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Start-up Advice

Why Starting Small, But Thinking Big was Sibongile Mphilo’s Ticket to Success

Patience and perseverance paid off for entrepreneur Sibongile Mphilo who saved her tips to start her security company, Sibongile Security Services.

Monique Verduyn



Sibongile Mphilo

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Vital stats:

  • Company: Sibongile Security Services
  • Player: Sibongile Mphilo
  • Est: 2002
  • Turnover: R70 million
  • Contact: +27 (0)12 343 1164
  • Visit: 


Her company was named the woman-owned business of the year at the Standard Bank Top Women awards in 2014, and its annual turnover of R70 million will leave no one in any doubt.

39 year-old Sibongile Mphilo registered Sibongile Security Services in 2002, after training as a security officer. At home, however, money was in short supply, forcing her to work as a petrol attendant at an Engen service station near Tembisa. “I had always wanted my own business, but for a long time that was just a dream,” Mphilo recalls.

Related: How to Start a Small Business

Saving every cent

Her determination could not be quashed and being lowly skilled was not going to stop her. Instead, she gave customers excellent service and got great tips in return. Remarkably, she saved enough of this loose change to start setting things in motion. 

“I saved because I knew I was investing in something bigger. As my savings grew, I became more motivated. I worked even harder, and signed up for overtime and extra shifts.”

No short cuts

Once the company was registered, she used her spare time to research the security sector and found the best opportunities were in Polokwane, where local government was seeking entrepreneurs.

Even after winning her first contract with the Sekhukhune Magistrate’s Court, resulting in a R12 000 monthly retainer for six months, she continued to work at the service station.

“I wanted to make sure the business would be sustainable before I left my job,” she says. “I was right. When the contract came to an end, there was nothing further in sight for another six months.”

Learning how to tender

Mphilo is adamant about acquiring knowledge and experience. “Because I knew nothing about the tender process I went to workshops, where I was usually the only woman. People with the best tender knowledge are the most successful when it comes to winning. When I failed to get a contract, I would go back to find out why, and what I could do better next time.”

In 2003, Sibongile Security Services was awarded a large contract by the Department of Public Works in North West. By 2005, the business was flourishing. Between travelling and using only her days off to focus on the company, she was struggling. Mphilo finally made the decision to resign, turning her focus to the needs of the company, which she was running with the help of her sister. The risk paid off. EM

Breaking into the corporate supply chain

Too few small businesses become suppliers to South Africa’s largest organisations. With help from Telkom, Sibongile Security Services got a much-needed boost, sparking significant growth for the company.

Tapping into a large commercial supply chain and becoming a supplier to a big company can be a game-changer for small businesses.

Global studies show that when a small supplier lands a contract with a larger company, its revenues increase by around 250% and they create 150% more jobs in only two to three years.

Mphilo’s big break came in 2011 when Telkom awarded a contract to Sibongile Security Services. It was also a big wake-up call. Small businesses can be a risky investment for corporations. Among the biggest worries is that the SME can’t scale to their needs.

“The Telkom contract required us to make a huge capital outlay for new vehicles, uniforms, and firearms and control room equipment,” Mphilo recalls.

“None of the banks were willing to provide finance until Telkom’s procurement team stepped in to back us up. That was thanks to the effort both sides made to develop a healthy relationship.”

But Telkom also wanted to see the security company beef up its management and operations processes. In the first year, Telkom helped Sibongile Security Services develop and implement a quality management system that is ISO 9001:2008 compliant.

Here are some of the benefits of ISO compliance:

  • Well defined and documented procedures improve the consistency of output
  • Quality is constantly measured
  • Procedures ensure corrective action is taken whenever defects occur
  • Defect rates decrease
  • Defects are caught earlier and are corrected at a lower cost
  • Defining procedures identify current practices that are obsolete or inefficient
  • Documented procedures are easier for new employees to follow
  • Organisations retain or increase market share, increasing sales or revenues.

For Mphilo’s business the results were phenomenal. Sibongile Security Services went from being a micro enterprise with a turnover of less than R5 million, to a large supplier with an annual turnover of more than R35 million in less than two years.

Learning from Mphilo’s experience

  • Be patient. Mphilo used her profits to expand her business to other provinces, which meant that she sometimes had to sleep in her car to save money when travelling to tender briefings.
  • Be an employee in your business. She believes that if you treat your employees as colleagues and not as their boss, they will always be on your side and help you get through the challenges.
  • Do not fear challenges. For Mphilo, every challenge – like learning how to use a PC – has resulted in an achievement that she has learnt from.

Related: The Companies Act: Friend or Foe of Small Business?

Monique Verduyn is a freelance writer. She has more than 12 years’ experience in writing for the corporate, SME, IT and entertainment sectors, and has interviewed many of South Africa’s most prominent business leaders and thinkers. Find her on Google+.


Start-up Advice

Alan Knott-Craig Answers Your Questions On Money And Partners

From starting the right business, to managing business partners and finding your magic number, there is a secret to happiness.

Alan Knott-Craig




If I get rich will I be happy? — JC Lately

Does money equal happiness? Mostly, yes. Research in the US shows that your happiness is proportionate to your earnings up until you earn $80 000 per annum. Thereafter, incremental income gains have a negligible effect on your happiness.

In other words: More money will make you happy as long as you’re poor. Once you break out of poverty and enter a comfortable middle-class existence, more money will not make you happier.

These are the top three for old folks:

  • I wish I’d spent more time with family.
  • I wish I’d taken more risks.
  • I wish I’d travelled more.

Therein lies the secret to happiness. Spend time with your family. Take risks. Travel.

But first, make money. Don’t do any of the above until you’re making enough money not be stressed about money.

Related: Your Questions Answered With Alan Knott-Craig

What is the magic number? — Mushti

The magic number is the amount of money you need to not worry about money ever again. If you don’t need toys like Ferraris, yachts and jets, the magic number is R130 million. Here’s the math: R130 million will earn R9,1 million in interest annually (assuming 7% interest). After tax that is R5,46 million.

Assuming you need 50% to maintain a good lifestyle, that leaves approximately R2,7 million for reinvestment, which is enough to keep your capital amount in touch with inflation for 50 years. The balance of R2,7 million (after tax) is for your living costs. In South Africa, R2,7 million will afford you a lifestyle that allows you to send your kids to a great school and university, to travel overseas a couple of times a year, and to live in a comfortable house.

Over time your living costs (and inflation) will eat into your capital amount. After 50 years you should be down to nil, assuming you earn zero other income in that time.

In 50 years, you will probably be dead. If you’re not dead, your kids will be able to support you (because they love you and they have a great university education).

I am the sole director of a company (the others still have full-time jobs and don’t want to be conflicted) and there is pro-rata shareholding based on our initial shareholder loans. However, I am putting in most of the hard work, together with one of the other actuaries. How best do I manage the director/shareholder dynamic? I obviously want to make as much progress as possible but there are times when I need the input from the others (and their responses aren’t always as quick as I would like). — Mike

If you have any perception of unfairness regarding effort/risk vs reward, deal with it NOW! You can’t do so later. The best approach is honesty. Call your partners together. Explain your thinking. Perhaps argue for 25% ‘sweat equity’ for yourself. Everyone dilutes accordingly. Ideally cut a deal whereby you have an option to pay back all their loans, plus interest, within six months, and you get 100% of equity (unless they quit their jobs and join full-time).

Equity dissent must be resolved long before the business makes money, otherwise it will never be resolved.

Related: Alan Knott-Craig’s Answers On Selling Internationally And Researching Your Idea

What do you think of WiFi in taxis?— Ntembeko

It’s a good idea, but not original. Before embarking on a start-up, you should survey the landscape for competitors. Just because there are none doesn’t mean no one has tried your idea.

It just means that everyone that tried has failed. You need to be 100% sure that you have some ‘edge’ that makes you different from everyone who came before you (and failed). Otherwise you will fail. What is your advantage that is different to everyone who came before?

Read ‘Be A Hero’ today


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Start-up Advice

What You Need To Know About The Lean Start-up Model

The Lean Start-up philosophy was developed by Eric Ries, a Silicon Valley-based entrepreneur who also sat on venture capital advisory boards. He published The Lean Startup in 2011, igniting a movement around a new way of doing business.





The model follows key precepts that include:

Taking untested products to market

The fact that too many start-ups begin with an idea for a product that they think people want, spending months (or even years) perfecting that product without ever testing it in the market with prospective customers.

When they fail to reach broad uptake from customers, it’s often because they never spoke to prospective customers and determined whether or not the product was interesting. The earlier you can determine customer feedback, the quicker you can adjust your model to suit market needs.

The ‘build-measure-learn’ feedback loop is a core component of lean start-up methodology

The first step is figuring out the problem that needs to be solved and then developing a minimum viable product (MVP) to begin the process of learning as quickly as possible. Once the MVP is established, a start-up can work on tuning the engine. This will involve measurement and learning and must include actionable metrics that can demonstrate cause and effect.

Utilising an investigative development method called the ‘Five Whys’

This involves asking simple questions to study and solve problems across the business journey. When this process of measuring and learning is done correctly, it will be clear that a company is either moving the drivers of the business model or not. If not, it is a sign that it is time to pivot or make a structural course correction to test a new fundamental hypothesis about the product, strategy and engine of growth.

Lean isn’t only about spending less money

It’s also not only about failing fast and as cheaply as possible. It’s about putting a process in place, and following a methodology around product development that allows the business to course correct.

Progress in manufacturing is measured by the production of high quality goods

The unit of progress for lean start-ups is validated learning. This is a rigorous method for demonstrating progress when an entrepreneur is embedded in the soil of extreme uncertainty. Once entrepreneurs embrace validated learning, the development process can shrink substantially. When you focus on figuring the right thing to build — the thing customers want and will pay for, rather than an idea you think is good — you need not spend months waiting for a product beta launch to change the company’s direction. Instead, entrepreneurs can adapt their plans incrementally, inch by inch, minute by minute.


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Start-up Advice

Start-Up Law:  I’m A Start-up Founder. Can I Pay Employees With Shares?

Bulking up employee salaries with equity is a common method to attract, retain and incentivise top talent.




Every early stage start-up company battles with restricted cash flow and not being able to pay market related salaries to their employees. Bulking up employee salaries with equity is a common method to attract, retain and incentivise top talent.

Can I pay salaries with shares?

South African labour laws require that employees be paid certain minimum wages, and “remuneration”, as defined within the Basic Conditions of Employment Amendment Act, either means in ‘money or in kind’.  ’In kind’ does not include shares or participation in share incentive schemes, as determined by the Minister of Labour. As such, there is no room for start-ups to completely substitute paying salaries with shares or share options. However, there is no restriction in topping up below market related salaries with equity via an employee share ownership plan (‘ESOP‘).

Related: 7 Ingredients Of Small Business Success Online

Employee Share Ownership Plans

There are a variety of ways in which employees can be incentivised, and it will always be important for the start-up founders to consider what goal they wish to achieve by incentivising their employees.

ESOPs can be structured in several ways, for example: employees may be offered direct shareholding in the company, options for the acquisition of shares in the future; or alternatively, a phantom / notional share scheme can be set up.

ESOPs permit employees to share in the company’s success without requiring a start-up business to spend precious cash. In fact, ESOPs can contribute capital to a company where employees need to pay an exercise price for their share options or shares.

The primary disadvantage of ESOPs is the possible dilution of the Founder’s equity. For employees, the main disadvantage of an ESOP compared to cash bonuses or bigger salaries, is the lack of liquidity. If the company does not grow bigger and its shares does not become more valuable, the shares may ultimately prove to be worthless.

Related: 7 Strategies For Development As An Entrepreneur

Key Features

Some key features to consider when setting up an ESOP are:

  • ELIGIBILITY – who will be allowed to participate? Full time employees? Part-time employees? Advisors?
  • POOL SIZE – what percentage of shares will be allocated to incentivise employees?
  • RESTRICTIONS – will employees be able to sell their shares immediately?
  • VESTING – will there be a minimum period that service employees will have to serve with the start-up to receive the economic benefit of his or her shares?

Employee share ownership plans are great corporate structuring mechanisms for attracting and retaining employees, as well as fostering an understanding of the company ethos and encouraging loyalty and productivity. It is essential when implementing an ESOP that all the tax implications are considered and that the correct structure and legal documentation are in place.

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