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Performance & Growth

Market Stifled? Create Your Own

Escape economic doldrums and achieve maximum business growth.

Pavlo Phitidis

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In the days of wind powered seafarers, the true skill of a ship’s captain was measured by those who traversed the Atlantic and the Pacific. What made these journeys so treacherous were the doldrums, spaces and places of no wind.

Not a breath sometimes for days on end. Caused by the centrifugal forces of the earth’s spin, the doldrums claimed many pioneering and ambitious captains, crews, the ships they sailed in and ultimately, the investors who lost all but their lives.

The strategy adopted by smart captains was this: Acknowledge that you’re in the doldrums and then act. Get your crew on deck to take up oars and paddle to where the headwinds are blowing. Those that sat and prayed for an end to the doldrums often perished.

Related: Thriving in a Downturn

Paddling a seafaring ship is no mean feat. It’s hard. The ship was designed to be powered by wind, not grumpy sailors. The smartest captains would even offload hard-won cargo into the seas to lighten the load since they knew it was a race against time and resources – water and food!

The South African Doldrum

Today, I believe that South Africa is in the doldrums. The rand has collapsed, our recent credit rating places us just above junk status, the impasse between labour and business deepens and that between business and government is at an all-time low.

Ambivalent economic direction and leadership suggests the doldrums are here to stay for a while. Any prediction of when they will end will make one look like a fool or a genius. Either way, it’s too risky to bet, and good entrepreneurs are risk averse.

At Aurik Business Accelerator we’ve conducted 22 000 entrepreneur assessments, and the best performing entrepreneurs have a number of things in common, one being a low tolerance for risk, and a habit of only moving once the downside risk has been capped.

The best way to alleviate the worry of the doldrums is to act. Paddle towards the headwinds. Make changes in your business model, strategy and perhaps life.

The big benefit today is that we have  many radars pointing clearly to where the headwinds are blowing. As a South African entrepreneur, when I look into this radar I see a weak currency that seems intent on depreciating further as long as current conditions hold.

I also see a distinct and unique heritage, English as the language of business, a collection of excellent trade agreements such as the African Growth and Opportunity Act allowing exports into the US to be duty free, the source of raw materials and brainpower.

When I shift the radar further afield, I see flat, soft economies globally, intense competition, humility brought on by tough times, and the need to innovate to sustain and build business. In one word, the appetite for change in foreign markets is greater than it’s ever been, and with change, the appetite to accommodate new ideas has grown remarkably.

The starting point is always to work with what you’ve got. Looking at the radar of three entrepreneurs that I work with can provide some inspiration, insight and ideas on what we could do.

Related: How to Survive – and Grow – in Tough Times

The Biker Fashionista

Preston has always had a natural talent for fashion and making any item of clothing look edgy and sexy. 20 years back he created a brand called Rip Torn that targeted urban, hip, edgy young professionals. It was a hit.

Recently he became interested in biking and noticed that the protective clothing that bikers wore was, well, very functional. It made a biker look ridiculous and overweight with a contorted body made up of knobbly knees and a big bum.

Within a short period, Preston came out with a range of bikers’ wear that challenges the edgy, sexy clothing ranges of Diesel, True Religion and the like, but with all the functional features of traditional bikers’ wear.

The jeans were Teflon coated inside, had removable knee guards inside the leg, gauzes to increase airflow and reflector tags in all the right places.

The range got launched and the business is being built. Preston’s radar points his ship towards an obvious set of headwinds.  Niched customer segments, such as bikers amongst others, are easy to find and reach globally.

Bikers cliques are serviced by passionate, biking retailers that are easy to locate globally. On the back of his unique, edgy fashion biker wear, a number of models would see Preston leveraging his fashion range here in South Africa into the same market abroad.

His choice of country must capitalise on trade agreements, the weak rand, his unique designs, and the fact that a retailer in that foreign market will want a point of difference.

That retailer is hungry for something that will set his outlet apart from other competitors in his market. Preston’s strategy for entry could be through an agent, distributor or direct, but this is another discussion. His radar is clearly indicating which direction he needs to paddle his ship to catch some very fruitful headwinds.

The Leather Lord

As a second generation entrepreneur, Thomas’ taxidermy business is built on one of South Africa’s most sustainable natural resources: The hunting industry. Popular or not, it brings in over R1,6 billion of foreign revenue and employs well over 400 000 people.

Foreign hunters pay fortunes to spend a week on a hunting trip and leave with a trophy. The skills of a good taxidermist include the tanning of skins which allows for the manipulation of the leather into shapes and creates a smooth feel.

His greatest competition comes from US taxidermists who also target American hunters. They claim that South African taxidermists cannot be trusted to turn a hunt into a trophy; that they’re poorly skilled and unreliable, and a hunter can ill afford to take chances. It’s problematic for Thomas.

The creation of a hunting trophy has a number of stages and each stage adds tremendous value in the process. Ideally, Thomas, and South Africa, want the complete trophy to be made here.

Thomas’s radar is spinning hard and never before has timing been so good to paddle towards headwinds blowing in the faces of his competitors. In the niched taxidermy industry, American competitors who are at a cost disadvantage serving the same market will find relief in having a significant portion of the taxidermy process done locally where the cost of labour is lower, the advanced process of value dropping the shipping costs further and no need to use preservative chemical for the hide.

The competitive price advantage for a taxidermist in the US using Thomas for this purpose would provide an undeniable competitive advantage.

Related: Disrupt Your Thinking, Transform Your Business

The Dignified Driver

Martin had a terrible accident at the age of 26. On a weekend away with friends, he jumped into the Vaal River from the same spot as the day before and hit a sandbank, which left him paralysed, unable to move his hands or legs. Many of us would have resigned our lives at this misfortune. Martin did otherwise. He went on to build one of the world’s best 4×4 electric wheelchair manufacturing businesses, selling wheelchairs locally and globally today.

Most disabilities occur at a time in one’s life where you don’t know what you don’t know and so the purchase of a wheelchair is a tricky business. Martin’s wheelchairs have the benefit of being designed by someone who knows what your life will be like.

I understand that a great frustration is the complete loss of independence, having to rely on people for almost everything. In addition, it’s likely you use a catheter. Catheters that aren’t managed and not emptied can cause fatal infections. Martin’s experience in this field led to him designing a number of useful elements to his wheelchairs.

The most recent has been a solenoid that Martin designed to allow the user of the wheelchair to independently void the catheter. You simply drive out the room, find a tree, park under it and release the contents of the catheter with a wisp of your breath: A completely independent solution avoiding an embarrassing request for help, and potentially fatal outcome for inaction.

Similar to Preston and Thomas, Martin’s radar is pointing to strong headwinds. A niche market, proprietary design, local manufacture using many local parts, a weak currency lowering his final costs, and a trade agreement.

Sourcing and finding other manufacturers and licensing the solenoid or supplying it for their use on their products is in itself a significant business. What makes it even easier for Martin is the fact that he has an international reputation both as a motivator, inspiring all who have the benefit of meeting him, but also as a user.

There is undoubted sincerity in his presentation of the product. Imagine his story in the US!

So, to all entrepreneurial captains out there, look at what you have, combine it with what we have in South Africa, and begin paddling to the headwinds. It may take time but when your spinnaker fills with wind, you may wonder why you never did it before.

Your first step is acknowledging

Admit you’re stuck in a doldrum, then act accordingly. Those who do nothing will perish.

Plot your direction

Shift your radar for headwinds or market opportunities, then paddle if you have to, to get there.

Related: Silent Killers of Great Businesses and How to Avoid Them

Pavlo Phitidis is the CEO of Aurik Business Incubator, an organisation that works with entrepreneurs to build their businesses into valuable assets. Pavlo is a regular commentator on entrepreneurship on 702 Talk Radio and 567 Cape Talk Radio. He can be contacted at www.aurik.co.za

Company Posts

How Partner Elite Helped My Business Grow

David Seinker, CEO of The Business Exchange, talks about his journey with Raizcorp’s Partner Elite division and how it contributed to the growth and success of his business.

David Seinker

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I started out in corporate property but later decided to launch my own business helping entrepreneurs connect with investors. My first office was in a business centre (now one of my competitors) which was extremely full with a waiting list. I realised I could provide what they were offering but add something new and exciting with a networking angle, and so The Business Exchange was born.

When I first started the business four years ago, I approached Allon Raiz and subsequently joined Raizcorp’s Partner Elite programme. The team at Partner Elite have been very influential from a strategic point of view. We have also received important marketing guidance from Raizcorp in terms of public relations, media exposure and the website, and even the aesthetics of our workspaces. Allon has also given us airtime on his TV show The Big Small Business Show. I have appeared on the show a number of times, and Allon has interviewed some of my tenants which has been a real value add.

Partner Elite has really helped me with business processes, and introduced me to their Flowcode system – a really clever, unique approach to building strategy and creating processes. It’s been very relevant in terms of what the business needs and I am already seeing the benefits.

Related: How Allon Raiz Went From A Failed Business To Raizcorp And All The Lessons Along The Way

My journey with Partner Elite has definitely helped me to grow as a person. I have a much clearer understanding of my weaknesses, and how to deal with them and turn them into strengths. When I started on the programme, a key thing that came out of the panel interview was that I wasn’t as good a listener as I could be. I believe there are many entrepreneurs who don’t listen enough and think they’re always right, and I remember Allon asking me, “Would you rather be right or would you rather be rich?” We’ve done a lot of work on listening and also on leadership skills which is an ongoing process.

When I originally approached Partner Elite for investment, I thought I would acquire a certain sum. Their investment in The Business Exchange, to date, is 22 times what I initially asked them for. They have supported me through my growth and have ensured that, not only did I have the funding, but that I expanded commercially and strategically.

After starting with one business centre, we are about to open our fifth in Mauritius and are looking to expand further into Africa. We now have almost 10 000m2 of property in our portfolio. In terms of staff, we started out with just me and a receptionist but we are now employing 30 people. Our revenue has grown and so have our profits. The next big development in our journey will be buying property instead of leasing it. That will be a big diversification for us.

I have had – and am having – a great journey with Partner Elite. It has provided me with a platform to test myself, bounce ideas off others and strategise. It has added a lot of value and I don’t think I’d be in the position I am without it. I highly recommend joining Partner Elite if you are serious about your business and you want to grow.

To find out more about Partner Elite, please visit www.partnerelite.co.za.

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Company Posts

Sasfin Is Gearing Your Company For Growth

How trade and debtor finance solutions can enable business growth beyond self-imposed ceilings created by cash flow restraints.

Sasfin

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When an entrepreneur running a manufacturing business approached Sasfin for Trade and Debtor Finance, he had four things going for him: Experience, reliable customers, orders and a relationship with Sasfin. When other banks let him know via email that his financing had not been approved, he approached Sasfin, knowing the organisation would take a deeper look at his company than a spreadsheet analysis.

“He approached us because we had a working relationship with the business and they were looking for a facility that would enable them to purchase the stock they needed to fulfil their orders,” says Linda Fröhlich, Head of Business Banking, Sasfin.

“They didn’t have any assets, but they did have those orders, which meant they could bring their debtors to us and we could advance cash against them, getting them started.”

Solutions to enable growth

Today, Sasfin offers a full suite of inter-connected products designed for entrepreneurs and SME owners, but the bank, which operates under the slogan, ‘Beyond a bank’, was built off a base that began with trade and debtor finance.

Related: CEO Michael Sassoon Shares Sasfin’s Successful Strategies To Stand The Test Of Time

“Sasfin’s founder, Sydney Sassoon, went into trade finance in the 1960s because as a textile importer he recognised the need for trade finance amongst SMEs and importers,” says Linda. “It takes an entrepreneur to understand entrepreneurs. This business has never been about products — it’s about the best solutions to enable our clients to grow their businesses.”

When Sasfin first launched trade finance it was because of the challenges around importing goods: The time it took for the shipment of raw materials to arrive, manufacturing to take place, the finished article to be sold and then a further 60 days for payment was crippling for SMEs.

Not only were no facilities available that understood that time frame, but traditional overdrafts require security and are not designed for specific needs. Trade and debtor finance on the other hand work hand-in-hand and provide SMEs with the most valuable commodity: Cash.

Cash is King

“Through trade and debtor finance, we can finance the purchasing of your goods and I can give you terms that fit your cash flow cycle,” says Linda. “Now that’s meaningful for the business owner. Yes, we charge for the facility and the risk we carry, but if you have to make a payment upfront to an exporter, you can also negotiate discounts and off-set a portion of the discount you will receive from the supplier to our fees, which is win-win.

“More importantly though, the biggest challenge that SMEs face is cash flow. Cash flow is king, and that’s where trade and debtor finance comes in. If you borrow money that enables the growth of your business, the finance cost is part of the cost of your sales. The upside is that you have access to cash, enabling growth.”

Many SME owners are familiar with the challenges of growth: You work hard, build your client base, get traction in the market, and suddenly you’ve signed a large order or client whom you can’t service without assistance, because your own cash flow doesn’t cover the raw material costs of the order.

“This is true across all product-based industries,” says Linda. “Instead of slowly building cash reserves to grow the business organically, or waiting between 30 days and 60 days for clients to pay, we advance our clients up to 80% of the value of fulfilled invoices, enabling business owners to grow beyond a self-imposed ceiling created by cash flow restraints.”

Related: Think Beyond The Box

Gearing up

Over the years, Sasfin has watched its clients grow from strength to strength.

“One of our SMEs started out with a R5 million facility. Today they’re operating a R50 million facility and continue to grow. That’s the power of cash flow,” says Linda.

“There’s always a good time to gear-up the growth of your business, where it will enhance the growth and profitability of your company. If the time is right, a financing solution that suits your needs can make all the difference.”

The benefits of trade and debtor finance

  • Converts sales with proof of delivery into cash for day-to-day expenses
  • Extended terms of repayment, with up to 120 days for local purchases and 150 days for imported goods
  • A fully disclosed factoring facility or a confidential invoice discounting facility
  • Match sales to repayments, enabling cash flow management.

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Performance & Growth

My Business Is Growing… What Now?

Unplanned growth can be disastrous for a business, particularly a start-up where most of the departments consist of one person – the founder – or where the business has been based in one city or town or focusses around one service or product for some time.

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It is a known fact that most growth and change are uncomfortable – especially in business. However, when your business grows, you grow with it and so will the business revenue, employment numbers and contribution to the country’s economy. Planning for growth is not only a good way to stay motivated through tough times in business, it will equip you for when the moment of growth arrives– to take your business to the next level.

Make the mind shift

James Cash Penney, founder of JC Penney, said:

“No company can afford not to move forward. It may be at the top of the heap today, but at the bottom of the heap tomorrow, if it doesn’t.”

Business growth should be actively pursued and be a constant part of your business planning acumen. Frequently ask yourself and your staff members: Where do we want to go to next, and what will we do to get there?

Take time out to plan

Research and planning lead to informed decisions which will be critical for your business growth. Consult all stakeholders – external and internal – through meetings or Strat sessions. Whether you bill by the hour, or bake by the truckload, it is critical to remove yourself from operations at least twice a year to take figurative stock of your business growth. This process requires you to be quiet and give it the importance it demands.

Related: Growing Globally – Supporting SMEs On The International Stage

Reasons for growth

Studies have shown that the top five reasons for growth include:

  • To increase the business’ market position
  • To increase profitability
  • To improve the use of company resources, better economies of scale
  • To increase frequency of use or number of users
  • To remain in business.

Know your obstacles

Know what challenges you may face on your journey to growth and be ready for them. Listing the obstacles will bring reality home and help you prepare for how to tackle these obstacles. Think of creative ways to sidestep these barriers to growth by being flexible.

Be brave

Continuously look for planned, achievable and sustainable growth opportunities. Calculate the risk, be mindful of the pitfalls, but do take up new growth opportunities in your business. See growth as the opportunity – that big break – you have been waiting for in your business, and it just could be that. Start slow or small but do continue to grow your business. In the words of Virgin’s Richard Branson: “There are people in this world who choose to see the glass half empty instead of half full… Personally, I see any glass half full as an opportunity to top it up, start a conversation and perhaps spark a great new idea.”

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