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Performance & Growth

Want To Build Your Business? Sweat The Details

What is the secret to growing a business successfully? After a decade of business, I’ve learnt that it’s the nuts and bolts that keep the ship afloat.

Vusi Thembekwayo

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I recently celebrated a decade in business. Reaching this milestone got me wondering whether or not the things that they say we need in business (and the phases we experience) are actually true?

Are the first 999 days crucial? Do all businesses suffer a near-fatal fiduciary crisis in the five-to-seven year period? Does the risk embedded in the business morph and become more sophisticated as the business becomes older and larger?

I traced the journey of entrepreneurship as I have experienced it. I remembered the first eighteen months: The early days full of starvation, big dreams with limited resources and a wolf-like resolve never to let go of my prey (the client).

Related: 50 Steps Every Entrepreneur Must Take to Build a Business

I remembered the first time I had substantial funds in my bank accounts and how liberating that feeling was. My disposition changed. I began to worry about the softer things: The legacy I was leaving, the culture I was building and the change I was effecting in the lives of clients.

I remembered my first office outside South Africa — the thrill of knowing that we had truly built a global business without secure tenure from contracts, but rather through proving our mettle to clients on a daily basis.

Each of these milestones represented a change in the level of thinking for me as the entrepreneur, but also for my team, and even my family. Opportunity must meet an able and equal mind.

Many people fail not because of the lack of opportunity — although that remains a serious challenge in South Africa — but because their minds were not ready for that opportunity.

So what are the realities of building a high-growth business? How do you ensure that you protect yourself from yourself? How do you ensure that growth, whilst necessary, is controlled and manageable? Here are my two strategies:

rock-fall-risk

1. Risk is real

Many theorists have argued that risk and opportunity exist in equal measure; that the larger the risk, the larger the opportunity. My experience has been that this is a fallacy.

Risk and opportunity are often omnipresent and like to travel together, but they are not proportional. Opportunities tend to be affixed to the reality of the need from the client, while risks change as our behaviours change.

Lesson: Manage risk as a standalone entity unencumbered by the elusive opportunity.

Related: How to Build a Business That Works Without You

2. Process must be strong

Each time I made a poor decision that jeopardised my business, I was being driven by character, ego, personality, pity or some other emotional force. To mitigate this behaviour, I had to begin to think about building strong and robust processes that would protect me — even from myself.

Large companies have internal audit and compliance. Developing businesses need robust processes that the entrepreneur, regardless of his or her feelings, must stick to. Take something as simple as hiring at a management level. We all have a specific process, and yet, when you need the hire and you’re taking workload strain, it’s easy to want to ignore these processes. Don’t.

Lesson: You are not above the processes and systems that govern your business.

Related: Lead The Charge By Building Your Business Momentum

We all desire a high-growth business. But growth — if not controlled — can be a curse. Most of us become the hurdles to our own development by using old thinking and learnt behaviours (habits) to make new decisions in a changing context. Free yourself of your own biases. Build strong processes and stick to them.

Mr. Vusi Thembekwayo has been an Independent Non-Executive Director of at RBA Holdings Ltd. since May 14, 2013. Mr. Thembekwayo has already collected numerous accolades and awards as businessperson, entrepreneur and international public speaker. Mr. Thembekwayo completed a PDBA and a course on advanced valuation techniques with the Gordon Institute of Business Science and completed a Management Acceleration Programme (Cum Laude) with the Wits Business School. His speaking achievements include the international hit talk “The Black Sheep” which he delivered to the Top 40 CEOs in Southern Africa, addressing the Australian Houses of Parliament and speaking at the British House of Commons. To add to this, Vusi speaks in 4 of the 7 continents over 350 000 people each year.

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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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Performance & Growth

How Well Do You Really Know Your Customers?

Staff are more secure, and turnover is decreasing.

Nathalie Schooling

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All businesses go through 4 distinct stages of growth. In the early start-up days everyone is thinking on their feet, few formal processes are in place and sales funnels are still being constructed. Then the business enters the growth stage where things become more formalised and client relationships are maturing into the three to four-year mark. Staff are more secure, and turnover is decreasing.

Next is into the maturity phase, growing by about 5% annually with early employees entrenched with 8 – 10 years’ tenure. This is the stage where you feel most secure, with operations being predictable and revenue steady. But it is also the most critical period in your company’s life as this is when complacency may set in. This leads to the last growth stage for a business – renewal or decline.

Renewal equals customer growth

Your business’s final growth stage must start with identifying what customer value is still untapped in the business. The Pareto Principle or 80/20 Rule, says that 80% of your business wealth will come from 20% of your customer base. Since it costs 10 times more to acquire new clients than to sell to the ones you already have, focusing on existing clients should be a no-brainer.

To talk to and retain these all important existing clients, it is essential to provide value through the entire customer lifecycle; from when you acquire them to engaging them in meaningful conversations to retaining them by continually providing value – ultimately turning them into brand advocates.

Related: 5 Reasons Why Your Business Is Losing Customers

Key relationships not just transactions

Engaging with your customers this way moves you away from a transactional approach to a more long-term partnership. But to do this your clients need to trust your company. Not just the sales team, but everyone at every touch-point. I have found this to be especially true for the B2B market. Clients want to do business with a business that continuously adds value to them – not taking their account for granted and making them feel that their business is important.

This more long-term approach means greater value to the right clients, in the right ways at the right times. Collectively, the long-term effect should result in greater customer retention, preventing churn and attrition, turning your clients into loyal advocates. So it is vital to have an ongoing and robust helicopter view of your clients’ sentiment. Don’t put your head in the sand. Be brave, ask the tough questions and then listen to the answers.

It’s not just up to Sales

Identifying who you regard as key clients must be done carefully with clear criteria, leaving you with a core group (your 20%) that is a manageable size. Implementing a more customer-focused approach is a different way of doing business and will require buy-in and advocacy from the highest levels within your organisation.

There will need to be acknowledgement and agreement to work differently with certain priority clients. If a key account is promised priority access to urgent products or service, Operations will need to provide it, not Sales.

Protecting your business against decline can most simply be done by growing value that is already in your business, both by investing in staff and by growing revenue from your key clients, renewing not only your business strategy but also your relationship with the people that enable you to do business.

Read next: Effective Ways To Bring Customers To Your Door

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Performance & Growth

What Should I Do If My Business Has Outgrown Me?

Here are a few tips that will help you get ahead of your business’s growth.

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If you’re reading this and thinking, “Yes, I’m there right now!” then first of all, congratulations. Your business is thriving and in this economy that is a testament to your vision, your drive, and your team. Well done.

However, you might also feel less celebratory right now, because your growth has reached a point where you feel the control and insight into your business is slipping through your fingers like water.

Here are a few tips that will help you get ahead of your business’s growth:

  1. Be honest. This is probably the most important step and the best place to start. Be honest with yourself that your business has outgrown what used to work when you were a startup or a smaller SME. If you’ve lost sight of your business’s day-to-day operations, the staff issues, the stock and production queries, and your bottom line, then be brave and own it. Many people have stood in your shoes and bounced back, and you can too.
  2. Recognise your own limitations. Yes, you are the founder and visionary of this business and it has risen to this state of success on your back. However, at this point in your business, you cannot be the only wellspring of productivity or experience. Invest in yourself, and your business, by meeting with a reputable business coach for a fresh set of eyes on your business processes in order to increase your business’s capacity.
  3. Invest in people. When you start a business, it is often difficult to hire an expensive, well-experienced, weighty management team. This might be the right time to start. Invest in your senior management team by hiring the right people, even if they come with a higher price tag. Their experience and expertise in managing people, as well as steadying the ship in this growth phase, will help you tremendously as they shoulder some of the burden of leadership in their departments.
  4. Outsource. This point is not a new idea in South Africa, but servers as a good reminder. If your part-time bookkeeper is not up to the task of running full financial reports and handling your VAT and Tax payments, but you cannot justify the salary spend of a full-time CA, then investigate outsourcing for your financial management requirements – you get CFO expertise at a portion of the cost. The same goes for marketing management, as well as any other secondary but vital function that you and your team don’t have capacity to get to.
  5. Upgrade your systems. Immediately. If you have several applications to handle the various functions of your business – such as warehouse management tool, time tracking app, accounting software – and these don’t communicate with each other, then this is a tower of cards waiting to collapse. If you’re still using paper, or a spreadsheet to quote, or manage stock, or write reports, then I guarantee you that you have very little clarity into your business, and even less control of what’s going on. More than that, you are using valuable time for admin tasks that can be automated with ease, and for an affordable price. South African ERP systems offer SMEs what international systems offer big corporates, but for a fraction of the price. Only a robust system that communicates with itself can carry the weight of your growth, and provide you with the data you need to steer the ship with care and confidence.
  6. Goal-set through. Be careful of this one; it is an easy trap to reach your goals, and then fail to create a new one in the process. This can often lead to depression and lack of motivation. If growing your business to a certain annual turnover or production rate was your only goal, then take the time to goal-set through. What will you aim for once you have reached your goal? And once that goal is reached, what is your next goal? Human beings are teleological – we need a goal, or purpose, a reason in order to thrive. Keep on giving yourself – and your team – a reason to grow, and communicate it regularly.

Read next: Learning To Let Go: 5 Realities Of A Scaling Start-up

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