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Prosopa Restaurant: Dino Fagas

Opening an independently-owned restaurant is one of the toughest and most rewarding options

Juliet Pitman

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Dino Fagas of Prosopa Restaurant

Many an aspirant entrepreneur has dreamed of handing in their notice to their employer and opening up a restaurant. How hard can it be, they ask. Everyone needs to eat and food is never out of demand. And did they mention that they love to cook and really, really love to eat?

Sadly, a love of food and cooking does not a successful business venture make, and many a culinary dreamer has been left with a bad taste in their mouth and an empty feeling in their wallet.

Taking on the toughest

The hospitality trade is one of the toughest in the business and opening and running a restaurant is as demanding as it gets. Doing it with the brand power, systems backing and ongoing support of a franchisor is one thing; launching and running an independently-owned restaurant is another thing altogether.

Restaurants are among the most frequently started small businesses but they also have one of the highest failure rates. However, the rewards are plentiful for those who crack it. Just make sure that you’re ready to do your homework, dig deep into your pockets and work harder and longer than you’ve ever done in your life.

Research your market

Dino Fagas, owner of Prosopa Restaurant in Waterkloof Heights in Pretoria, refers to the importance of deciding on a concept and sticking with it. Begin with the end in mind. “You want your restaurant to be the first place a customer thinks of dining at.

That should be your goal,” he says, adding that one should try to appeal to a broad enough market while still retaining points of difference that distinguish your establishment from those of your competitors. Prosopa is a Mediterranean-styled restaurant with a difference. Instead of the usual Greek paraphernalia of blue-and-white tablecloths and profiles of Zorba the Greek adorning the walls, the lighting is muted and the décor is done in warm earthy tones. Among other things, this has helped Fagas to achieve a unique positioning in the market.

Knowing who your competitors are, what they sell, how they price it and who their customers are is vital background information as well. Fagas says: “Make a list of all your competitors, their locations and what is unique about their concept relative to yours.

Try to determine how important they are to your perceived target market. Then familiarise yourself with everything they have to offer by visiting them. Know their pricing, seating capacity and levels of service. Ask around to determine what people’s impressions and experiences are of these establishments.”

In gathering this information part of your goal should be to identify gaps that your competitors have missed and that you can do better, or differently. Aim for greatness and in doing so, do a personal survey of as many successful restaurants as you can. What do they do differently to your competitors and what can you learn from the way they run their operations?

If competitors make up one side of the research coin, customers make up the other. Don’t make the mistake of assuming that you know your market without having conducted any research on it – no matter how informal. Many would-be restauranteurs assume that their clientele share their own tastes in food, décor, wine and ambiance, an approach that is not only arrogant but dangerous.

“You need to know who your ideal customer will be and their demographics – things like age, income, household size, ethnicity and lifestyle,” says Fagas. While it is possible to conduct such research on your own, he warns that doing so properly will take up valuable time and energy, resources that could be better spent on other aspects of the business.

“Rather give it to a professional firm with experience,” he says. While they conduct the formal research, you can get a more general feel for the market by reading the local press and talking to local customers and business people. If you simply don’t have the capital to pay a research company to undertake the task for you, allocate enough of your time to do as thorough a survey as possible.

What’s on the menu?

The concept of your restaurant needs to be carried through, not only to the décor, ambience and service, but most importantly to the food that you serve. While this might sound like stating the obvious, you’d be surprised by how many restauranteurs think it’s sufficient to invest all their capital in swanky décor and then serve sub-standard food that is totally at odds with the experience they are trying to create.

Your starting point, as with most things, should be costing. “All costs – both direct, such as ingredients and indirect, such as labour, utilities and marketing – need to be carefully considered,”says Fagas. You want to offer a broad enough range to appeal to most palates but bear in mind that the longer your menu, the more it is going to cost you to hold stock, so try to pare down unnecessary items.

“Consider presentation and the fact that seasonal produce can cost more at different times of the year,”he continues. “But remember that pricing on a menu is not just about costs.It’s also about knowing your customer and their psychology.

One would obviously expect to pay a little more for an item that is served in a restaurant with white tablecloths than in one where there is no linen, for example,” he says. Finally, consider what the actual menu is going to look like. “It should be easy to read, given the lighting in the restaurant, and easy to understand.

A professionally printed and bound menu gives a much better impression than a ‘home-made’ version but remember that you are probably going to have to reprint it twice a year so choose a style where this can be done relatively inexpensively,” comments Fagas.

Suppliers as partners

“You can have the fanciest set-up with customers queuing at the door but without good reliable suppliers, you will have nothing to serve them,” says Fagas. Suppliers are an integral part of a restaurant’s business and, in addition to proper controls and good staff, are one of the biggest contributing factors to your ability to offer customers consistency and quality. 

Establishing constructive relationships with them is therefore crucial. Fagas advises that you make your requirements and terms clear from the outset and that you treat suppliers as you would expect to be treated. “Keep your promises and maintain an open and honest relationship. If you are having cash flow problems, it’s always best to communicate with suppliers that you cannot pay and try to negotiate alternative arrangements.

Make sure you stick to these and never compromise your integrityor reputation,” he says. Supplier prices have a direct effect onyour own prices so it pays to make sure you are getting the best deal from the best supplier. “Drinks usually increase once a year and shopping around for better prices is of no use if you are already buying direct from the agents.

They’ll be giving you the best deal you can get,” says Fagas. However he adds that it’s wise to do a price check on food every month or so.

Finding the right location

You’ll no doubt have heard that location is everything but what does this mean exactly and what makes for a good location. In selecting a location for your restaurant, Fagas again points to the importance of knowing your target market.

There is no point in establishing an upmarket restaurant in a neighbourhood that can’t afford to frequent it, no matter how‘ aspirational’ you believe your market to be. Be realistic and select a location that is affordable enough not to push your menu prices sky high.

Foot traffic is another important consideration but you need specifics in this regard. “You not only need to know what the peak traffic times are but more importantly what drives the traffic. Is there a high volume of traffic because people work in the area, quickly pop in to shop in the centre or because they live there,” he says.

Just because there are a lot of people around during the day does not mean you will have a good dinner trade if those people only work in the centre and leave to go home in the evenings. Such a location would be better suited to a lunchtime restaurant. A good location should also be easy to access, highly visible and offer plenty of safe parking to patrons.

Dealing with landlords

Landlords are part and parcel of almost every location, unless you have enough capital to purchase your own building (not always the best idea even if you do have the money). So like it or not, your choice of location is also partly a choice of landlord. Fagas cautions would-be restauranteurs not to sign anything without understanding the future implications. “Make sure you have a good attorney who specialises in leases to advise you. Rather walk away from a lease you are not comfortable with than think you can ‘fix’ it later. Look for alternative premises,” he advises.

Leases are always negotiable, as he points out, so do some background research on comparable rental rates in the area and negotiate with the landlord. “You may want to negotiate some sort of exclusivity to prevent anyone else from opening a similar operation in the same centre,” he says, adding that some landlords in new buildings contribute a portion towards a new store’s start-up costs and others offer a grace period while you get set up.

However, don’t expect to be offered such things. You get what you ask for so don’t lose out by not raising these important issues. It’s also very important to ensure that your lease has a renewal option. Exercise it timeously or you could find yourself out on the street when your lease is up.

But most importantly, as Fagas points out, “Never ever allow your relationship with your landlord to deteriorate. He has nothing to lose by your being upset and he has time on his side. You stand to gain nothing!”Aside from your monthly rental, there are other ‘hidden’ costs that you should be aware of. These include contributions to the landlord’s marketing fund and operating costs.

“If there is a turnover clause in your lease this will also affect your payments. Such things are usually worked out as a percentage of your rented space and you can expect them to increase annually. In addition, your landlord can impose penalties on you for failure to present turnover certificates or for not abiding by the set operating times in a centre, for example,” says Fagas.

Investments and expenses

At the end of the day, no lease can be signed and no menu served unless you have the requisite capital to open and run the restaurant. Working out how much money this will require is extremely difficult, especially in the case of an independently-owned restaurant. In determining approximate set-up costs, Fagas advises: “Take the average building costs per square metre in the area and multiply this by the square metres in your space. Then add the cost of designing the restaurant if you’re getting a professional to do this, as well as your equipment, fixtures, fittings and furnishings.”

But this is just the beginning. Hidden costs include liquor licence fees, a trade licence, a certificate of acceptability from the health department and a gas licence. To this, add working capital. “You need to have sufficient cash flow to pay suppliers and other financial commitments on time.

It’s very difficult to put a figure to this but factors that influence it include fluctuations in turnover, maintaining unnecessarily high levels of stock and poor accounting practices,” he says. Your margins will also help you to determine how much working capital you need and what you can expect your profit to be. “Food can have anywhere between a 30% to 40% cost and alcohol around 15% to 20%.

Beer can have a 25% to 30% cost and wine 35% to 40% but this varies widely.” He adds that you can expect to recoup your costs within two years, depending on how extravagant set-up was.

Common challenges in the restaurant trade

Whether you’re a franchised operation or an independently owned outfit, you will probably be unable to avoid some challenges in your business as a restauranteur. Dino Fagas, owner of Prosopa Restaurant, offers some insight into how to deal with the following common challenges:

1. Seasons and weather

Rain, cold weather and other elements havea marked effect on business. If you have an outside section, you need to make sure that it is covered to protect against rain, and that it can be closed off and easily heated to protect against cold. Making sure it is comfortable for your patrons and that it blends in with the design and ambience of the restaurant is also important.

2. Quiet nights

Depending on the style of the restaurant, one can institute a night of lower pricing across the menu, or you can offer good deals to draw customers. Of course it would not be appropriate to have a “buy one get one free” evening in a fine dining establishment, so finding what suits your establishment is vital. An alternative could be having themed nights where you can explore different aspects of food and drink, such as a wine tasting or an olive oil sampling evening.

3. Marketing

You need to find the most effective means of reaching as many of the people in your target market as possible and to have a continuous and lasting effect on them. Remember that you are only as good as the last memory someone has of you. Continuous effort is therefore needed.

4. Staff/unions

I believe in taking a firm but fair approach to staff with an open door policy. One should always treat staff with respect, and keep continuous and clear lines of open communication with them.

Remember that training is of vital importance to maintaining a good relationship with your staff. This in turn creates an atmosphere where they are happy and content at work, because they feel that something is being done for their personal improvement. I have always welcomed unions because theycan act just as much in favour of the employer as for the employees. Unions will soon realise if employees have unfair or unrealistic expectations, and that you as the employer are doing things by the book.

Juliet Pitman is a features writer at Entrepreneur Magazine.

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Case Studies

Starbucks Coffee Is All About Culture… For A Reason

CEO Howard Schultz reveals how Starbucks does it.

GG van Rooyen

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Howard-Schultz

Vital Stats

  • 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’.

Related: How tashas Built A Recession Proof Business

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.

Starbucks-franchise-south-africa

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.

Related: Howard Blake Stays Hungry With His Innovation Strategy

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.

Starbucks-franchise-layout

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.”

Related: Don’t Let Expansion Ruin A Great Company 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.”

Starbucks-storefront-layout

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.

Read next: 5 Inexpensive Ways to Create a Company Culture Like Google’s

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Case Studies

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.

Nadine Todd

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Dov-Girnun-of-Merchant-Capital
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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.

Dov-Girnun

Vital Stats

  • 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.”

Related: Bootstrapping Is Much More Fun Than Investors

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Case Studies

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.

GG van Rooyen

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Autotrader-George-Mienie

Vital Stats

  • Player: George Mienie
  • Company: AutoTrader South Africa
  • Established: 1992
  • Visit: www.autotrader.co.za

Key learnings

  • 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.

Related: Fake It ‘Til You Make It: How These 10 Entrepreneurs Did Just That

Measuring change

Autotrader-technology

“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.”

Related: 11 SA Entrepreneurs on What They’ve Learnt About Managing Staff

An innovative solution

Autotrader-team

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.

The watershed

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.

Related: 5 Wrongheaded Attitudes Stunting Your Growth As An Entrepreneur

New competition

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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