While many entrepreneurs grow their businesses organically, and surprise themselves by where they end up, there’s a lot to be said for good old fashioned planning, research and vision if you want to achieve your goal.
Just ask Cheryl Nesbitt, founder and director of Capsicum Culinary Studio. A combination of goal-setting, careful planning and comprehensive research, together with Nesbitt’s natural entrepreneurial flare and eye for opportunity, have helped her establish a chef school with national presence and a R13 million turnover in just five years.
Laying the groundwork
“I had previously owned my own catering company and many years ago set myself a personal goal that, by the age of 35, I would own my own business again. I had always thought that it would be a hotel management training school,” says Nesbitt.
She’s nothing if not thorough and set about conducting comprehensive market research on hotel management schools,drawing a comparative analysis between them and the chef training schools. “I looked at how many students were enrolling in each type of school, what percentage of them was able to access jobs on completing their training and what kinds of salaries each group was able to command,” she explains.
Identifying the gap
The exercise gave her important insight into the market demands in each sector. “I figured that the two criteria for choosing a school would probably be accreditation and price, so I plotted all of the schools that existed on a graph with these two axes and it soon became glaringly obvious that there was a huge gap in the market for a competitively priced chef school that was properly accredited,” says Nesbitt.
While many of the schools have since gained accreditation, few of them had it at the time that Nesbitt conducted market research. “It was really fortuitous because other schools could ride on the reputation of the top chefs that ran them, but I wasn’t a chef so I quickly realised that accreditation would have to be my USP if I was going to compete with them,” she explains.
Today, Capsicum has more local and international accreditations and associations than any other chef training institute in South Africa. They include authority from the Department of Education to operate legally as a provider of Further Education and Training; Institutional Accreditation with the Services Seta; membership with the Association of Private Providers of Education, Training and Development; accreditation with City & Guilds International, United Kingdom; membership with the South African Chefs Association; membership with the French Gastronomical Society, the Chaines des Rotisseurs; and an Association Agreement with DCT, the European Culinary & Pastry, Chocolate Arts Centre in Lucerne, Switzerland. But Nesbitt’s the first to point out that getting them was far from easy.
“On the one hand, I needed to be accredited before I opened in order to attract students and be able to offer them something reputable that had the backing and endorsement of an external body,but on the other hand you can’t get accreditation in many instances until you’re open – so it was a bit of a Catch 22 situation,” she says.
There can be no doubt that accreditations played a key role in helping Capsicum to attract its first students, but Nesbitt, a former marketing manager, knew she’d have to hit the pavements when it came to recruiting the first batch.
“I went on a marketing drive, targeting high school leavers, and although I didn’t yet have premises, I had fortunately already employed the head chef, Miranda Haricharan who was executive chef for the Legacy group of hotels in the Cape Town Waterfront, and with whom I had studied. So I could confidently promote who their lecturer would be,” she relates.
With four students ready to enrol, Nesbitt had just a few short months to find and stock the premises so that Capsicum could open its doors as a fully equipped chef training college in January of 2004.
“I borrowed R60 000 from my parents, R60, 000 from a friend and cashed in my provident fund of R30 000 and my husband’s insurance policy of R20 000. We found premises in Cape Town but because we were so inexperienced, we ended up spending R40 000 doing it up (I now know to get landlords to pay for those types of things!).
We set up two lecture rooms and one training kitchen for 20 students and I got all the equipment we needed from auctions. The only thing I insisted on buying brand new was the stoves because I felt that the students couldn’t cook on old ones,” says Nesbitt of those hectic pre-opening months.
Getting through the first year
The work paid off and lectures started on 26 January 2004. But Nesbitt realised that the first year was never going to be easy. “The full professional chef qualification takes two years so we wouldn’t be able to graduate any students in the first year and I knew I was going to have to look for alternative income streams,” she relates.
Yet again, it was research that delivered a solution to the problem, as Nesbitt relates, “Years ago when I owned my catering company I had trained domestic workers in my off time, and I’d loved it. So I put my feelers out and started doing some research and discovered that there was a government project to train domestic workers for free, whereby the government would cover the cost of the training.”
She lost no time in setting up a meeting with a training school in Stellenbosch that had a government contract to train domestic workers, but that wasn’t managing to meet its student number quotas.“They told me I could train as many students as I could recruit,” says Nesbitt,who worked out that she could make R32 400 in a three-week cycle training 72 students.
“That was serious money so I worked out my plan on the weekend and gave myself a week to recruit 72 people. On the Monday morning I had the media at my house and told them all about the project and that it was free to employers, and also printed thousands of flyers and put them in all the postboxes,” she explains.
By the Sunday night she had 73 students and on the Monday morning, she was teaching. The project only ran for a year but it was enough to tide the business over. “We also ended up doing a learnership for 128 learners at R12 500 per learner and that, together with the domestic workers project allowed us to open in Johannesburg in 2005,” says Nesbitt.
As is the case with many growing businesses, it was in opening a second branch that Nesbitt learned an important lesson. Flush with the profit from her two training ventures, Nesbitt opened the Johannesburg school in July.
“It was a big mistake,” she says, looking back,“What we didn’t plan for was that most people think about studying something in January, and very few people think of it in the middle of the year.” The company sank its funds into setting up the new branch, but didn’t get the student intake it had anticipated.
“We really battled with cash flow that year– it was a very difficult six months.” To help the business through this difficult period, Nesbitt sold her house and invested R1 million into Capsicum.She also learned from her mistake; since then, all new branches open in January.
Fortunately, the Cape Town branch’s second intake at the beginning of that year was an astonishing 43 students (a 39 student increase on the previous year), so all was not lost. A Pretoria branch opened in January 2007 with 31 students, followed by a Durban branch in January 2008 with 19 students.
And although the business model has remained the same over this time, Nesbitt has made certain changes in line with the company’s growth, of which costing is just one. She explains: “It’s probably taken us four years to get our costing right.
In the first year we were way too cheap but it served our purpose because we were new and needed to attract students and buildup credibility. Back then we charged R26 000 for a one-year course whereas now our fees are R40 000. But part of our vision has always been to remain affordable and we’ve managed to do that – we are still the most affordable private chefs school in South Africa by a long shot and our students get more qualifications for their fees.”
To date, Capsicum Culinary School has graduated over 230 qualified chefs. It’s a far cry from the early days when Nesbitt had nothing more than a PA, a head chef, a 12-year-old computer and a vision. “Over time the vision has grown and today we have a 20-year plan for Capsicum,” she says.
The one thing that hasn’t changed however is her belief in strategic planning. “Every year I take the management team away for three or four days and we take a hard strategic look at the company. During that time, we look at what we’ve done and what we want to do, and then we set deadlines and outline plans for all of those goals.
This means that by August every year, we have a timeline and deadlines for the year ahead. By September our marketing plan is done and by November cash flow statement and budgets are out,” she explains.The reason for such dedication to planning? “I fervently believe that companies who don’t engage in strategic planning shut their doors,” she answers simply.It’s clear she has no intention of being among them.
Cheryl’s advice to aspirant entrepreneurs
Networking can make all the difference to your business so find the time to go out there and meet other people, even if it’s the last thing you feel you have time for. Being an entrepreneur can be very lonely and my involvement in various organisations and networks such as the South African Council for Businesswomen and Endeavor, has helped me enormously to find solutions to common entrepreneurial problems.
In addition,it gives you a network of professionals you can trust and with whom you have a personal connection who you can call on for advice.
Invest in training – for yourself and your staff. It may seem like money going out of the business, but it will never be better spent. Its so easy to think that you know everything but remember that what got you to where you are now, won’t get you further.
Most entrepreneurs are self-motivated and don’t require motivational courses, but I would recommend management development and leadership training courses. I recently went with my general manager on an excellent course conducted by Real Training and it has elevated the business to a whole new level. Focus on strategic planning. Know whatyou want to achieve, do the research, plan your work and then work your plan.
Current challenges in the education industry
Cheryl Nesbitt reports that accreditation has become more onerous in recent years and providers of further education and training are now required by government to meet a list of criteria. Capsicum had to change from being a CC to being a Pty Ltd company and this meant Nesbitt needed to attend courses in order to know how to meet her legal obligations as a director.
“In addition, the large number of fly-by-night educational institutions has precipitated the need for government to insist that education and training facilities put financial sureties place to protect students in the event that a company should close its doors. While one can understand the need for this type of measure, what it unfortunately does mean is that companies need to put millions of Rands in trust if they want to set up an educational institution – it makes for a pretty high barrier to entry,” says Nesbitt.
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.”