Andre Rademan and Ken van Ginkel launched Bizcommunity in August 2001. Rademan, who had an IT background and had worked for several large companies, was 30 at the time and had seen a gap in the market for a content-driven website that would provide industry news across all sectors. He had started working on his idea part-time in 1999, and full-time from 2000, living on his savings.
Van Ginkel, also 30, had studied sound engineering but found he preferred the idea of writing instead, so when Rademan approached him in 2001 with the proposal for Bizcommunity, he jumped right in.
Narrowing the focus
“Initially, we were going to launch a news website that would cover all industries,” says Van Ginkel. “But we soon realised that was too broad and we would have to focus on one. We settled on advertising and media because no-one else was providing online news for this audience.” The Internet bubble was deflating at full speed at the time, but the two were convinced they were onto something. Determined to get the business off the ground, they got some cash from friends and family and stuck to a very tight budget. “We launched the site on our own steam,” Rademan recalls. “A few months down the line we approached an angel investor – who is still a shareholder in the business today – when we needed some bridging finance, but we also ploughed every cent we made back into the business.”
After Van Ginkel joined Rademan, the two moved into IT start-up incubator, the Bandwidth Barn, where they stayed for six years. There they not only had access to all the office space and infrastructure support they needed, but also to interaction and sharing of ideas with 30 other young companies. It was an opportunity that both found invaluable. “Because our overheads were so low, we started to make a profit after just ten months,” says Rademan. But we were still only paying ourselves a fraction of our salaries; just enough to cover personal expenses. Unless you have enough personal funds that can be invested, as well as the ability to sustain yourself for at least 18 months, I would suggest building an online business as a part-time project. Keep improving it and reconsider your options as soon as it gets good feedback and shows promise.” Rademan points out that he based the idea for the site on existing international models, and also on South Africa’s own technology industry news portal ITWeb. Being a technology expert allowed him to keep all the IT in-house, a factor which he says is important for an online business as uptime is critical. What makes for great online content? “Be interesting, informative and relevant,” says Van Ginkel. Don’t be boring. Most important, find out what people want to read about and give it to them. The only way you can do this is by actually speaking to your audience and asking them what they want.”
Getting the cash to flow
Testimony to the value of a good business plan is the fact that Bizcommunity’s core offering has not changed much over the years. It remains an advertising and marketing news site that looks at the state of the industry, and reports on events, research and other news to a focused business community. Bearing in mind that content on the Internet is largely free, at the same time, it has to be of a consistently high quality to attract readers and keep them coming back. How do you make it available to users at no charge, but still create a sustainable and profitable business? What Rademan and Van Ginkel have done very successfully is to build a range of revenue streams that have concurrently enabled them to generate loads of free, relevant content. One of their main products is the press office, a micro-site that is branded with the client’s own logo and corporate colours, and allows them to distribute press releases to subscribers daily or weekly.
The company’s news is published on Bizcommunity and in the company press office showcase. Search engine optimisation ensures that articles in these press rooms are easy to find via the search engines. A total of 450 of the largest companies in media and marketing in South Africa have a Bizcommunity press office, all of them contributing content of value to users, and at no cost to Bizcommunity. Also popular is the recruitment section which advertises jobs in the various industries, again attracting users with valuable content that comes free of charge. For businesses that want to advertise on the site, Bizcommunity offers animated and text ads, or they can choose newsletter advertising and place banner ads in the daily industry newsletters which go to all 93 500 subscribers. Advertisers can also sponsor one of 60 website sections focusing on specific industry topics.“We also have more than 12 000 companies listed in our business directory,” says Rademan. “Some have free listings, and others have paid-for full page or multipage listings. It’s a good strategy to first offer something for free, and then have a premium option available to companies wanting higher visibility.” Rademan and Van Ginkel agree that it’s wise to have a variety of revenue streams. If one drops, then overall revenue is supported by the other business units. “Our products have evolved over the years,” Rademan adds. “We listen to our customers and the market and change them to suit their needs. When launching a new feature or product, we research and develop it as best we can, but we are very attentive to the feedback we get after its launch.”
Growing the business
Bizcommunity’s growth from day one was based entirely on word-of-mouth. “When we got the site up, we sat back and waited for traffic to come, but it did not happen,” says Rademan. “That’s when we started inviting people to visit through a concerted campaign in which we emailed industry leaders and sent out press releases. We were confident that the product was so good that they would refer others to the site.” Growth was slow in the beginning, but once the website gained traction, the numbers multiplied. In year one, Rademan recalls pitching to an agency when Bizcommunity had only 87 subscribers. “We always had a long-term vision and faith that the website would eventually be a success, although it took much longer than expected. We were never fixated on competitors; instead we focused on improving our product and giving the reader and advertiser as much value as possible. ”This paid off and we passed the circulation of our largest competitor – which had 10 000 subscribers at the time – 18 months after launch.”
They employed their first member of staff, in sales, in 2003. It was at this time that they realised they needed to grow press office and advertising sales to provide the resources to fund growth in the rest of the business. Once sales increased, a production manager was brought on board in March 2004. That same year, experienced industry editor Louise Marsland joined to head up editorial, which had been managed solely by Van Ginkel up to that point. In 2006, Robin Parker was appointed as MD. “We realised we needed someone with experience and industry knowledge to grow the company to the next level,” says Van Ginkel. “The result was an immediate increase in revenue. It also allowed the two of us to focus on what we are good at in the editorial and technical areas.” Another coup for the business was the appointment of Chris Moerdyk as chairman. “He has many years of experience and is very well connected in the media and marketing industry,” says Rademan. “I think at this point we felt as if we had grown up. Although we had monthly management meetings in the past, board meetings were a bit more formal, progress reports were better presented, and decisions were taken by the board, not by Ken and myself. I think this is the final growth phase that any start-up company needs to go through.”
Replicating the model
It was only after six years – and the certainty that they had a working business model – that Rademan and Van Ginkel looked at expanding into other industry sectors, and so Media and Marketing Africa, Retail South Africa, and Medical South Africa sites and newsletters were launched in 2007. Like other successful online businesses, they have been able to replicate their original model, grow the business into new channels at a relatively low cost, generate new revenue and amortise their costs.
Looking to the future
Like most South Africans, Rademan and Van Ginkel have been waiting patiently for bandwidth costs to come down. “Once there is greater access to the Internet, we can expect to see a radical increase in the number of users in South Africa,” Rademan says. “The opportunities for online businesses are limitless, provided you remember that an online business is still a business, and all the normal rules apply, such as having to research the gap in the market and providing a unique product that is different to what is currently available.
They agree that growth of the online industry will be two-pronged. On the one hand, there is no business in any industry today that can afford not to have a website; on the other, growth is set to be fuelled by consumer demand for online products and services. “There is massive scope for media businesses at the moment,” says Rademan. “You only have to look at how huge 24.com has become. News24 has over two million unique browsers and 24,3 million page impressions per month.” Van Ginkel says they were lucky that Bizcommunity had no competitors, but he also has the widely-held view that the Internet environment – unlike the brick and mortar world – is one of cooperation and pooling of resources. “It’s changing the way people view things. To focus on culling competitors is not very progressive in online. It’s far more valuable to find ways of working together to grow the number of users.”
Bizcommunity website Stats
- Unique browsers (readers) per month: 311 792
- Page impressions per month: 3 421 522
- Ranking: One of the two largest websites focusing on industry news in South Africa
- Press offices: 450
- Business directory: 12 000 companies listed
Bizcommunity.com is a member of the Online Publishers’ Association of SA (OPA)Statistics quoted are for January 2010.
Bizcommunity Newsletter Subscribers
- Media and Marketing South Africa: 87 000
- Media and Marketing Africa: 36 000
- Retail South Africa: 26 500
- Medical South Africa: 14 500
- Total number of unique subscribers: 93 300
- Subscriber growth: 1 000 new subscribers per month (consistent over a number of years)
Starbucks Coffee Is All About Culture… For A Reason
CEO Howard Schultz reveals how Starbucks does it.
- Player: Howard Schultz
- Company: Starbucks
- Market cap: $85 bn
- Established: 1971 (Schultz purchased the brand in 1987)
- Website: starbucks.com
When Howard Schultz was raising money for his first coffee shop called Il Giornale (later to be renamed Starbucks) he was finding it hard to land investors. The reason was simple: Schultz was trying to create a coffee culture where none existed.
The idea that the man on the street would pay a premium price for a cup of Italian coffee with a name he couldn’t pronounce seemed nothing short of preposterous. But that wasn’t the only reason people weren’t willing to buy into his idea. Schultz, you see, refused to talk like a proper capitalist. He kept emphasising the fact that he wanted ‘to do good’.
Schultz recounted the trouble he had finding investors during a recent visit to South Africa for the local launch of Starbucks. He spoke at a Q&A session hosted by the Wits Business School.
“My wife was eight months pregnant at the time,” says Schultz. “Her father actually sat me down and said: ‘My daughter is pregnant, and she’s working. You have a hobby. You need to get a job.”’
But, as is so typical of entrepreneurs, Schultz persevered and eventually got the funding he needed.
“The first time someone gave me $100 000, I couldn’t believe it,” he recalls.
Since those early days (the shop opened in the mid-1980s), Starbucks has grown rather prodigiously. Consider the following: By the late 1980s there were 11 Starbucks stores that employed about 100 people. A few years later, in 1992, the company went public with a market cap of $270 million. Today, it has around 24 000 stores in more than 70 countries. And its market cap? A cool $85 billion.
While growth is good, it has a tendency to birth a ravenous monster that is impossible to satiate.
“We have to add $2,5 billion in revenue every year for the next five years just to maintain our current growth rate and satisfy Wall Street,” says Schultz. “And to do this, we will need to add 80 000 employees over the next 12 months. Essentially, we’re launching a new massive company every year.”
Yet, despite this, Starbucks manages to maintain its unique culture. Just as when Starbucks was a far smaller operation, it is known for stores manned by high-energy individuals who have a clear love for the brand. How has the brand managed this? Schultz attributes it to the following seven core principles.
1. Partners not employees
Howard Schultz’s father worked as a truck driver, delivering and picking up cloth diapers in the days before Pampers. When he slipped and seriously injured himself, he was summarily retrenched. Schultz wanted to create a very different company.
One of the reasons he didn’t adopt a franchise model was that he wanted to be able to offer each employee at least some stake in Starbucks.
When the company went public, each employee became entitled to a portion of their annual salary in the form of stock options. That is still the case today, which is why Starbucks employees are called ‘partners’.
“Success is best when it’s shared,” says Schultz. “At Starbucks, we always ask: What’s in it for our people? Starbucks is accused of being great at marketing, but it spends very little on marketing. It’s all about the experience we offer in the stores.
Managers and leaders must do everything to exceed the expectations of our people so that they can exceed the expectations of our customers.
2. Regular interaction
The management of Starbucks does everything in its power to engage with employees regularly.
“We travel extensively, and the amount of face-time management has with employees across the globe is really unusual for a company of Starbucks’s size,” says Schultz.
Schultz himself, for instance, sat down with each and every new Starbucks employee in South Africa during his recent visit.
Starbucks also has what it calls ‘Town Hall Meetings’ all over the world, during which management interacts with employees in an open and informal manner.
“We tell employees that they are free to speak up during these meetings without fear of retribution. We want honest opinions,” says Schultz.
3. Respecting (and cherishing) employees
Howard Schultz is a humanist at heart, and this is reflected in the culture of the company that he created.
“The universal language of Starbucks is a deep sense of humanity,” says Schultz. “Building a company is a lot like raising children. You are imprinting a company with a culture and a set of values. Now, if a child falls, what do you do? You pick it up and comfort it. You don’t scold it. You need to take the same approach in business.”
4. Protecting the culture
Being tolerant of failure, however, does not mean the same thing as indulging bad behaviour. In fact, Starbucks is fiercely protective of its culture, and it doesn’t tolerate bad behaviour.
“We teach employees that they have a voice, and that they should speak up when they see someone doing something wrong. You can’t enable bad behaviour because it will erode a company’s culture.”
5. Spending money on employees
According to Schultz, the management teams of most large companies would be horrified to discover the amount of time and money spent on Starbucks employees.
“We have been very innovative with technology, and we have created a massive digital eco-system. Interestingly, though, we spent as much time and money focusing on the things that were employee-facing as the ones that were customer-facing.”
6. Rewarding the right things
Schultz famously stepped away from the role of Starbucks CEO for around five years, and during that time the culture of the company quickly deteriorated.
“The company lost its way. The people who were managing the company — who were all good people — were measuring and rewarding the wrong things. Things such as profit and stock price became the focus. In any business, you need to continuously ask: What is our core purpose for being? Otherwise you lose your way.”
Schultz believes that his big mistake was not selecting a successor from within the culture. When he eventually retires, he intends to choose someone from within the operation who is in touch with the culture of the brand.
7. Being human
The film Fight Club famously depicted Starbucks as the epitome of the faceless corporation taking over the globe, but the company is actually quite unique in its willingness to speak out and engage with people on a social (and even political) level.
“We are very outspoken as a company. We feel that we live in a time where the rules of engagement have changed. What I mean by this is that we need to do more for the communities that we serve. The question we ask ourselves is: What is the role of a for-profit public company? Looking at this question has resulted in us taking on social issues such as same-sex marriage, gay rights, gun control and racism.”
For example, Starbucks recently unveiled its first store in Ferguson, Missouri (which has been plagued by racial unrest) as part of a plan to support efforts to rebuild and revitalise communities.
How Merchant Capital And Retroviral Were Built To Sell
Entrepreneur chats to Dov Girnun of Merchant Capital and Mike Sharman of Retroviral. We explore why their companies attracted funders, and how the relationship can be used to grow their businesses.
The Tech Based Business
Know your business’s numbers inside out, and don’t try to bluff your way through any questions that relate to numbers.
- Player: Dov Girnun
- Company: Merchant Capital
- What they do: Lending solutions for SMEs
- Est: 2013
- Investor: Rand Merchant Investment Holdings
- Shareholding: 25%
- Visit: merchantcapital.co.za
Less than two years into his business, Dov Girnun attracted the attention of Rand Merchant Investment Holdings (RMIH), a financial services investment company that includes the founders of FirstRand, Laurie Diepenaar, Paul Harris and GT Ferreira. These are no small industry players. On an investment level, they’re the funders who backed Adrian Gore when he launched Discovery and Willem Roos when he started OUTsurance.
How had Girnun found himself in the position to pitch to investors at this level? Months earlier, RMIH had launched a fintech incubator called Alpha Code. The idea was to find pre-revenue start-ups that would be the next game-changers. Their research brought them to Merchant Capital.
“We didn’t exactly fit their mandate because we were already operational and profitable,” says Girnun, “but they still really loved the business. They’d been researching the fintech space, and had recognised the potential in SME lending, which is our focus. They really wanted to invest, but at the time I was unsure if I wanted to dilute my shares further.”
Girnun already had an investor, the Capricorn Group, whose investments include Hollard, Nandos and Clientèle, and until this point he’d been careful to maintain his shareholding. His relationship with Capricorn was excellent, as the investment team added huge strategic value to the business over and above capital, and so he hadn’t been actively seeking additional funding.
And then a new opportunity presented itself. “We realised we have golden data on the SME space. How could we cross-sell to our base and monetise that data? We started chatting to RMIH, who were aligned to our thinking.
“Once I realised the value RMIH could add to our business, my whole perspective shifted. Here was an investor that could potentially help me to build a billion dollar business. I’d be diluting shares, but building a much bigger pie.”
Related: Funding Growth with Dov Girnun
The price of equity
Girnun is referring to the investment lesson that equity is cheap early on, and very expensive later, when a funder holds more shares of your business than you do. If you look for funding later, your valuation is higher, you’ve got a proven track record, and the same amount of money secures fewer shares. Sell too early, and the exact opposite happens.
This had always been Girnun’s view, but an understanding of how far the business could potentially go with RMIH’s backing was changing his mind.
There was just one challenge. While RMIH’s investment team loved Merchant Capital’s business model, investments need to be signed off by the board, which meant Girnun and his co-founder Daniel Moritz, needed to pitch to them in person, so that they could see their energy, passion and vision for Merchant Capital.
Serious, seasoned investors don’t make this easy. They need to see your passion, and how well you understand your business. They’re not there to make the experience easy.
“Even though I knew they were interested in my business, I still found the experience extremely daunting. There were very few introductions, handshakes or jokes. I was expected to launch into my pitch, and I knew that even though I had been given 20 minutes, the first two minutes would be the deciding factor. If I didn’t grab their attention in that time frame, they wouldn’t be investing in me and my business.”
Tapping into investor concerns
“I had just returned from the Endeavour international selection panel in San Francisco, and I think this played a major role in the success of my pitch,” says Girnun.
“One of my judges, a hugely successful venture capitalist from Sillicon Valley, really explained the significance of the elevator pitch to me. Imagine you’ve gotten into an elevator with the CEO of Goldman Sachs, he said. If you’re lucky, you’ve got seven floors to get them interested enough in your business to want your card, and maybe even a meeting. They can’t possibly learn everything about your business there and then — they just need enough for their interest to be piqued.
“Because you don’t know how much time you have, or who you’ll be talking to and what their area of expertise is, you can’t just learn a pitch off by heart, and you certainly shouldn’t have a power point deck that you rely on. Both are very bad ideas. Instead, you need to know your business so well, inside and out, that you can tailor your pitch to the person you’re talking to, based on what they care about.
“Because of this piece of advice, I was able to tailor the first two minutes of my pitch to the RMIH board and what they care about. If I grabbed their attention, I’d be able to hold it for the next 20 minutes, which actually ended up being close on two hours. If I hadn’t, we would have politely shaken hands after 20 minutes (if not earlier), and been on our way.”
It’s a simple, but incredibly important lesson: Know your business’s numbers inside out, and don’t try to bluff your way through any questions that relate to numbers.
“You have to know your unit economics — are you able to distill the essence of your business economics on the back of a napkin? You need to know the high level stuff and the minute details, and they all have to be at your fingertips. If they aren’t, you have no business trying to sell your company or attract investors.”
How AutoTrader Anticipated Change
AutoTrader South Africa is an online behemoth, boasting more than three million visitors each month. Not that long ago, though, the brand faced the very real possibility of extinction.
- Player: George Mienie
- Company: AutoTrader South Africa
- Established: 1992
- Visit: www.autotrader.co.za
- Trends are out there to be identified. Being caught unprepared is unacceptable.
- Change needs to be tracked through the use of a measurable KPI.
- Don’t be afraid to act pre-emptively.
- Do research. Know your customer.
- Create an unprecedented user experience.
By the mid-2000s, it was becoming clear that the world was changing. The internet was going mainstream, placing massive pressure on industries that only a few years earlier had seemed untouchable.
The print industry in particular was coming under threat, with readers moving to the internet for information. Things didn’t change overnight, though. The general decline in readership was steady but quite slow.
Like a frog sitting in a slowly-heated pot of water, it was all too easy to ignore the evidence. AutoTrader South Africa, however, was not willing to accept death by attrition.
“When it comes to the digital realm, you can never complain that some development impacted you unexpectedly. The writing is always on the wall, provided you’re taking notice,” says AutoTrader CEO George Mienie.
Long before the global shift to digital mediums started to affect AutoTrader in a real way, the company began to prepare for the inevitable.
“We knew it was coming. The shift to digital was already starting in places such as the US and Europe,” says Mienie.
“We also knew that we needed to measure this shift in a reliable way. When it comes to managing difficult change, you need a KPI that you can reliably measure.”
Comparing unique users of a website to the circulation of the magazine wasn’t reliable enough, since it was impossible to truly know how many people had used any given copy as a reference when shopping for a vehicle. Some other KPI was needed.
“We settled on leads to dealers. We wanted to track how many people had actually contacted vehicle dealers thanks to the magazine, versus how many had contacted a dealer because of the website,” says Mienie.
Finding a KPI
Tracking website leads and comparing them to magazine leads sounds like a simple idea, until you actually start to think about it. If it’s hard to know how many people used a single copy of AutoTrader as a reference, how do you figure out how many leads the mag has generated? It was a conundrum.
Tracking leads on the website would be easier, provided you were willing to harm the user-friendliness of the site. AutoTrader wasn’t willing to do this.
“We could track website leads by forcing every user to fill in some kind of form before gaining access to a dealer’s details, but we weren’t willing to do this,” says Mienie.
“Today, the average user spends a phenomenal amount of time on our site. A typical visit lasts 12 minutes, and we believe this is because our site is easy to use. While KPIs are important, they shouldn’t come at the expense of the user. Everything should be done to make the experience for the client or user as pleasant as possible.
“With this in mind, we give our software engineers a lot of freedom. They don’t need to seek permission to improve the site. If they’ve been working on something that they think will improve the website, they can run with it. You never want bureaucracy to stand in the way of improvement.”
An innovative solution
In order to effectively measure leads from both AutoTrader magazine and the website, the company came up with a very elegant solution called Call Tracker.
The solution was so elegant and transparent that even regular consumers of AutoTrader probably wouldn’t have noticed its existence.
How does it work? The number that you find for any given dealer in the AutoTrader magazine or on the website was not the same as the regular number of that dealer, although, the number was dedicated to a dealer.
Instead, it is a technology that redirected the call through the company to the dealer. Thus, giving AutoTrader the ability to measure leads via phone to the dealer, which was the most-used way in which consumers got in touch with dealers in those years.
Importantly, the company regularly placed a different number for specific dealers on the website and in the magazine, meaning AutoTrader could track exactly which platform a lead was generated from, and give the dealers useful insights into his/her dealership’s response.
AutoTrader had in essence created a reliable but simple KPI, using sophisticated technology at the time, that could be used to track consumers’ migration from print to digital.
As mentioned, the migration of users was fairly slow. AutoTrader had started monitoring the trend in 2007, but it wasn’t until 2013 that the website took over from the magazine as the core focus of the business.
In the mid-2000s, the company had printed around 230 000 magazines each month, and managed to sell 55% of those on a regular basis.
Today, it sells about 30 000 magazines a month. However, as magazine sales have declined, the number of visitors to the website has skyrocketed, with more than three million visitors to the website every month, opening more than 40 million pages.
The migration of AutoTrader magazine advertisers (sellers) and consumers (buyers) to the website wasn’t guaranteed. Getting buyers and sellers of the magazine to embrace the AutoTrader website required hard work.
“As a magazine, we had a big advantage: Potential competitors were faced with very high barriers to entry. We had the capability to compile a 600-page magazine, print it and distribute it weekly. Any new competitor would have found it hard to match us,” says Mienie. “The internet, however, obliterated those barriers. Suddenly it was much easier to compete with AutoTrader.”
AutoTrader wasn’t afraid to pre-empt the digital shift. “You need to be willing to eat yourself. One of the things we did was to place the website prominently in the magazine, knowing that it would eat into sales. We had to take a short-term hit, but we knew that we would benefit from it in the long term.” The company also placed a huge emphasis on the user experience.
“You need to be the best,” says Mienie. “You need to lead the charge and be first to market with every new development. You also need to know and respect your consumer and dealer. We believe in creating a site that is easy to use and offers more content than you’ll find anywhere else. We also make it a priority to know the consumer’s car-buying journey and car sellers’ needs.
“But, the game is changing again, fewer and fewer consumers are using the phone, and to an even lesser degree email, to get in touch with dealers. Our research over the last year shows that more than 52% of car-buying consumers don’t phone or email a car dealer, but simply take the address and visit the dealer directly.
“When it comes to managing great change within a company, research is incredibly important. But just doing research isn’t enough you need to use it effectively. The temptation exists to hog research because you don’t want competitors to get hold of it. That doesn’t work. We know exactly how much time the average consumer spends studying vehicles before buying a new car. We also know how much of that time is spent online (15 hours), and how much is spent in the physical world visiting dealers (14 hours), and this trend is shifting rapidly toward less time in the physical world and more time searching online, which means the consumer has pretty much made his choice before he leaves his screen. We give that info to our salespeople, who in turn give it to our clients (car sellers). Information needs to be disseminated.”
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