It would, however, be misguided to think that the advantages presented by citizenship-by-investment are for investors alone: for the governments and citizens of host nations the benefits are substantial. For governments, the inflow of extra capital reduces pressure on the treasury and protects national sovereignty by helping to mitigate the need for loans. Indeed, the establishment of a transparent, well-managed CBI program is not dissimilar to discovering a sustainable source of oil within the confines of a country’s national borders. Both scenarios create an immediate injection of new funds into the national treasury, which ultimately leads to greater long-term prosperity for the country and its people.

Successful applicants also bring intangible benefits to receiving countries, such as scarce skills and rich global networks. They add diversity and they uplift host nations through their demands for improved and novel services, which can create new opportunities for local communities. In Malta, for example, the establishment of a CBI program was as much about attracting rare talent as it was about generating much-needed capital in the aftermath of the 2008 financial crisis. Four years after the launch of the Malta Individual Investor Program (MIIP), Malta has one of the highest GDP growth rates — and one of the lowest unemployment rates — of any EU member state. In 2017, the country also reported a record-high budget surplus, with 90% of the gains attributable to the MIIP.

For smaller economies that face increasing trade and industry competition on the global stage, such an outcome can be transformative. Take the Caribbean nation of St. Kitts and Nevis, for example. Three years after relaunching its CBI program in 2007, the program accounted for around 5% of the country’s GDP. A year later, this figure had doubled, and after the sixth year, the figure had doubled again to 20%. By 2014, the St. Kitts and Nevis CBI program was responsible for approximately 25% of the nation’s GDP.

Related: From Local To Global – How To Expand Your Business Internationally

Moreover, other projects made possible through Caribbean CBI programs have had the knock-on effect of boosting employment and contributing to the greening of their economies. For instance, in Antigua and Barbuda an award-winning 10 MW clean-energy project cluster was realised within two years of launching its program. In addition to large-scale installations, over 50 schools and other government-owned buildings have been equipped with sustainable solar-energy systems in order to benefit from the new clean-energy supply. Such innovations were only made possible through the funds conferred by the country’s CBI program.

Thus, the inflows of funds from citizenship programs can be considerable, and the macro-economic implications for most sectors can be extensive. Just as traditional foreign direct investment (FDI) increases the value of the receiving state, bringing in capital to both the public sector and the private sector, so the benefits proffered by CBI — a form of FDI — rapidly turn the fate of a country away from debt and dependency and towards independence and stability.

Conclusion

In short, citizenship-by-investment is a boon to both host nations and investors alike. For South African entrepreneurs and investors who find themselves burdened by visa restrictions and red tape, acquiring a second citizenship is a simple means of expanding global reach, getting ahead of competitors, and giving something back to host nations that are only too grateful to have these talented individuals as part of their community.

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Performance & Growth

First Rule Of Securing Growth Capital: It’s Not About The Product

Paragon CEO, Gary Palmer, discusses the pitfalls facing business owners searching for capital to fund expansion.

Gary Palmer

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A common mistake made by entrepreneurs looking for growth capital is fixating on which product they should choose. When looking to finance growth in your business, the decision process should be focused on longer-term strategic priorities and then finding a partner to help you access the right product to deliver on those goals.

Let’s get real

At the outset business owners need to look at their business realities and decide whether they should be looking for debt or equity financing. For example, if a business can only support debt of 2.5 times EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation), and they are already at that limit, then they will need to look for equity financing to achieve their growth goals. In many instances, a combination of both debt and equity financing will hold the key, allowing the organisation to benefit from cheaper debt funding, but ensuring that it is not overextended.

Related: Dragon’s Den Polo Leteka Gives Her Top Tips To Attract Growth Capital

Even if the growth project can be funded through debt alone, business owners face the challenge of dealing with a multitude of institutions, each of which puts emphasis on different aspects of the deal. No business owner can know the minutia of their requirements, and so working with a partner who can help you prepare your presentations is a must.

The challenge becomes all the greater when companies may be looking to finance a non-traditional project. We have a client who is looking for finance to build roads leading to his development. This is not something traditional lenders usually deal with, and so in this instance he will need to access more creative funding options not offered by the banks. Another example is when a founder is looking to buy out other partners, this too may need to go to a lending institution which is able to structure deals for out-of-the-box requirements.

Square pegs, round holes

A common frustration faced by business owners is that some lending institutions sell products rather than solutions. Too little time is spent understanding the needs of the client and designing an appropriate solution, tailored to the client’s unique requirements. These lenders are literally forcing the client’s needs into the limited number of financial products they offer.

It’s going to get more complex

Another challenge for business owners is the sheer number of institutions out there. New funds, new lenders and the plethora of fintech offerings are making it harder for growth companies to find the best offer available. In the US and Canada, more than half of the big property deals are now funded by non-banks. We believe South Africa is headed the same way. The added competition, is of course great for the market and will encourage better service and more creative options, but it does make it difficult for business leaders to keep track of everything available.

Don’t fall prey to borrower’s remorse

In so many cases, companies are in a rush to secure funding and often end up choosing a product which is not suited to their longer-term strategy. Getting out of a transaction can be exceptionally difficult. Far too often companies wake up to better options too far down the line. If more appropriate finance is found, companies will be left carrying the settlement fees attached to their previous funding, not to mention the administrative pain of changing lenders.

Related: Funding Growth

Paragon has over 150 lenders on its books and a network of angel investors which we can access to find the right deal. It’s our job to know exactly what is available and more importantly, to work with business owners to ensure they access lending which is not going to result in borrower’s remorse. The only way to ensure good results is to start the lending hunt with a partner who can help you first determine the right lending strategy, based on your business reality. The alternative could prove both expensive and painful.

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