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At 21 Rodney Norman’s Business Owed R1 Million. Today He Has A R100 Million Turnover

When Rodney Norman was 21, his first business ended up R1 million in debt. With so much owing to suppliers, he couldn’t continue trading. Instead, he needed to take stock of what had gone wrong, pull himself together, and come up with a plan.

Nadine Todd

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Rodney Norman

Vital stats

  • Player: Rodney Norman
  • Company: Chrome Supplements and Accessories
  • Launched: 2009
  • Turnover: R100 million
  • Visit: www.chromesa.co.za

Ask Rodney Norman why Chrome Supplements and Accessories has grown to a company with a turnover of R100 million, and he’ll say it’s because things just go his way. He’s lucky like that. Except things haven’t always gone his way.

He was kicked out of school when he was 15. At 21 his business wasn’t just in debt — he owed suppliers R1 million. And just when he found out his wife was pregnant, he lost a distribution deal that wiped out 70% of his business overnight.

Keep a positive attitude and you’re half way there

It’s safe to say that things haven’t always gone Rodney’s way, and yet his positive outlook on life and business, his trust that things will work out, and his ability to put his head down and outwork everyone around him have enabled him to turn even the most hopeless situations around.

He’s also a born trader. If he’s not making deals, growing a customer base and finding solutions to all the daily challenges that running a business brings, he’s not truly living. Chrome SA is the result of taking life’s knocks on the chin, and then manning up, facing the music, and growing stronger through adversity. A lesson he began to learn at the tender age of 15.

I hated following the rules at school. I bucked the system and had a bad attitude

The result? Rodney was kicked out of school in Grade 10. His parents were not impressed. Determined to teach their son to face the consequences of his actions, they told him to find a job, pay rent, or move out. It was the greatest gift they could have given him.

“I got a job at the local gym as a weight packer. But my studies through Intec College cost R650 a month, my rent was R650, and I only earned R1 050. I needed to find a way to supplement my income.”

chrome-supplements-and-accessories

When opportunity knocks, answer

Rodney was athletic; he worked out, and was interested in supplements. Soon people at the gym started asking his advice on supplements, and he saw an opportunity. He offered to organise products for them, adding a small mark-up for himself.

“The gym had a strict no-supplements policy, so I’d deliver the products before and after my shifts. I once cycled from Edenvale to Isando to make a delivery that was worth R50. I was that serious about building up my client base.” It worked. That customer is still a Chrome client today.

“I kept every contact detail I ever received. Soon I had this incredible data base. I found a Durban-based company that agreed to supply me — I couldn’t pay cash upfront, so it took a while to find the right supplier, but from there my small side business started to soar. I made a profit of R95 000 in my first few months. That first year I didn’t even go on holiday in December because I was so focused on building my business. Soon my cell phone bill was higher than my gym salary.”

For 12 months Rodney ran his business from inside the gym. His managers turned a blind eye for as long as they could, but when people started phoning the gym and asking for Rodney or enquiring where their orders were, it was time to part ways.

Standing on your own two feet

By then Rodney had a large database, and could continue trading from his bedroom for the next three years. “I did try employment for a year. My supplier moved to Joburg and opened a store in Edenglen next to the gym where I had worked. My personal sales exceeded the store’s sales, so he offered me a job. Within 12 months I realised that I was better off running my own business, and went back to servicing clients from the boot of my car and my bedroom. Employment has never been for me.”

And then an old friend approached him with an idea. “He had a connection inside a small gym chain, and could organise a small pop up store for us in their Bedfordview branch. He just wanted to join the business as a 50/50 partner in return.”

Rodney agreed, and G-Force Nutrition, as his company was called, opened its first branch. The business took off, exceeding the wildest expectations of the partners. Within two years they had grown from one to 15 satellite stores, with the growth funded by their suppliers. “If I couldn’t negotiate payment terms with a supplier, we walked away,” says Rodney.

Cultivate relationships with your suppliers

“When we started we didn’t have the cash for COD terms, so we worked with suppliers who agreed to be paid 30 days from statement. As long as we could make the stock move, we had the cash to pay our suppliers. They could see the potential — I had built up good relationships, and good value. We were selling between R400 000 and R500 000 a month. We were not their biggest distributors, but they saw that we’d keep growing.”

If a supplier insisted on COD only, Rodney would renegotiate after two months based on the value of their orders, asking for terms of 50% upfront and 50% in 30 days. Two months later he’d renegotiate again, this time to the full settlement 30 days from statement. “You just have to ask. Never be afraid to negotiate. You need to convince people to take a chance on you.”

Rodney’s tenacious negotiating skills allowed the business to grow at an exhilarating rate — but that would also ultimately be what killed it and landed him in enormous debt.

We were R1 million in debt — and I had no idea

What happened next would teach Rodney two of his most valuable lessons. First, you need to always know what’s happening inside your company. “I didn’t understand margins; I just knew we needed to be trading, getting cash in, and making a small profit.

“I was 100% focused on negotiating the best terms I could, and moving stock. That was the secret — use supplier cash to fund the business, and then move stock so you could pay the statements on time.

Always know who you’re working with

“But I wasn’t paying any attention to my business partner, or his side of the business. One of his jobs was to collect the cash from stores and deposit it into our suppliers’ accounts. We would settle bills at 30 days, but pay in batches as we could, so there was a steady flow of money. Then one day I fetched stock from USN and they said, sorry Rodney, you’re very behind in your payments. We’re not releasing stock until you’ve settled your debt.

“USN had been a supportive supplier, so the exchange surprised me, but I thought it was just a misunderstanding. I called my partner and left him a message asking him to send me the deposit slips for USN. He didn’t return my call. I tried again. When it became clear I wasn’t going to reach him, I started calling the rest of our suppliers.

health-supplements-in-south-africa

“There was a pit in my stomach that grew deeper with each call. It wasn’t just USN. We owed money to all of our suppliers. None of them would service us. We were R1 million in the hole. I felt furious and betrayed, but I also needed to face the facts. I’d let this happen. I’d been trading, and not paying attention to the signs.

“You don’t get R1 million into debt with a business our size overnight. It happened gradually and I’d missed the signs. My partner had problems, and he left. I was the one who had built up relationships with our suppliers and convinced them to trust me. This was on me.”

Turning your business around: Anything is possible if you just get started

Which is when Rodney learnt the second — and most valuable — lesson: Anything is possible if you just get started. Start somewhere, anywhere. But start.

“At 21 I had this enormous debt. Where the hell do you get R1 million? It was a defining moment for me. I could call it quits, or get stuck in and make it happen. I managed to pay it back in two years. That’s all it took. I just had to start. I remember my dad telling me he would never see R1 million in his lifetime. It was this huge sum. So how could I do it? The answer? Slowly.

“I was young, but that was also to my benefit. My life wasn’t over. I knew it would be a rough few years, but I also knew that if I didn’t man up and make this right, I would never build the business I now knew I was capable of building. The first thing I did was speak to all of my suppliers. I explained the situation, and that I would be fixing it and paying off our debt — I just needed time.

“Then I went and found a buyer for my business. We had a name, clientele and premises — but we couldn’t pay for stock up front, and our suppliers wouldn’t do business with us until our debt was settled. I found a buyer who would take over the business and pay me R350 000 in two instalments. They would also hire me. It was an employee in my own business. I’d never been good at taking orders, but I knew it was time to learn. I needed the salary and commissions to pay off my debts.

Pay your debts, even if it’s a little at a time

“I’m proud that nothing was handed over to attorneys. I answered every phone call. They were tough; these are not nice calls to answer, but I did it, and I let every accounts manager who called me know what was happening, how much I was expecting to pay them, and by when.

“I made small deposits consistently, and that was enough. As long as it was being paid, and the needle was moving, everyone who I owed money to was happy. That’s the secret: Consistency. Don’t avoid the tough calls; take them and face the music.”

The result is that when Rodney opened Chrome SA a few years later, all of his previous suppliers were happy to start working with him again. They trusted his integrity.

By 24 I was debt free, and I immediately quit my job.

Unfortunately, although Rodney could now go back to being self-employed, he still had a 12-month non-compete clause. He needed to find something to do other than supplements, and so he sold surfwear for a year. “That’s what I do — trade,” he says. “I’m a salesman. I shared a showroom with a friend who had the rights to Fox. It did well but I realised I had no passion for the products I was selling; it was just a means to an end.”

Launching a business out of the ashes of another

And yet Rodney still maintains he’s incredibly lucky. Things have a way of falling into place. “On the day my restraint of trade ended, I got an email from an old supplier saying he was closing down his store, and did I know anyone who’d be interested in buying his PC and shelving.

“I had a better idea — I’d buy everything for R65 000, but I also wanted to take over the store. I even had a supplier — the friend I’d been sharing a showroom with had another friend in Durban who was launching a new supplements product and was looking for a distributor in Joburg. I had a store and a product. I contacted my entire client list, which I’d kept, and let everyone know I was back in business.”

The birth of Chrome

Rodney ran his new business with his girlfriend (now wife), Erienne. He handled sales and distribution, and she took care of the administration and finances. They registered the name Chrome Supplements and Accessories, and while they were waiting to move into the store, they filled her old bedroom in her parents’ house with stock and started trading.

“In our first month we did R76 000 worth of sales. Within six months we’d sold R1 million worth of products, and business was picking up. There were three of us; myself, Erienne and Gareth-Ashley Munthri, who had worked with me at G-Force. Gareth-Ashley and I did everything, from sales to sweeping the floors. We worked 24/7.”

But, while the store was doing well, Rodney was learning that being a distributor brought its own problems. “The more people we supplied, the bigger our cash flow issues became,” he explains.

“Many of our customers didn’t settle their debts, and we were starting to spend all of our time and energy collecting cash. It was when I realised I couldn’t buy the Corsa Utility I needed to make deliveries because I’d just written off R144 000 in bad debts that I decided to start operating on a COD basis only.

“I firmly believed that fewer clients who paid cash upfront was the smarter business decision, and would keep us cash flow positive.”

Unfortunately, Rodney’s supplier disagreed. They saw their own orders declining as a result of Rodney’s new strategy, and made the decision to take over Gauteng’s distribution themselves. The move couldn’t have come at a worse time.

You need contracts to protect you

“We had no formal contract in place. Our entire working relationship was based on the strength of a handshake. I learnt the hard way that you need contracts to protect you, although it’s still not a reality I like — I’d rather do business on trust and a handshake, even though I’ve been burnt so many times.”

The lack of a contract meant the supplier could cancel the contract overnight. Rodney and Erienne had just found out they were expecting their first child, and Chrome lost 70% of its business. It was a major blow.

“To balance the COD strategy I had promised our supplier that we would open more Chrome stores and boost sales in that way. By the time they cancelled their contract with us we had four stores, and so we poured ourselves into the retail side of our business. We needed to make this work. We were about to be a family.”

I learnt my limit was five stores — as soon as I opened my sixth, the wheels started falling off

The problem with growth is that with each new development, the business becomes exponentially more complex. “We wanted to grow; that was our strategy. But it’s very difficult for one person to manage more than five stores,” says Rodney. “After the fifth store, I started losing control.

“The good thing about opening multiple stores is that each new store is easier to open. One to two is a massive struggle; it’s expensive. But then it becomes easier. Two stores pay for the next one, then three stores pay for the fourth. And so we just kept rolling out new stores. But we didn’t have a proper plan.

Have a consistent brand image and business model

“I kept changing my mind about how the stores should look; merchandising wasn’t consistent, and we ended up with a confused brand. The stores didn’t do consistently well, and I needed to be at a store for it to perform well.

“I looked at other chain stores and realised I was getting it wrong. Our stores didn’t look the same. We needed to slow down, fix the model, do a revamp and develop a firm expansion strategy. We’d been winging it a bit, and the results were evident. This was no way to build a strong brand.”

At the same time, Rodney had started importing international products to give Chrome a competitive edge. The problem was that he couldn’t pay suppliers within 30 days of the stock arriving. He needed a different way to approach imports that still kept the business cash positive.

The solution seemed obvious. “We’d received so many franchising enquiries, we thought this was the perfect growth strategy. We could use franchisee cash to buy stock, instead of the bank’s cash. Plus, there was the control factor. With a franchise system, we could have a unified brand and get rid of the inconsistencies that plagued us.”

Chrome evolved into a franchise

There were seven stores when Chrome moved to a franchising model. This soon grew to 12 stores. Franchisees had a buy and sell agreement with Chrome. They had to buy stock exclusively from Chrome unless they could find the same product at a better price. Rodney put a small mark-up on Chrome’s product range and handled all the marketing for his franchisees.

Within two years it became clear that franchising had not been the right growth path. “We had more stores and a bigger footprint, but our control issues were even worse. Now we were trying to control people with their own vision for the business — and it didn’t align with our own. I wasn’t a good franchisor, that was the long and short of it, and I needed to accept that. It was time for a shift again.”

Trying to franchise the business was a failure. It just didn’t work for us

Although the franchising model wasn’t what Rodney had expected, the business had been growing and making a profit, and so he was able to buy all the franchised stores back bar one.

Franchising isn’t for every business

Now the real work began. It was time to get serious about growing his brand. Continuity, systems, finding good managers, incentivising them, formulating one vision and sharing it with the company — these all became paramount.

“I also decided that I would be based in head office only, and not in stores. I needed the retail side of the business to function well without me on the floor. I needed to learn how to hire and incentivise the right store managers.”

This is always a challenge for organisations whose previous success has been driven by the entrepreneur’s hard work, charisma and personal relationships with clients.

Chrome on the verge of exponential growth

Today, Chrome stocks 59 different brands, with four ‘house’ brands. One of those brands, Amplify, has 17 lines. Chrome is made up of a retail arm with 19 stores and a distribution arm. “We’ve maintained our COD policy,” says Rodney. “We occasionally give bigger pharmacies terms, but on the whole we would rather have fewer clients with a healthier cash flow.”

It’s taken Rodney almost eight years to build his business into a R100 million organisation, but he’s now poised for exponential growth.

“I needed to figure out who we were going to be, what the brand was going to look like, and what our growth strategy was. It took a while, and we had a few stumbles along the way. Once we found the model that worked, the business started taking off.

“Two years ago we built our first warehouse. Since then we’ve built a second warehouse that’s twice the size.” Rodney isn’t targeting unrealistic goals. He’s learnt that the best growth is slow, steady and sustainable. And a little luck goes a long way.

Lessons learnt

1. What seems like an expensive lesson is actually the best thing that could have happened to you

I wasn’t paying attention to my partner or my books. We ended up owing R1 million. In hindsight, it was a cheap lesson to learn. Imagine if that happened today? The fallout would be much greater. We have 19 stores and nearly 100 staff members. It would hurt everyone, not just me.

2. Increase your revenue streams

By becoming an e-tailer we not only have an online presence in South Africa, but we’ve been able to launch in the UK without funding a physical store.

3. Hire for attitude, not for skill

No qualifications can take the place of hard work. When we decided to launch our website and online store, I recruited a friend of mine from school, Chad Costa. He had a marketing background but no online experience. It didn’t matter. I knew he was a hard worker, and that he’d do what it took to upskill himself and build the platforms we needed. He’s got an incredible work ethic and I value that above all else.

4. Promote from within

Gareth-Ashley, my first employee who used to sweep floors with me at our first store, is now our warehouse manager. I’ve learnt that if you find good people who are willing to work hard for your brand, they’re more valuable than someone with highly specialised skills. It’s amazing what you can learn on the job with the right attitude. Hard workers will always figure it out.

5. Good management is crucial

This goes for store management, warehouse management and head office management. Everyone needs to treat the brand and the store like it’s their own, so you need to incentivise them appropriately, and value their contributions.

Nadine Todd is the Managing Editor of Entrepreneur Magazine, the How-To guide for growing businesses. Find her on Google+.

Entrepreneur Profiles

7 Foundational Values Of Brand Cartel And How They Grew an Iconic Business From The Ground Up

Marco Ferreira, Renate Albrecht and Dillon Warren built Brand Cartel, a through-the-line agency, that delivers exactly what they wanted — and has grown exponentially as a result.

Nadine Todd

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brand-cartel

Vital Stats

  • Players: Marco Ferreira, Renate Albrecht and Dillon Warren
  • Company: Brand Cartel
  • Launched: 2013
  • Visit: brandcartel.co.za

“We’d never worked at agencies, which meant we had no idea how much you need to run an agency. We grew into it. It’s made us really good at what we do.”

When Dillon Warren, Renate Albrecht and Marco Ferreira launched Brand Cartel in 2013 they were in their early 20s with zero agency experience between them. The idea had started when Marco recognised that social media was taking off, but no agencies were playing in that space yet. It was a clear opportunity.

Printing flyers that said ‘Your social media is so last season’, Marco and Renate went from store to store in Sandton City, pitching their services. When Dillon joined them a few months later because they needed someone to handle the company’s finances, they had two laptops between them, R6 000, which Dillon had earned from a Ricoffy advert, and sheer will and tenacity.

“We shared a house to save on rent and split everything three ways,” says Renate. “At one point we hadn’t eaten in two days. My mom lent me R500 so I could buy Futurelife and a bag of apples for the three of us.”

The trio hired their first employee soon after launching Brand Cartel, and after prioritising salaries and bills, there wasn’t much leftover. “Dillon actually paid us R67 each one month,” laughs Marco. “That’s what was left — although I still can’t believe he actually sent it to us.” It was at this point that the young business owners realised they needed credit cards if they were going to make it through their start-up phase — not an easy feat when your bank balance is under R100.

Related: What Comfort Zones? Get Comfortable With Being Uncomfortable Says Co-Founder Of Curlec: Zac Liew

“Looking back, those days really taught us the value of money,” says Dillon

We spent a lot of time with very little, and we’re still careful with money today.” Through it all though, the partners kept their focus on building their business. “It almost didn’t work for a long time. We were young and naïve, but in a way, that was our strength. We didn’t have any responsibilities, and we’d never worked at agencies, which meant we had no idea how much you need to run an agency. We grew into it. It’s made us really good at what we do. All of our business has been referral business. It takes time, but we focused on being the best we could be and giving everything we had to our clients. Our differentiator was that we really cared, and were willing to offer any solutions as long as they aligned with our values.”

This is how Brand Cartel has grown from a social media agency into PR and Media Buying, SEO and PPC Strategy, Digital and Print Design, Web Development, Campaign Strategy and now an Influencer division. “It’s an incredibly competitive space with low barriers to entry, which meant it was easy to launch, but tougher to build a client base,” says Renate. “I’d sometimes cry in my car between sales pitches, and then walk in smiling. We had no idea if we’d make it.”

The perseverance has paid off though. Strong foundations have laid the groundwork for exponential growth over the past year, with turnover growing almost ten-fold in 2017 thanks to relationship-building, strong referrals and fostering an internal culture and set of values that has driven the business to new heights as a team.

Like many start-ups, Renate, Dillon and Marco have made their fair share of hiring mistakes, but as the business grew and matured, the young entrepreneurs began to realise that the success of their business lay in the quality of their team and the values they stood for.

This meant two things: Those values needed to be formalised so that they could permeate everything Brand Cartel does, and they needed a team that lived, breathed and believed in them.

“We’ve had some nasty experiences,” admits Dillon. “You should always hire slowly and fire fast, and for five years we did the opposite. We’ve hired incredible people, but we’ve also ended up with individuals who didn’t align with our values at all, and that can destroy your culture.

Dillon, Marco and Renate realised they needed to put their values on paper. “We did an exercise and actually plotted people based on a score grading them against our values, so we knew where our issues were. We knew what we wanted to stand for, and who was aligned with those values. We were right; within a few weeks resignations came in and we mutually parted ways.”

The team that stayed was different. They embraced Brand Cartel’s values, and more importantly, it gave the partners a hiring blueprint going forward.

“Values are intangibles that you somehow need to make real, so it’s important to think about the language you use, and how they can be used in a real-world work context,” says Marco.

The team has done this in a number of ways. First, they chose ‘value phrases’ that can be used in conversation, for example, ‘check it, don’t wreck it’, and ‘are you wagging your tail?’ Team members can gently remind each other of the value system and focus everyone on a task at hand simply by referring to the company’s values. “In addition, when someone is not behaving according to those values, you can call them out on the value, which is an external thing, rather than calling them out personally,” explains Dillon.

Related: How Matthew Piper And Karidas Tshintsholo Launched Their First Business From Their UCT Dorm Rooms

Second, all performance reviews are based on the values first. This means everyone in the organisation begins any interaction from a place of trust, knowing they are operating according to the same value system.

“When you’re in a production environment with jobs moving through a pipeline, there can be problems and delays,” explains Marco. “Instead of pointing fingers when something is over deadline or a mistake is made, our team can give each other the benefit of the doubt and work together. They trust each other, which creates cohesion. We all work as a team, which impacts the quality of our work and the service we offer our clients.”

The system is simple. Coaches will step in first if there is an issue before it escalates to the Head of Team Experience, Nicole Lambrou. If Nicole is called in, she will address the problem head on. “Inevitably it’s something fixable,” says Marco. “By addressing it immediately and in the context of our values it can be sorted out quickly. Ultimately, the overall quality of our team improves, and we are a more cohesive unit.”

The founders have seen this in action. “I recently arrived at a client event and three different people came up to me and complimented my team on the same things — all of which aligned with our values. Everyone at Brand Cartel lives them, internally and externally,” says Renate.

The value system has also shaped how the team hires new employees. “We used to meet people and hire for the position if they could do the job,” says Renate. “But then we started realising that anyone can hold up for an hour or two in an interview. You only learn who they really are three months and one day later.

“We need people who walk the talk, and we really only had a proper measurement of that once we articulated our values. Our interview style has changed, but so has what we look for.”

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Here are the seven values that Dillon, Marco and Renate developed based on what they want their business to look like, how they want it to operate, and what they want to achieve, both internally, and in the market place.

1. Play with your work

Our goal is for everyone on our team to become so good at what they do that it’s no longer work. Once that happens you love your job because you’re killing it. It’s why sportsmen are called players, not workers, and it starts with the right mindset.

2. Wag your tail

The idea behind this value stems from Dale Carnegie, who said ‘have you ever met a Labrador you don’t like?’ In other words, we all respond well to people who are friendly. It needs to be genuine though, so again, it’s a mindset that you need to embrace.

We live these values whether we’re at the office or meeting clients. If you go into each and every situation with joy and excitement, from meeting someone new to a new brief coming in, you’ll be motivated and excited — and so will everyone around you.

3. Check it, don’t wreck it

The little things can make big differences. Previously it was too easy to pass the buck, which meant mistakes could — and did — happen. Once you instil a sense of ownership and create a space where people are comfortable admitting to a mistake however, two things happen. First, things get checked and caught before there’s a problem. Second, people will own up if something goes wrong. This can help avoid disasters, but it also leads to learnings, and the same thing not happening again.

4. What’s Plan B (aka make it happen)

We don’t want to hear about the problem; come to us with solutions, or better yet, already have solved the problem and made it happen. We reached a point where we had too many people coming to us with every small problem they encountered, or telling us that something wasn’t working so they just didn’t do it.

That wasn’t the way we operated, and it definitely wasn’t the way we wanted our company to operate. We also didn’t want to be spoon feeding our team. It’s normal for things to go wrong and problems to creep in — success lies in how those problems are handled.

Ignoring problems doesn’t make them go away, so we embrace them instead, encouraging everyone on our team to continuously look for solutions. For example, the PR department holds a ‘keep the paw-paw at Fruit & Veg City’ meeting every morning, where we deliberately look for where problems might arise so that we can handle them before they do. We start with what’s going wrong and then move to what’s going right. You need to give your team a safe and transparent space to air problems though. We don’t escalate. We need to know issues so that we can collectively fix them, not to find fault.

Related: The 5-Hour Rule Used By Bill Gates, Jack Ma And Elon Musk

5. Put your name to it

It’s about pride in work and making it your own. When someone has pride in what they’re doing, they’ll not only put in extra time and effort, but they’ll pull out all the stops to make their creative pop, or go the extra mile for a client.

We need to find the balance between great quality work and fast output though. One way we’ve achieved this is by everyone reviewing the client brief and then committing to how long their portion will take.

When someone gives an upfront commitment, they immediately take ownership of the job. It took time for us to find our groove with this, but today we can really see the difference. Our creative coaches also keep a close eye on time sheets and where everyone is in relation to the job as a whole to keep the entire brief on track. If someone is heading towards overtime we can immediately ask if something is wrong and if they need assistance.

We also celebrate everything that leaves our studio. Every morning we have a mandatory 15-minute catch up session where we check in on four core things: How am I feeling (which allows us to pick up on the mood in the room and the pressure levels of our teams); What’s the most important thing I did yesterday; What’s the most important thing I’m going to do today (both of which give intention and accountability); and ‘stucks’, issues that team members need help with. We then end off with our achievements so that we can celebrate them together.

6. Keep it real (aka check your ego at the door)

We believe in transparency. At the end of the day we’re all people trying to achieve the same thing, but it’s easy for ego to creep in — especially when things go wrong. You can’t be ego-driven and solutions-orientated. If clients or team members are having a bad day, you need to be able to focus on the solution. Take ego away and you can do just that. It’s how we deal with stucks as well. We can call each other out and say, ‘I’m waiting for you and can’t do my job until I receive what you owe me,’ and instead of getting a negative, ego-driven reaction, a colleague will say, ‘sorry, I’m on it.’

7. Walk the talk

For us, ‘walk the talk’ really pulls all our other values together. It’s about being realistic and communicating with each other. If you’ve made a mistake or run into a problem, tell your client. Don’t go silent while you try and fix it. Let them know what’s happening and fill them in on your plan of action.

Walk the talk also deals with the industry you’re in. For example, if you’re a publicist, you need to dress like a publicist, talk like a publicist, and live your craft. In everything we do, we keep this top of mind.

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Entrepreneur Profiles

John Holdsworth Founder Of Tautona AI Shares 4 Disruptive Strategies That Are Changing The Insurance Industry

What can we do now that we couldn’t do before, thanks to changes in technology?

Monique Verduyn

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“Disruption isn’t just doing things in a different way which doesn’t resonate or go any further — it’s about changing the game. Being disruptive means taking a look at an industry and finding a way to do it differently, giving you an advantage over the incumbents.”

Vital Stats

  • Player: John Holdsworth
  • Company: Tautona AI
  • Est: 2016
  • Visit: www.tautona.ai

Disruptive innovation is the catchphrase that defines the last 20 years. New technologies, business models and media have disrupted the way we do just about everything. Conventional wisdom has it that the new kids on the block are the ones who are going to own the market at the expense of industry stalwarts, but this innovative South African disruptor is showing them how it’s done.

1. It’s the experience economy, stupid

Regardless of how the world changes, organisations that consider their customers’ emotions and experience first, win. That’s exactly what Tautona did. They put themselves in the customers’ shoes and asked one key question: ‘What’s wrong?’ Few industries are as ripe for disruption as insurance. When John Holdsworth co-founded cognitive automation business Tautona AI in 2016, he knew that there had to be a better way for insurers to handle client claims.

Tautona AI emerged out of a consulting engagement John had with a large insurance company. With a background in IT, he is a highly experienced technology executive and entrepreneur who has started a number of successful companies. He says he loves the energy and adrenalin associated with start-ups. He pioneered the use of digital signatures in South Africa, founded mobile payments company PAYM8, and converged voice and data provider ECN, which he sold to Reunert for R172 million in 2011. The experience acquired over this time meant he was ready to take on a massive challenge.

Related: 5 Key Areas Pratley Are Using For Current And Future Growth

“When a policyholder submits an insurance claim, that action should trigger an instant decision, with the outcome immediately communicated back to the policyholder,” John says.

“Customers want swift claims handling, communication, and compensation. They want the same instant gratification that they get from online banking. So that’s what we set out do — to revolutionise the entire claims process. We have made traditional claims processing a thing of the past by pioneering a cognitive solution that is making the claims process faster, smarter and more efficient.”

2. Automating judgment tasks once reserved for humans

Tautona’s claims automation solution uses artificial intelligence to instantly approve or refer claims for further investigation. By using machine learning algorithms to identify patterns in the data, Tautona’s solution identifies fraudulent claims, enabling insurers to halve fraudulent claim losses.

Tautona also uses Robotic Process Automation to integrate to legacy systems, removing the need for traditional programming techniques. This means that Tautona’s claims automation solution can be implemented with minimal disruption to a business. By automating decision-making, communication, and compensation, Tautona enables insurance companies to take a major step towards becoming true digital insurers.

3. Ditch the legacy systems, start from scratch

Disruptive innovators invest in digital strategies so that they can find new ways of responding to their customers’ evolving needs. The founders of Tautona AI agree on several principles, but one that stands out specifically because it goes entirely against traditional thinking, is the importance of starting from scratch.

“You cannot take a non-digital business model and expect it to work online,” says John. “Instead of using old methods, you need to start from the beginning. Ditch the legacy systems, take a leader mentality and imagine the art of the possible.”

This iterative, modular approach typically begins with defining the strategy and programme plan upfront, delivering a core capability fast so it can provide benefits immediately, and then continuously improving with regular, incremental capability improvements to achieve the objectives of the strategy. It’s an approach that fosters closer collaboration between stakeholders, improved transparency, earlier delivery, greater allowance for change and more focus on the business outcomes.

Related: 8 Codes Of Success That Helped Priven Reddy of Kagiso Interactive Media Achieve A Networth Of Over R4 Billion

4. Shaking up an industry

How do you launch new solutions and educate customers who are used to doing things the way they have always been done? John says resistance to change is inevitable. That’s why you need more than good technology.

“When you introduce something ground-breaking to the market, you encounter many different types of personalities asking diverse questions. That demands an approach that is client-centric and entirely customer focused. It also means you have to spend time developing a sound business case to present to decision makers.”

A solid business case documents the justification for the undertaking of a project. It’s the way you prove to your client and other stakeholders that the product you’re pitching is a sound investment. You need to justify the project expenditure by identifying the business benefits the innovation will deliver and that your stakeholders will be most interested in reaping from the technology.

“Essentially, it’s about proving you can deliver,” says John. “When you have an entirely new proposition, the only way you can hope to get your foot in the door is with a value proposition so profound that clients are forced to take a look at it.”

Tautona has convinced a number of South Africa’s top insurers to implement their AI-powered claims automation solution. The results to date have been ground-breaking, with insurers dramatically reducing turnaround times and processing fees. As a result, Tautona’s sales pipeline is full to the end of the first quarter of 2019.

“But there’s no rest for disruptors. Nokia and BlackBerry crumbled because they were slow to react to market changes, and they underestimated the challenge from Apple and Samsung. The only way to retain leadership is with relentless innovation, that is, a constant flow of new versions and features. That applies in any industry today.”

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Entrepreneur Profiles

Tim Hogins Started Out As A Security Guard, Today His Has A Turnover Of R150 Million And Has Self-Funded Three Huge Lifestyle Parks

As a poor township kid, Tim Hogins watched kids pile into buses heading to Sun City every weekend, knowing he couldn’t afford to join them. He was a youngster, but he made a promise to himself. One day he would build parks that anyone could visit — especially underprivileged kids like himself.

Nadine Todd

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tim-hogins

Vital Stats

  • Player: Tim Hogins
  • Company: GOG, formerly Green Outdoor Gyms
  • Est: 2012
  • Turnover: R110 million
  • Projected Turnover: R150 million (2018)
  • Visit: gog.co.za

“I’m a visionary, and I’m not scared to invest in my vision. I’ve lost millions, but I’ve made more because of that. Business is about making money, but I’ve grown beyond that – I want to employ people, develop them, push boundaries and see where we can take this.”

“Poverty can be a good thing, because growing up poor makes you creative, and that’s an incredible power if you know how to use it.”

Seven years ago, Tim Hogins drove out of an office park and pulled onto the side of the road because he was having a panic attack. His car was closing in on him, he couldn’t see and he couldn’t breathe. After months of hard work, it was all over. His dreams were shattered.

Tim isn’t the first entrepreneur to find himself here, and he won’t be the last. What separates him from countless other aspiring business owners is that despite a massive setback, he didn’t back down. He sat in his car, phoned his wife, and told her what had happened. Instead of telling him it was time to move on and find a job, she asked him how they were going to cobble together the money he needed to start again.

And that was the beginning of Green Outdoor Gyms, a vision Tim had been nurturing for almost two years. A business idea that had led to his retrenchment and was almost ripped away from him by his business partners and investors.

But he didn’t quit. He pushed on. And today his business has a projected turnover of R150 million and has self-funded three huge lifestyle parks that Tim hopes will impact the lives of thousands of underprivileged children while providing jobs for hundreds more.

Related: 8 Codes Of Success That Helped Priven Reddy of Kagiso Interactive Media Achieve A Networth Of Over R4 Billion

The in-built art of tenacity

green-outdoor-gyms

To understand Tim, you need to understand where he came from. As a township kid growing up in Randfontein on the West Rand of Johannesburg, Tim always helped his parents to sell stuff. They were traders. His dad had a small café selling burgers and chips, and his mom baked. While other kids in the area piled into buses for Sun City on the weekends, or visited a local bird park, Tim had to work or the family didn’t eat.

“I matriculated in 1996, and even though I had an exemption, tertiary education wasn’t on the cards for me,” he says. “We just couldn’t afford it.” But Tim had a plan. His cousin told him about a free four-week course to become a security guard, and Tim aced it, securing a position at one of the firm’s top industrial sites.

Here’s the first secret to Tim’s success. Instead of seeing a dead-end job, Tim saw an opportunity. If he did his job well, he would progress to a driver, and then a cash-in-transit guard. From there the plan was management. Becoming a security guard wasn’t his fate because he couldn’t get a degree — it was step one to the rest of his life.

“I was raised to be the best version of myself. Everything is what you make of it. In primary school I was head boy, and in high school the head of the SRC. There’s always a way to grow and improve yourself.”

Two years into his career as a security guard, Tim heard about another opportunity  — a free programming course teaching COBOL, a back-end system used by the financial services industry.

“I grew up 500 metres from Stafford Masie, who would go on to become the first head of Google South Africa and is one of our country’s greatest tech entrepreneurs,” says Tim. “I had zero programming experience — I’d never touched a computer — but I knew how valuable these skills were, and here was an opportunity being handed to me.”

It wasn’t quite as easy as Tim imagined. He failed the aptitude test and had to take it again. Once he was on the course, he failed that too — it was a programming course after all, and Tim needed a far more basic introduction to IT. He didn’t give up though. He’d quit his job and needed to make this work while he was still living with his father and didn’t have financial responsibilities, so he begged the course administrator to let him retake the programme. This time he passed, and found a job at a small IT firm.

Once there, Tim built up his IT acumen. Over the course of his IT career Tim worked for Dimension Data, EOH and SITA. In his final three years he applied for an account management position and moved into sales. His goal was to become a business owner, and so he diversified and learnt what he could about business.

He also paid attention to the world around him, looking for a business opportunity or problem he could solve. He dabbled with some ideas, but the one he kept coming back to was outdoor gyms.

“I saw kids in parks doing sit-ups, push-ups, pull-ups on trees, and kept thinking there must be a better way than this for them. I knew that a proper solution would be good for the whole community — giving kids and parents a safe and free environment to play in and focus on their health. I focused on poorer communities, where gym fees weren’t an option, and kids needed safe places to play and keep out of trouble.”

The more Tim unpacked the idea, the more he began to believe in it. And then his employers found out, and made it clear that they did not like Tim’s attention divided between his job and his business idea. Despite this, Tim continued to focus on his entrepreneurial play, and within a few months he’d been retrenched, ostensibly due to a restructuring of the business, yet Tim was the only person let go.

It was October 2010 and Tim had no job, two-months’ salary and he was about to get married. But it was the best thing that could have happened to him. “That retrenchment catapulted me into business. From then on, my full focus became outdoor gyms.”

Winning and losing

gog-water-park

Tim had approached Joburg City Parks who where interested in the idea. He had also met with an engineer and they had begun to design the equipment. There was just one small problem: Money.

“I knocked on doors, approaching anyone who would listen. One investor laughed at me. He said I’d gone from IT to playing with steel — what was wrong with me? A contact at SITA said flat out that she wouldn’t help me. Looking for funding can be incredibly demoralising. I had an idea and a letter of intent from Joburg City Parks, and it still wasn’t enough.”

And then Tim was introduced to a group of investors who wanted to instal kids play areas in municipal parks. Tim had the City Parks connection; they had the funding. They entered into a business partnership and built a prototype together. This was when Tim’s wheels fell off.

“I was invited to a meeting by my three business partners, and when I arrived there were five people in the room — my partners and their two lawyers. We’d entered into the agreement as 50/50 partners, and they wanted us to all be 25% shareholders. I couldn’t agree to that. This was my idea, my connection, my baby.”

By the time Tim left the meeting, he had no funding, no partners and no prototype and he knew City Parks was getting impatient. All he’d done was create competitors — and they had a demo model.

Tim had spent most of 2011 looking for funding and then building the prototype once he found his partners. He wasn’t just back to square one, he was behind where he’d started months ago. Hence the panic attack.

It was a pivotal moment. Give up or push on? Tim chose to push on. That night, Tim and his wife, Rona Hogins, sat down and came up with a plan. They would sell one car and Rona would apply for a bank loan. Together, they managed to come up with R200 000. Tim approached a friend who was interested in a side business and they launched LXI, an importer of screens for media companies. LXI brought in enough to pay the bills while Tim concentrated on getting Green Outdoor Gyms off the ground.

Then luck stepped in. “I drove past a warehouse and saw some play equipment. Instead of driving on, I pulled in and pitched my business idea to the owner.” The owner, Neta Indig, agreed to build Tim’s prototype at cost, in exchange for a long-term partnership. Tim agreed. His R200 000 would be enough to get the business back off the ground. Green Outdoor Gyms was officially launched in February 2012.

Here’s the thing about luck though. Unless you’re open to opportunities, paying attention and willing to step out of your comfort zone, luck alone will get you nowhere. By the time Tim drove into Neta’s parking lot, he’d spoken to countless investors, had doors shut in his face, lost a partnership and his prototype, and was still willing to look for any opportunity that might present itself. Through sheer will and tenacity, he found it.

Related: The 5-Hour Rule Used By Bill Gates, Jack Ma And Elon Musk

Seizing opportunities

gog-exercise

After the first outdoor gym was installed, two things happened. The competition Tim had feared from his old partners didn’t materialise. It was Tim’s first real lesson in the power of passion. He’d doggedly pursued his idea for over two years. His partners, who didn’t share that passion, did nothing with the prototype they’d acquired. Tim was still — at that stage — in blue ocean territory.

The second was how quickly an idea can take off once the foundations are in place. GOG’s turnover was R3 million in its first year, and orders were flooding in from municipalities throughout South Africa.

Tim was invited to present his solution in parliament, and it was included in the National Development Plan. “Everything escalated faster than I could have imagined,” he says.

“The reality is that we’re an obese nation. It’s a real problem. On top of that, 90% of the country can’t afford commercial gym fees. Under the National Development Plan, every community was earmarked for an outdoor gym. Government saw my vision and they bought into it.”

Tim had to tender for each new site, but he had a first-mover advantage. By the time other players entered his space he’d already built up a track record. His team’s turnover times are impressive and the business doesn’t only design and instal the equipment, but can also overhaul a derelict park. The quality of his products ensures that equipment lasts at least eight years with no maintenance, although once an outdoor park is installed, the community takes ownership of it, cleaning it regularly and maintaining the area.

In six short years, GOG has installed over 1 000 outdoor gyms for local municipalities around the country, and there’s still room for growth. There are currently between 5 000 and 10 000 sites available, and while Tim doesn’t believe they will get all of them, the business will continue to expand. “I believe we still have a ten-year run with government-funded outdoor gyms, but this is no longer our core business.”

In fact, GOG has grown and changed considerably since that first outdoor gym was installed in February 2012.

“I’m an opportunist. I pay attention to developments around me and am always on the lookout for where we can add value,” says Tim. As a result, GOG is now developing its own sites and supplying equipment to the industry — across private and public sectors.

“You need to know that competitors are coming,” says Tim. “When we started out we had a niche with outdoor gyms and government, but someone will always want to eat your lunch. If you know that someone’s paying attention to what you’re doing and that everyone needs to diversify, you can stay ahead of your competitors.

“Our business is centred around health, fitness and family, and  this understanding has allowed us to grow into lifestyle spaces that support our core focus.”

As a result, GOG has expanded to the installation of play areas and outdoor gyms for hotels, private and public schools, beach parks and lifestyle estates, including Steyn City.

“We also have a registered landscape company,” says Tim. “We can take vacant land and transform it into a park with grass, trees, water and pathways. We have a Geotech division that does soil testing and environmental studies.”

None of this happened overnight. It takes time to build a reputation, but if you’re focused on four key things, you can build a sustainable business. “You need to diversify your product range, diversify your customer base, nurture relationships and push outbound sales,” says Tim.

Tim has geared the business for scale, which is critical in a production and manufacturing context. “We have always outsourced our manufacturing, first with Neta, and later to a Chinese manufacturer who has become integral to our success.”

Tim’s relationship with Neta was critical in the start-up phase, but after two years the manufacturer decided to focus on his core. “We were too big — it wasn’t a side project anymore, and Neta wanted to remain in construction,” says Tim. “I needed to either find another manufacturing partner, or move into that space myself.”

Tim visited manufacturing facilities in China and sourced samples until he found a plant that could handle GOG’s volumes and quality. “Chinese manufacturers value loyalty and they’ll do whatever you want at the price point you ask. If you want a cheap product, you’ll get it — and the quality to match. Good quality costs more. I have an excellent relationship with our supplier — so good that he flew out to South Africa to see our operations, because he was impressed with the volumes he produces for us.”

It’s this relationship and the capacity available to Tim that has allowed him to take the next step towards his ultimate vision for GOG: Lifestyle parks.

Living the dream

gog-exercise-park

GOG’s first lifestyle park stemmed from Tim’s need for a showroom and his life-long dream to give underprivileged children access to entertainment parks that he couldn’t afford when he was a child.

“We were manufacturing outdoor parks and I started thinking about other ideas in this space that aligned with our vision and niche. I needed a showroom that could showcase everything we can do, from ziplines to climbing walls, swimming pools to spray pools and outdoor gyms. A lifestyle park was the natural answer to everything I wanted to achieve.”

GOG Lifestyle was opened in November 2016 and is situated off the N14 near Lanseria Airport. It’s close to a number of townships, including Diepsloot and Cosmo City. “The revenue model is corporate team building events, family days and launches, which allows us to run specials for kids, the elderly, and CSI projects for schools and churches.”

The next lifestyle park, GOG Gardens, was opened in Soweto in December 2017. Bigger than the first lifestyle park, GOG Gardens caters for picnics, outdoor events and concerts. It’s a multi-purpose venue with seven venues in one, and also focuses on corporates, the general public and events, with CSI projects that support children.

“We have launched some smaller projects, such as GOG Kids at Chameleon Village in Hartbeespoort and a play area in Vilakazi Street, but our next big project is Happy Island, a 36 hectare water park off Beyers Naude Drive in Muldersdrift.”

Happy Island is GOG’s first joint venture with an investment partner, Tim’s Chinese supplier. Unlike the other lifestyle parks, which GOG self-funded from cash reserves, Happy Island is a multi-hundred million rand project with large capex needs. “The idea came to life when the chairman of our manufacturing supplier visited our operations in South Africa. There are no water parks in South Africa similar to those I visited in China. We are doing something completely new and exciting, and we broke ground in April 2017.”

All of GOG’s lifestyle parks have required high capex investments and have not yet reached break-even, unlike the smaller projects that will reach break-even within a few months. “Our projection for the lifestyle parks is three years, and five years for Happy Island,” says Tim.

“My long-term goal is to have ten lifestyle parks across South Africa, one in each region, and that’s what I’m investing in. We want to make a difference, give kids access to these parks and employ people.

“I’m here today because of my childhood experiences, but before I could invest in this dream, I needed to start small and build up my reputation and cash reserves. To achieve my ultimate dream will take a lot of investment, so that’s the focus.

“I’m a visionary, and I’m not scared to invest in my vision. I’ve lost millions, but I’ve made more because of that. Business is about making money, but I’ve grown beyond that — I want to employ people, develop them, push boundaries and see where we can take this. When someone says something is impossible, I want to know why, and then try anyway. That’s how you achieve great things. That’s how you realise your dreams.”

Related: 6 Lesson Gems From Appanna Ganapathy That Helped Him Launch A High-Growth Start-Up

Next level

In 2016, GOG launched its first lifestyle park, GOG Lifestyle. Since then, two more lifestyle parks have been added, GOG Gardens in Soweto, and GOG  Kids in Chameleon Village in Hartbeespoort. The company’s biggest venture, Happy Island will soon be open to the public as well.

Healthy Living

GOG’s genesis was outdoor gyms, and the company continues to grow from these original roots: Catering to a growing focus on healthier lifestyles, from public parks to beaches, corporates and residential estates.

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