Great idea, wrong spot
- Borjan and Lidija Ivanonic are the founders of Balkan Burger.
- What started as an experiment at a farmer’s market has grown into a full-time, highly profitable and successful business.
“We bought a 1967 short-body school bus that we converted into a mobile food truck. We took it to Arts on Main in Maboneng and parked it at the entrance of the market, but that didn’t work out for us. It was a great marketing tool – people would stop and chat and want to learn more, but they’d always say they’d come back after looking around and then forget about us.”
Borjan Ivanovic is very candid about the wins and losses of growing Balkan Burger. Effectively pioneers of mobile food trucks in Joburg with no one to guide them, they spent a lot of money buying and outfitting a very cool mobile food truck that was not yet needed.
A combination of being a purchase made too soon and positioning it in a bad spot for food sales, it was a costly trip-up that only started paying itself off once they joined other markets and started landing catering jobs.
Wanting to start a business? You should read these books first
Give people what they want, not what you want
- Andrew Leeuw and Herzon Louw are the founders of Sumting Fresh.
- Starting out as a food trailer in the streets of Midrand and making negative profits at first, they’ve since grown by 9 000% and have a staff contingent of 18.
“I’m a qualified chef and opening my own restaurant was just far too expensive to consider. I figured I could bring people restaurant-quality food from a food truck but learnt hard and fast that that’s not what people wanted. They wanted street food.”
Andrew Leeuw and Herzon Louw learnt a costly lesson in their early days as street food vendors. They were serving expensive food, expensively, because that’s what Leeuw thought people wanted. The minute they pivoted and focused on selling quality street food at value-for-money prices, sales rocketed. They went from 80 portions and – R480 a day, to 120, 240 and beyond.
“We really had to take a hard look at ourselves, develop our own identity and style, and then bring it to the people. Be flexible, take criticism constructively, and don’t wait for the customers to decide who you should be.”
Read more: 4 Ways Entrepreneurs Can Become Truly Great
Estimate how long you think something will take, then double it
- Yossi Hasson is the co-founder of Synaq.
- Established in 2004 the firm underwent major changes that allowed the business to scale much more efficiently.
- In 2011 Dimension Data bought a 50,1% share in the business, allowing them to scale at even greater speed.
“When we made the decision to convert from a product-based business to a service-based business, we lost R1,8 million, we owed SARS half a million rand, and grossly underestimated the complexity of the change and planning for it. What we thought would take six months actually took two years.”
It was an incredibly tough time for Yossi Hasson and his business partner David Jacobson, but they maintain it was the best move they ever made.
“We recovered through management pay cuts, we froze salaries, cancelled outsourced providers, managed expenses like crazy, managed to get clients to pay upfront for a small discount, and convinced shareholders to give a little bit more money.” The major lesson they learnt about change?
“Now we always get advice and manage expectations before we start, so we have a more realistic timeline of how long something will take.”
Read more: Yossi Hasson’s full story here
Look before you leap
- Chris Ndongeni is the co-founder of Twin Cities Cleaning Services.
“We should have done more research about the contract cleaning business and industry before we started. We’d landed our first contract with Man Truck and Bus, and on our first day we were shocked to find that there was absolutely no cleaning equipment or detergents and the previous contractor hadn’t left anything behind. We scrambled and made expensive purchases because of that.”
Business plans belong to the last century. Gone are the days of creating 40-page, detailed documents about your business, it’s target market, competitors, finances and so on.
Today it’s about the lean canvas: Starting with a hypothesis, testing it, and quickly iterating depending on the results of your test. Even though this method requires less research, research is still very necessary.
Ensure you know what permits, certificates, and approvals are required to operate in your industry, how competitors are operating, and then figure out what you can do differently.
Do what you know
- Ross Wilson is the founder of urbantonic, a Cape Town-based eventing agency.
In 2007, Ross Wilson made a business decision that would take him almost five years to recover from. Despite his background in eventing, he bought a joinery business.
“Urbantonic was a successful, growing business, but I’d been building it for almost a decade and I thought it was time to branch out. My ego was sky-high. I thought I could do anything, in any industry.”
This would turn out to be a very expensive assumption. 20 months after buying the joinery business, Wilson managed to close it down. It would take a further three and a half years to pay off the debts associated with the business.
“I kept thinking about that Top Gun quote, ‘Son, your ego’s writing cheques your body can’t cash. We built up urbantonic slowly. We offer incredible customer service because we’ve never over-extended ourselves, so our growth has been organic and self-funded. We’ve never spent what we don’t have. And most of all, we know this industry inside out. The joinery business was none of those things.”
Read more: Ross Wilson’s full story here
Hire for cultural fit, not skills
- Irfan Pardesi and Hina Kassam are the founders of ACM Gold, a R350 million + gold and foreign exchange trading company.
Of course skills are important, but many entrepreneurs have learnt to their detriment that a person with the right skills who is a complete cultural mis-match with the company will bring everybody down, and even put your business at risk.
Irfan Pardesi and Hina Kassam, founders of ACM Gold, learnt this the hard way. As their start-up grew, they started building up a team. The problem came when they made the decision to bring in an experienced management team. They focused on the credibility that they thought big names would bring to the business, instead of whether those same names suited the company’s culture.
“The whole culture of our company started shifting – it was no longer what we had worked so hard to build. It took us months to rectify, and cost us a lot as well. Today we know, always hire for cultural fit. Attitude is everything. Skills can be taught, experience gained, but you’ll never change a person’s values and personality.”
Read more: The Midas Touch: Hina Kassam & Irfan Pardesi
Know your numbers
- Kerryne Krause-Neufeldt is the founder of I-Slices Manufacturing, the producers of eyeslices.
When Kerryne Krause-Neufeldt launched her business, she was so focused on customers and making sales, that she neglected the inner-workings of her own company.
“I particularly wasn’t good with numbers,” she says. This was Krause-Neufeldt’s biggest lesson.
“It’s easy to abscond the numbers to the ‘finance guys’, especially if you don’t have a background in finance. I didn’t even know we weren’t paying PAYE, and ignorance is no excuse. You need a basic understanding of numbers at the very least.”
Once she realised the shambles her start-up’s finances were in, Krause-Neufeldt realised the buck needed to stop with her.
“I did accounting for dummies, followed by financial management workshops. It was time consuming, but worth it. It was the only way for me to truly be in control of my own business. Now I can spot problems in the figures at a glance.”
Read more: Kerryne Krause-Neufeldt’s full story here
Everything will always take twice as long as you think it will
- Vusi Thembekwayo is the founder of Motiv8.
- He is a Dragon on South Africa’s Dragon’s Den, and the youngest JSE director in SA.
Vusi Thembekwayo is not the first entrepreneur who learnt this lesson, nor will he be the last.
“By the time I launched my motivational speaking and strategic consulting business I had top tier experience at a local FMCG giant. I knew business. I had seed money from ring-fencing and selling the division I’d built up and ran.”
Thembekwayo certainly wasn’t green behind the ears, and yet his start-up journey ended up being very different to how he imagined it to be.
“I used that money to get set up in fancy offices with a PA. I thought that was what you needed. And then it took eight months to get my first client.”
Eight months of zero income, and expensive overheads. Thembekwayo was sleeping in his car, fending off the bank who wanted to repossess it because he wasn’t meeting the payments.
Today that business has a turnover of R140 million, but Thembekwayo will never forget his first real start-up lesson: However long you think it’s going to take to get going, triple it. And you still won’t be there.
Read more: 10 Tips From The Dragons Of Dragons’ Den SA
Not everything is an opportunity, some are a waste of time
- Mongezi Mtati is Founder and MD of WordStart, a word of mouth marketing firm that connects brands with influencers.
“Your time is yours to pour into the business, not to use on non-paying efforts that present themselves as opportunities,” said a mentor who was discouraging Mongezi Mtati from taking on more work for exposure. “The advice fell by the wayside,” admits Mtati. “Unfortunately, he was right.”
Mtati knows the situation well: When you’re starting out, people offer you the opportunity of ‘exposure’ in lieu of billable work and hours. Start-ups that are desperate to build up their portfolios often agree.
“The reality is that most of that exposure does not amount to billable work. It ends up being a waste of time that could have been used to either make money or spent in the business waiting for the phone to ring or drumming up sales. It could even have meant going to SARS for an hour or two, which saves you pain and punishment later in the year.
“The rule is simple: Don’t work for free,” he says. You’re there to make money, so do it.
Never treat the business’s cash like your own
- Lebo Gunguluza is the founder of the GEM Group and a Dragon on South Africa’s Dragon’s Den.
Like many young entrepreneurs, Lebo Gunguluza treated the money his start-up made as his own. After a few weeks, he realised that he needed to start saving the cash he was making in a bank account if he wanted to hire some help. It wasn’t a lesson that translated into good cash flow principles. The more the young entrepreneur made, the more he spent.
On the one hand, he was a bootstrapper, and he made his first million at the age of 27 without funding, tenders or loans. This just meant that he at least didn’t owe anyone money when he went bankrupt a year later.
“I spent my first million in one year,” he says. “Instead of using the money I was making as seed capital, I bought a GTI and partied like there was no tomorrow. It didn’t take long before I was flat broke.”
He learnt from that lesson, built himself up, and never squandered cash again, and to this day he warns other young entrepreneurs: Never treat the business’s cash like your own.
Read more: Lebo Gunguluza’s full story here
(Podcast) Playing To An Audience Of One
When you’re starting out, you’re often playing to an audience of one.
When you’re starting out, you’re often playing to an audience of one. No one knows who you are. No one understands what you can give them. You need to really, really believe enough in what you’re doing to play to an audience of one until you can build up traction. Don’t give up too soon.
Listening time: 3.25 minutes
Your Questions Answered With Alan Knott-Craig
Which comes first, customers or revenue? To make revenue, you need customers. Here’s how you build a business that people will care about.
How can I start a small Internet service provider ISP business? — Tonderai
This is similar to the hoary chestnut, “How can I take over the world?” The answer is the same. Sit at the knee of a master for two years (at least) and learn the game. When you have a sufficient network of contacts, and understanding of the business, head off on your own. How do you find a ‘master’? Identify an ISP that appeals to you. Get your foot in the door somehow, even if it’s just making coffee. Work your way to as close to the CEO’s door as possible by continuously over-delivering. Learn like a sponge.
The possible alternative to ‘find knee of master’ is to find a technical guy with zero sales inclination. Make him your partner. You become the front office (sales — find customers). He becomes your back office (tech — product delivery). If you can’t find a master or a tech partner, you can’t start an ISP.
How do I find a co-founder? How do I find a development team? — Kirsten
For a technical co-founder, Tinder is best. Jokes. In fact, Tinder is the last place on earth to find a technical co-founder. Rather try family and friends. Conferences. University. Milk your networks by letting everyone know that you’re looking for a technical co-founder. Failing that, you must hire a development team.
The days of compensating software developers with equity in lieu of cash are long gone. Absent a technical co-founder, there is only one way to develop software: Pay for it. How do you find the right dev-house?
Word of mouth is best. The rules of thumb are:
- Maximum project duration = three months.
- Scope it once. Don’t change the scope.
- Keep it simple.
For your first iteration, it usually makes sense to go with a young and relatively inexperienced crew (try www.avochoc.com). Yes, the product will not be future-proof, but your first version need not be future-proof. You just need something to start signing up customers and getting market feedback.
If you get traction, then you can start worrying about scalability and consider engaging with more experienced (and expensive) dev-houses.
I have invented a hamburger roll that ensures the patty and toppings cannot escape. Would you suggest I patent it? — Albert
Interesting idea. From the photos, it seems your solution is a variation of a pita bread. It may be worthwhile reading Zero to One by Peter Thiel.
He argues that consumers will always resist change, even change that is very obviously good for them, ie: non-leaking hamburger rolls. The only way to introduce innovation into an established market is if it represents a minimum of 10x improvement over the status quo. Only such a quantum improvement will induce people to change behaviour.
Although undoubtedly a big improvement, I’m not sure the non-leaking hamburger roll qualifies as 10x innovation. And so it probably will not succeed in the market place.
Before patenting, I suggest you try sell some rolls to establish whether you can get traction and prove revenue potential.
I’d like to launch an app with an advertising revenue model. What do you think? — Mvelo
I’m sorry to be the bearer of bad news, but advertising is an insufficient revenue model in South Africa. You need to figure out another way to make money. Most times, the paths to non-advertising revenue streams only reveal themselves once you have users.
You should work on the assumption that it will take you at least two years to get sufficient traction, therefore you need to have two years’ worth of runway before plunging into your entrepreneurial adventure. In those two years, you should be growing your users as much as possible.
The size of your user base will determine your negotiating power with potential investors and/or customers, and will determine the odds of success in finding a non-advertising revenue stream.
Okay, forget advertising. I’m going to charge my users a monthly subscription of R20. — Mvelo
I realise that it’s a chicken and egg situation, but it’s very hard to find backing until you have proof of your theory working in the real world. On other hand, it’s hard to get proof without first finding backing. That’s the entrepreneurial quandary.
Generally speaking, the egg comes before the chicken. The egg is users. The chicken is revenue. Before you can test your revenue theories, you need users. Refer to previous answer.
Read ‘Be A Hero’ today
How The Black Umbrellas Programme Can Boost Your Local Black Business
Going it alone and succeeding isn’t unheard of in entrepreneurial circles – but getting the right backing can accelerate your success. South African SMEs have a ‘big brother’ in Black Umbrellas, explains CEO Seapei Mafoyane.
Going it alone and succeeding isn’t unheard of in entrepreneurial circles – but getting the right backing can accelerate your success. South African SMEs have a ‘big brother’ in Black Umbrellas, explains CEO Seapei Mafoyane.
The networks that the programme has are extensive. Along with mentorship, when these building blocks come together, they do something really majestic for the outlook of SMEs.
“The perception of SMEs in corporate South Africa is that they’re risky, unreliable and incompetent,” says Seapei. This results in a lack of opportunities for SMEs because large corporates still view them as potentially risky.
Joining Black Umbrellas offers the following:
Belonging to a group of people who are going through the same challenges that they are. I think it’s extremely encouraging to find people who understand the challenges in the environment you’re going through.
2. Entrepreneurial spirit
You find businesses in different sectors and at different maturity levels in their business lifecycle. It’s very encouraging for someone starting out in their business to find a more mature business, perhaps in their second or third year, that has banked some projects.
3. Relying on a big brother
Black Umbrellas has been able to build a brand that is recognised for understanding the needs of corporate South Africa and being able to empathise with the requirements and support structures of SMEs. What entrepreneurs look for in the programme is that big brother that helps them weather the storm.
“In a market where there’s quite a visceral relationship between corporate South Africa — where the majority of markets are — and smaller, medium enterprises trying to locate those opportunities, Black Umbrellas really is a meeting place,” says Seapei.
“We provide a marketplace for corporate buyers and SMEs to come together in an environment that is trusted. Some of the opportunities our businesses are able to access would not have been accessible to them if they were flying solo.”
SMEs abound, but it’s not always easy for larger corporations to find, vet and mentor them.
SMEs that join the Black Umbrellas programme have reported reaching levels they never saw themselves achieving outside of the programme.
“It sounds overly-simplistic, but I think the change is tremendous when SMEs join Black Umbrellas,” says Seapei. “It’s quite a thing to watch: A business trying to do this on their own and how their outcomes change when they join the programme.” Black Umbrellas opens them up to a network of help that is as wide as it is deep.
The Power of Partnership
“We’d never be able to do anything we do without relying on collaboration,” emphasizes Seapei. “We rely very heavily on corporate partnerships to avail those opportunities to us and those markets for SMEs to be able to do what they do.”
Black Umbrellas has an extensive network of funders and donors that is expanding continuously and prides itself on being the custodian of SME development in South Africa. She says the programme aims to ensure high-impact SMEs produce incredible results to turn the outlook of the economy around.
One of Black Umbrellas’ longest-standing partnerships is with Transnet:
- Transnet understands the mandate set out by Black Umbrellas and the need to invest in entrepreneurs.
- We’re able to support their supply chain through the development of these dynamic businesses that go on to transform their supply chain and respective communities
- Transnet has an incredible impact on the economy — through just two small incubators in Richard’s Bay and Port Elizabeth, with almost 500 jobs, which is a huge social return on investment.
BECOME A BLACK UMBRELLAS SME
Black Umbrellas’ mandate
Many start-ups don’t make it beyond the first two years because of inadequate planning, lack of support, financial or knowledge resources. Yet the growth of the SME sector in South Africa is vital for economic development of our country and in solving the unemployment crisis.
Black Umbrellas offers a platform through which to develop a business from its start-up phase to full independence. Because the programme addresses the multidimensional components required to develop an emerging business into a sustainable one, entrepreneurs are 100% supported on their business journey, which gives them the leverage to succeed. This support includes access to markets, networks and finance.
Emerging businesses are supported with infrastructure, mentorship and collaboration, to assist their transition from incubation to viable, independent businesses.
For committed, hardworking and dedicated entrepreneurs, this multi-tiered business support programme is an important catalyst in enterprise development.
Related: 10 Dynamic Black Entrepreneurs
Black Umbrellas’ contribution to the economy
- In seven years 1 000 SMEs have achieved a collective turnover of over R2 billion
- The programme has contributed a combined R118 million in taxes back to the fiscus
- Over 10 000 jobs have been created through our SMEs
- R436 million in salaries has been contributed as a result of the programme.
Mistakes to avoid when establishing your SME within a large supply chain
Focus on a specific area where you can add real value. You’ll never be able to maximise every opportunity by trying to be all things to all people, says Seapei. “As an SME you want to find a particular niche that you can fill successfully, thereby maximising your unique value proposition.”
Who should apply?
- Entrepreneurs with a business enterprise at its start-up phase
- The business should be registered with the Companies & Intellectual Property Commission (CIPC), and for small business tax
- You must have the passion to succeed and be willing to work to achieve your business goals
- You must be South African and black according to the BEE definition.
The 2017 National Enterprise Development Awards
Top performing small and medium enterprises have been recognised at the Black Umbrellas National Development Awards. Black Umbrellas established the National Enterprise Development Awards (NEDA) in recognition of the achievements of the entrepreneurs in their business incubation programme. These awards highlight the hard work and dedication required to establish and sustain a successful business that creates jobs and contributes to the economy.
The finalists were selected from regional enterprise development awards ceremonies held at each of the Black Umbrellas incubators across the country. The businesses in the incubators have altogether created and preserved over 10 000 jobs across key economic sectors, which include mining, construction, engineering, security services and project management.
Overall winners were:
- Most Jobs Created: Hula Minerals and Processing
- Best Performing Company: Aquila Projects (PTY) LTD
- Best BU Ambassador: Recycle 1st
- Overall National Winner: Modi Mining
- Incubator of the Year: Johannesburg incubator
- People’s Choice Award Winner: Recycle 1st
Seven Years 1 000 SMEs R2 billion collective turnover
- Contributed a combined R118 million in taxes back to the fiscus
- Created more than 10 000 jobs
- Contributed R436 million in salaries
- Expect more from your ESD Investment.
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- R33 Million Boost For Job Creation And Innovation In SA
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