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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

In Touch Media’s Margie Carr Shares How She Made An Out-Of-Home Media Agency A Solid Competitor

Out-of-home media agencies are growing and In Touch Media’s Margie Carr is leading the way with an approach that embraces trust, simplicity and the power of networks.

Monique Verduyn

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margie-carr

Vital Stats

With content playing an increasingly central role, out-of-home media agencies can no longer just be real estate companies. They must evolve to become publishers. That’s according to a recent article in US advertising trade publication Adweek.

It’s an approach that has worked for Margie Carr, owner and MD of In Touch Media, a business she has built over 20 years in a cutthroat industry. Having gone through several key growth phases, today the company has a level 2 B-BBEE rating, and is accredited with the Association for Communication and Advertising (ACA).

Margie is positive about the future of out-of-home, thanks to the increasing digitisation of the media, consumer demands for responsive experiences, and an explosion of location data.

Related: Funding For Women Entrepreneurs – A Collective Effort

“Advertisers are fundamentally changing their perception of out-of-home advertising,” says Margie. “Where we have differentiated our services is that we simplify the entire process, from idea to execution, so that our clients can focus on managing their brands.”

When Margie started the business, she had experience as an account manager and copywriter. Initially she was ‘selling out-of-home stock’, but her passion for strategic campaign management got in the way, and the business evolved into a full-service out-of-home media agency. That shift required a change in mindset.

“To book, plan and execute an out-of-home campaign is a much more complex process than selling space,” says Margie. “It was a major adjustment. A tangible product is easier to sell than an intangible service.”

That’s because a tangible product can more easily demonstrate value, whereas with a service, you create a vision and sell the vision to the customer.

“Our promise to the client is that once they brief us, we do the rest. We handle the communication across all the teams contracted into campaigns, keeping clients updated on progress every step of the way. Out-of-home is an extremely complex medium, and knowledge of both buyers and sellers is critical. We have differentiated the business on our depth of knowledge and extensive experience in the market.”

Believe in your employees

Margie admits that one of her biggest challenges was learning to trust employees. It’s a common one for entrepreneurs. One of the key requirements of ‘learning to let go’ is showing your people what it means to walk in your shoes, and to avoid the temptation of trying to protect them from reality.

“Giving employees the ability to see things from your perspective helps to make them feel more like partners, rather than staff who are in it for the salary at the end of the month. This makes it easier to establish trust, and a mutual commitment to the business and its long-term goals.”

Become part of a network

Margie also acknowledges that it’s important to have a professional network. For her, membership of the local chapter of Women Presidents’ Organisation (WPO), of which she is also a founder member, has been beneficial. It’s an organisation for female CEOs and managing directors, and the South African chapter, launched in 2008 by Anni Hoare, is the first to be established beyond North America. Margie credits the organisation with empowering her to grow her company.

“The WPO aims to accelerate business growth, enhance competitiveness, and promote economic security through confidential and collaborative peer-learning groups,” she says. “For me it has been a platform to learn from, and to be inspired by and work with incredible people who are determined to succeed.”

As an entrepreneur, she points out that you do not have a board that meets regularly. Instead you are expected to have all the answers. With a dedicated board, you have people who are focused on what you need to be successful, guide you on the risks you should take or avoid, and can help you to achieve your long-term goals and strategic objectives. Boards expand networks, promote accountability, and give a company a level of credibility that is reassuring for customers and employees.

Related: Watch List: 50 Top SA Business Women To Watch

“In the absence of that, membership of a powerful network can make all the difference. Having the ability to meet with fellow entrepreneurs once a month, to work through different sets of challenges together and come up with creative solutions, is a proactive learning experience that really helps you to grow as a business owner and leader. It’s an opportunity to come to grips with your own strengths and weaknesses, and to understand the value of high-level advice.”

Simplicity is the key to success

Ken Seagall, author and former Apple creative director, said ‘The most important thing we do is give people a simple solution, so they can do amazing things.’ The connection between simplicity and success has contributed to the success of In Touch Media. Keeping it simple has been a guiding principle for the business.

“We had to make changes to our systems to make them more client friendly as the out-of-home environment evolved. In some instances, clients are required to sign more than a dozen different contracts with diverse providers — we have streamlined our processes so that clients sign one agreement with us and we manage all the suppliers.”

The future is digital

Looking ahead, Margie expects ongoing change with the growth of digital out-of-home. PricewaterhouseCoopers (PwC) valued South Africa’s out-of-home market — the biggest in Africa — at R4,4 billion in 2016, with growth of 2,7% forecast over the next five years. More than a quarter of the country’s out-of-home revenue is now sourced via digital screens. UK research has shown that digital out-of-home reaches 92% of Londoners.

“There are exciting times ahead. On average, out-of-home super-users increase profits by 26%. Consumer trust is a key element, and  familiarity nurtures trust. A consumer passing your ad every time they go shopping will develop confidence in the brand. They see you are here for the long haul, and that you have confidence in your brand.”

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

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Entrepreneur Profiles

The House That Moladi Built – How Challenging Traditional Building Empowers Local Entrepreneurs

Hennie Botes is a true entrepreneur — through a combination of passion and resilience, he has pressed on despite challenges, developing an unrelenting ability to sell his vision, and execute it. His goal has always been to use the technology he created — which challenges traditional building techniques — to empower other entrepreneurs.

Monique Verduyn

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hennie-botes

Vital Stats

  • Player: Hennie Botes
  • Company: Moladi
  • Est: 1986
  • Visit: moladi.co.za

South Africa has a housing backlog of between 2,5 million to three million and it’s continuing to grow. The country also has a persistently high number of unemployed people at 5,98 million, according to the latest numbers from Stats SA.

One entrepreneur who is committed to helping address both crises is Hennie Botes. A toolmaker by trade, the Port Elizabeth-based founder and designer of construction system Moladi developed this innovative building technology as a means to address many of the cumbersome and costly aspects of conventional construction methods, without compromising on the quality or integrity of the structure. The system replaces the bricklaying process with an approach similar to plastic injection moulding.

Founded back in 1986, when Hennie first realised how difficult it was for the poor to get good quality housing, his solution was the development of a whole new building system, which he named Moladi. The company has been in existence for more than three decades, and exports to 22 countries around the world.

“I built the first house based on the Moladi system in Benoni, in 1987,” Hennie says. “Substandard craftsmanship has resulted in South Africa’s poor living in inferior housing structures. I wanted to fix this problem, and I wanted to show people that the concept I had developed actually worked in real life.”

Like many truly innovative entrepreneurs, however, he discovered that a brilliant business idea is no guarantee of success. Converting an idea into a reality (regardless of the required investment of time and money) is never an easy task. In fact, it can be extremely difficult.

“I was naïve to think that a phenomenal breakthrough in the way we build houses would have people beating a path to my door, but academics and politicians speak different languages from entrepreneurs. I discovered that the saying, ‘Eat the elephant one bite at a time’ really does apply to entrepreneurship.”

Related: Construction Business Plan

Hennie learnt that you have to believe in yourself enough to handle the consequences of your decisions. “When you take on the responsibility of developing something that had not existed before, you become accountable. To turn that opportunity into a reality, you have to believe in yourself 100%. Great ideas fail because the unexpected challenges become more than you think you can handle, and the risk is that you lose the belief in yourself to see things through all the way to the end. In many ways, it’s like competing in a triathlon — you achieve one goal, and you have to move on straight to the next one.”

Hennie says his goal is not to enrich himself, but to use his technology to help empower other entrepreneurs. His methodology has been used to build thousands of houses all around the world — from Mexico to Sri Lanka. Today, Moladi exports to multiple countries, including Mexico, Trinidad and Tobago, Panama, Nigeria, Ghana, Tanzania, and Kenya. Moladi recently built a showhouse for a low-cost housing development in Trinidad and Tobago — the structure went up in 12 days. Another big win has been the construction of the 1 600m2 Kibaha District Courthouse in Tanzania. It was built in six months, at a cost of 4 250 per m2, which is less than half the cost of a conventional building. In Mauritius. the technology is being used to build 2 000 low-cost homes on 250 acres of coastline.

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“Despite the housing backlog in this country, what has sustained my business over 32 years is the work we have done beyond our borders,” he says. “But that is changing. Earlier this year we were contracted by the Western Cape Department of Education to build four classrooms in Philippi, as well as a double-storey building with eight classrooms in Robertson. We completed these projects in a record four months, at a third of the price. Usually, the construction of just one classroom can take between four to six months. This kind of government project is exactly the foot-in-the door that Moladi is after. The Western Cape has to build 20 schools a year to provide for its growing population.”

Moladi provides training in the construction of its houses and licences people who finish the course to build Moladi houses. Training is free, but trainees need to pay for the moulds and admixture. Licensees are supplied with viable business plans to help them secure loans for their start-ups. Hennie has a vested interest in the success of the licensees, since poor outcomes reflect badly on the business. He also prefers working with cooperatives rather than individuals, as it means that people will check up on each other. This is especially important when it comes to cash flow. Many new entrepreneurs fail, he says, because they splurge on cars and cell phones instead of the must-haves required to make a business grow.

Hennie has kept his team small. Low overhead costs have enabled Moladi to remain profitable in the low cost housing market. Companies with high overheads simply cannot compete in this small-margin, big-volume space.

“The real market requires a vast amount of homes below the R500 000 range, and that’s where our focus lies. Also, I did most of the work alone for many years after I started the company. These days my daughters, Shevaughn and Camalynne, are key to the successful running of Moladi and they fulfil vital roles. We outsource work to keep overheads down and have very good relationships with various suppliers, building experts, engineers, town planners, architects, and funding institutions. Our biggest differentiator is the pride we take in our ‘land to stand’ approach’ — we are a one-stop-shop for home building.”

Related: Engineering Consulting Business Plan Sample

His goal now is to find ways to work together with organisations like the National Development Plan (NDP) and the National Youth Development Agency (NYDA). Hennie refers to his customers as partners, which forms part of his holistic approach to construction. Typical clients include private construction firms and property developers. Governments can often play indirect roles, as they would usually contract state-funded housing programmes through the tender process.

“I believe we need entrepreneurship that looks beyond spaza shops, hairdressers and car washes,” he says. “There is an enormous and pressing need to provide dignified housing for South Africans, and to address our appalling unemployment levels. What better way to begin to do that than by using accredited, affordable technology that can achieve both goals at an accelerated rate? Moreover, to fulfil the supply chain, work would be provided for painters, plumbers, electricians and roofers.”

The Moladi building system uses a removable, reusable, recyclable and lightweight plastic formwork mould, which is filled with mortar to form the wall structure of a house in only one day.

Hennie describes it as the ‘Henry Ford’ of mass housing. “We produce components and products that reduce the cost of building, and we work on a production-line basis, from production to homeowner, bypassing the middleman in the supply chain.”

The process involves the assembly of a temporary plastic formwork mould, the size of the designed house, with all the electrical services plumbing and steel reinforcing located within the wall structure, which is then filled with a specially formulated mortar mix to form all the walls of the house simultaneously.

All the steel reinforcing, window and door block-outs, conduits, pipes and other fittings are positioned within the wall cavity to be cast in-place when filled with the Moladi mortar mix. The mix is a fast curing aerated mortar that flows easily, is waterproof and possesses good thermal and sound insulating properties.

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Entrepreneur Profiles

Swipe Successful – How Sureswipe Scaled To A R250 Million Turnover

Here’s how Sureswipe cornered a niche market with limited funding and continues to enjoy double-digit year-on-year growth.

Nadine Todd

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Vital Stats

  • Player: Paul Kent
  • Company: Sureswipe
  • What they do: Sureswipe is one of South Africa’s first card Payment Service Providers (PSPs), established to make card payment acceptance easy and accessible to all independent retailers and service providers.
  • Est: 2008
  • Turnover: R251 million
  • Visit: sureswipe.co.za

Four years ago, Paul Kent received a Request for Proposal (RFP) from a tier one retailer. He ran around the office high-fiving everyone. Sureswipe had made it. They were officially on the map.

Two days later, Paul and his COO, Richard Flack, turned the RFP down, choosing not to pitch for the business, even though it would have been a huge deal if they’d secured it. It took two brutal days to make the decision, but ultimately, Paul and Richard understood that sometimes you have to say no to business, particularly if it doesn’t align with your vision.

“I was so excited, but Richard immediately said, ‘let’s think carefully about this before making any decisions,’ and so we did. We went back to our vision to make card acceptance easy and accessible for all independent retailers. The more we thought about the RFP, the more we realised that we’re not geared to service tier one retailers. Our team has a deep connection with independents. That’s who we want to support and where our expertise lies. Our business model is geared to support that market sector. Extending our focus to tier one retailers would require a change in our business and a new division to service them. It wasn’t the right move for us.”

Paul learnt what many successful entrepreneurs before him have discovered: In business, what you say no to is as important as what you take on. The more focused you are and the better you understand your core customers, the more successfully you will service them. That’s the foundation of a sustainable, high-growth company.

It took Paul and his team five years to get 3 000 Sureswipe card payment machines into the market. They were growing rapidly by the time they received the RFP. Today they have 10 000 devices in the market, and expect to hit 30 000 within three years. The business has grown 30% in the last year alone.

Here are the lessons Paul has learnt since launching Sureswipe in 2008, from the leanest way to start (and run) a business, to minimising customer churn and maximising market loyalty.

1. Launch a solution, not just a company

sureswipe-machine

The idea for Sureswipe was born inside Healthbridge, a company that processed claims between doctors and medical insurers. It was the mid-2000s and medical aids were changing. Where previously doctors submitted directly to medical aids, co-payments and limited annual benefits compelled medical practices to start accepting cash and card payments.

Sureswipe was launched as a division that supplied card payment machines to support this shift. Paul, who was heading up the business development key account team at Healthbridge, realised that there was a much bigger market that needed a value-for-money, high service level card payment solution, and that was independent retailers.

“Growing up in the UK, I spent a lot of time in my grandfather’s fruit and florist store and in high school I worked weekends at a local clothing retailer. As a result I understood the challenges of retail, particularly the time-bound administrative burdens,” he says.

Paul researched the market and developed a value proposition based on two key factors. First, although paying for payments is a grudge purchase, particularly for small, independent retailers, cash-based businesses that adopt card payments typically experience a 50% increase in monthly turnover. Second, independent retailers with point of sale (POS) machines were paying a 5% transaction fee, while those that hadn’t adopted POS systems weren’t the core focus of banks. Paul found a frustrated customer base eager for an alternative service provider.

“Most retailers either thought that card payments were too expensive, or that they could only access POS machines through their banks. They’d often wait up to 30 days for a machine, and if it broke, it would be another week before a technician came to fix it. At that time, the large banks weren’t geared to service that market.”

With a clear value proposition in mind, Paul convinced Healthbridge to ring-fence Sureswipe and launch it as a separate business. In October 2008, Sureswipe opened its doors with Heathbridge as the majority shareholder. The business model had two core focuses: Converting cash-based businesses and switching independent retailers who already had POS systems but were dissatisfied with their current service providers.

“We were strategic in picking the right market, but luck also played a part,” says Paul. “When we entered this space, a similar company was launched to focus on tier one and two retailers. But, the banks were highly competitive in that market segment and new entrants found it difficult to compete. We targeted a market that was largely ignored and today, 70% of our business is from single-store owners.”

While they were fine-tuning their offering, Paul and his team found that their customers were so grateful for an alternative solution that they tended to forgive start-up wobbles as Sureswipe found its groove.

Related: If You Want Scale, Fail Fast And Learn Quickly

Stress-testing your business

In the early days, the Sureswipe team leveraged its relationship with Capitec Bank to secure meetings and make sales. “We’re not a bank, so we need a banking sponsor to help us meet regulations and operate within this market,” explains Paul. “When Capitec secured its licence to do merchant acquiring, they had no customers and were developing their product in-house. They were also looking for a distribution partner. We aligned Sureswipe with Capitec as our sponsor and provided them with a distribution partner and a solid footprint in the medical market — it was a perfect solution.”

When you’re dealing with people’s money, you need a strong level of trust, so the relationship with Capitec was essential while Sureswipe built its own brand. “It wasn’t always easy,” says Paul. “We had six people who went from retailer to retailer explaining who we were and what we did. At one restaurant, two off-duty cops heard one of our reps and decided it was a con. They arrested him and he called me from the back of the police van. I had to convince them that we were a legitimate business before they’d let him go.”

After five years, Sureswipe and Capitec found that they were competing with each other. When the contract came to an end, both parties decided not to renew it. But Sureswipe had 3 000 devices in the market, all of which were on Capitec’s technology platform. By not renewing the agreement with Capitec, Sureswipe needed to recontract all 3 000 of their customers. It was a massive project.

“It was also a huge lesson for us, and I’m glad it happened when we only had 3 000 machines in the market. We realised the risk in working with one bank, particularly because the technology that processed our customers’ payments wasn’t our own. We needed to licence our own technology and develop a dual sponsor system to mitigate this risk.”

The entire project took more than six months to complete. “People in the industry were sceptical — a project of this scope had never been done before,” says Paul. “We started with a small, ring-fenced team. By the end of the six months every employee was working on the migration of customers onto the new platform.”

The lesson: There will always be challenges, particularly during growth phases. Stress-test your business as much as possible. The earlier you spot a potential risk or problem, the sooner you can address it and implement a solution, even if it means adjusting your business model.

To stress-test your business, ask yourself these four questions regularly: What happens if everything goes right (ie, we grow too fast)? If I remove one piece that’s central to the functionality of my business (this is what Sureswipe faced), what happens? Is my business valued (ie, do you know if your buyers love you and why)? What’s the worst that could happen?

2.Variable cost models keep businesses lean

One of Sureswipe’s success factors is that its product isn’t cutting edge — what the business does is not unique, and the technology is available to be licensed. Nothing had to be built from scratch.

This allowed Paul and his team to launch the business with a variable cost model, outsourcing sales, the call centre and even their technology.

“The biggest outlay was the initial investment into the product, funded by Healthbridge, but within a year we were cashflow positive,” says Paul. “We’ve been funding ourselves organically ever since.”

At the time, launching the business wasn’t a big risk because it didn’t involve a huge upfront investment. Healthbridge was happy to see where it went. Paul and his team of eight kept costs down and slowly built up the business to the point where it became bigger than its initial shareholder.

“It was the ideal business model to start with. Don’t try to build the biggest — do the minimum required and don’t use a lot of capital. If you use a lot of capital upfront shareholders will put you under immense pressure. We were under no pressure. We weren’t drawing anything; we were just a little side thing that may or may not work.

“We were the first mover in this space in South Africa, but everything we do has been done somewhere else. The machines are sourced from a few companies in the world that manufacture them. The mPOS machine is licensed from a company in Iceland. Software is licensed. Everything Sureswipe needs exists — it’s just a case of sourcing it and building a solid service-delivery business around the tech.”

Without the burden of heavy research and development and other start-up costs, Sureswipe channels all internally-generated cash into finding ways to do things better and faster for their customers.

 “Today fintech is a buzzword. Disruption within the financial services sector is expected. Ten years ago, fintech wasn’t even a word. Everyone thought you could only deal with banks.

“What we had going for us when we launched was our card machines. People understood them so we didn’t need to educate our market on what we did. We just needed to make them aware that there was an alternative to banks, and because we focused on an untapped market, there weren’t really competitors in the space. We weren’t trying to bring in new technology like mobile payments. The market wasn’t ready for that in 2008.”

Sureswipe launched with traditional stand-alone card machines, followed by Integrated payments for larger retail franchise stores, mobile MOVE card readers for businesses on the go, and Sureswipe POS LITE, an app-based point-of-sale software for start-ups and smaller retailers.

“When it came to mPOS, we were happy to be followers. We had a product ready to launch, but we made the decision to wait for the banks to launch their offerings and educate the market first. We were then in a perfect position to be fast followers — without needing to educate the market ourselves.

“It was a strategic play and it worked for us. We’ve also had good growth in our MOVE product and we’re doing the same with QR code payments. There have been trailblazers in the market who have done phenomenally well, but they operate on separate platforms. We can now offer a QR code that accepts almost any QR Wallet.

“On the other hand, a peer-to-peer mobile wallet was developed within Healthbridge that never gained the traction needed for success. It was too early for the market and deep pockets were needed to fund the business. The business had a great team that worked on the project and Sureswipe benefited from accessing them.”

Today, Sureswipe has integrated many functions that were previously outsourced. “Our variable cost-model allowed us to enter the market without huge financial backing, but where it’s made financial sense, or it offers us a strong competitive advantage, we have brought services or products in-house.”

Related: How to Build a Lean and Efficient Business Plan

3. Understand — and leverage — your competitive advantage

sureswipe-product

Since entering the market ten years ago, transaction fees have more than halved. This is good for retailers, but it makes the space more competitive for service providers who must maintain quality products and service as profit margins narrow.

Sureswipe’s value proposition is captured in one sentence: They come for price, they stay for service. “Everything we do needs to adhere to that,” says Paul. “We need to bring technology to market at a lower price point than incumbents are offering, and then secure customer loyalty with our superior service offering.”

Within an increasingly competitive space, Sureswipe is not always the most cost-effective solution in the market, but a focus on service and convenience means that retailers are willing to pay a premium if the offering is good for their business.

“Our focus is value for money, not price. Retailers want to be able to accept any legal currency from their customers. As a service provider, we needed to figure out a way to do that in the most cost-effective way possible, without increasing our administrative burden as the business grew. With its low margins, this business only works at scale. If our internal costs escalate with each new user, that’s not a scalable business.”

So, what is Sureswipe’s competitive edge? “We’ve always understood retailers,” says Paul. “Their biggest burden is time — they never have enough of it. If you have an unreliable product, or an administrative burden, you’re essentially losing time and revenue.”

This was the business’s entry into the market, but growth has been the result of continuously fine-tuning Sureswipe’s offering based on its knowledge of customer needs. “The more time we spend understanding our target market, the more we’re able to recognise their pain points. Everything we do is focused on simplifying the lives of retailers and helping them to grow their businesses.”

In a highly competitive space, you need to create an edge for yourself. Some businesses create a moat around the business with tech, but often there is a competitor who can do things faster and cheaper.

Successful companies find a different competitive edge, one that focuses on delivering value to the customer beyond the product.

Sureswipe has a two-pronged approach. First, convenience and simplicity are a must — if Sureswipe isn’t making the lives of its clients easier (and more convenient for their customers in turn), then the business isn’t living up to its core values. The second is keeping costs as low as possible. Sureswipe needs to be able to offer its products and services to the market at highly competitive prices. This is only possible if the business has lean operations and is scalable.

So, how have Paul and his team managed to offer exceptional service while keeping costs low? “You need to sweat the details,” he says. “This landscape has become increasingly competitive. Banks have caught up to us. An independent retailer can pick up the phone and the bank will send someone the following day to chat to them.”

To counter competition, Sureswipe focuses on service and cost to serve. It’s one thing acquiring a customer, it’s another keeping them, and this has been where Sureswipe’s team focuses their passion and energy.

“We’ve found that complex structures hinder service levels and so we’ve kept our structure flat. Our internal culture is extremely important for customer service. Hiring the right people who are passionate about retail and business means we are able to service our clients better. We care about their businesses. 86% of calls get resolved by our call centres. If they can’t solve the problem, a technician is sent to the store to fix or swap a faulty machine.”

From a cost perspective, Sureswipe needs to continuously get to market cheaper than before, while simultaneously offering products that are better, more seamless and more integrated into the business.

“There is always an initial cost when introducing a new product, whether it’s a device or an app. However, each new offering increases our clients’ revenue, which in turn increases our revenue. Scale is critical — we’re in the red until we achieve scale.

“We’ve had to be ruthless about achieving great service levels at low costs. We don’t believe in either low cost or good service — we need to deliver both. If something is too expensive for us or our clients, we either don’t do it, or we find a more cost-effective way to bring it to market.”

Related: Why Start-ups Like Uber Stumble When They Scale

4. Ensure you have a ‘stickiness’ factor

One of the dangers of a highly competitive market is that it’s simple for customers to switch service providers if they are only looking at price. If a retailer only has a POS machine with Sureswipe for example, it can be swopped out for another device. With this in mind, Paul started looking at value-added services that increase brand loyalty and reduce churn.

“We call it preventable churn,” says Paul. “If business owners have a POS device and take just one more product from us, the stickiness factor is exponential. This can include a cash advance product, or creating a gift and loyalty programme through our platform, or both. As a business owner you can still switch to another service provider, but it’s more complicated and you’re receiving a bundle of services that all add value to your business.”

To achieve this, Sureswipe has partnered with Retail Capital to offer its customers cash advance products, while a loyalty programme allows consumers to swipe their loyalty cards and gift cards at all Sureswipe terminals, accumulating points.

“We’ve seen a small increase in revenue since we added these offerings, but more importantly, our customers’ revenues have increased. For example, if someone has a gift card, they will generally spend a bit extra in-store as well. Our merchant discount fee means we offer these products to our customers at a low cost, but our churn rate has lowered by 70%.”

Everything Sureswipe introduces to the market is based on a long-term view. “We offer a commoditised product and so our success relies on scale and volume. As long as you can do that at the right cost, with the right returns, you have a sustainable business. These extra products reduce churn, solve pain points for our customers and in the long term will increase our revenue.”

Paul’s long-term focus is consolidation. “We’ve been in this space for ten years, we have a great customer base, and we believe that we can consolidate our market. Our long-term view informs any decision we make about acquisitions or mergers.”

In 2016, Sureswipe acquired Concord, a company running software that integrated banks with retailers’ till systems.

The acquisition enabled Sureswipe to reduce costs by offering customers one point of contact for their POS system, tills and the processing between the two. “It removes complexities from the value chain, reduces costs and reduces retailer admin.”

With new generation mPOS offerings encroaching on Sureswipe’s standalone devices on the one side, and Integrated payments on the other, Sureswipe is effectively cannibalising its own market, but as Paul is quick to point out — that’s the idea.

5. Always look to the future

paul-kent-sureswipe

Sureswipe’s potential is huge. With 10 000 devices in the market, the business will facilitate R10 billion in transactions this year alone, which accounts for only 6% of its target sector, 2% overall, and 1% if you consider that the biggest competitor to electronic payments isn’t other service providers or banks, but cash.

“Markets change and adapt, particularly in this space where there has been incredible innovation and growth over the past few years. We know that in the long run, if we want to sustain growth, we will need to cannibalise the stand-alone devices, which we’re already doing. Ultimately though, what we really want to bring to market are products that can compete with cash.”

According to Paul, everything comes down to two things: Convenience and cost. mPOS is a lower cost option; contactless payments are all about convenience. Sureswipe needs both — and to keep looking ahead to see what’s next for their market.

“In the UK this year, for the first time, there were more electronic payments than cash, thanks to the convenience of contactless purchases for small ticket items. This is a big driver for us.”

To stay ahead of the game, Paul focuses on the business’s capabilities, and his own. “I need to pay attention to what’s happening internationally and how we can adapt our product offerings based on international innovations, but I also need to continuously focus on personal growth.

“One of my biggest fears is that the business will outgrow me. It’s a common founder’s fear, and for good reason. Many founders are great at launching businesses, but they don’t possess the skills the business needs to grow.”

To avoid this pitfall, Paul has consciously developed his business acumen over the past 15 years, beginning with Wits Business School’s Management Advancement Programme in 2003, and completing his MBA in 2015 through IE Business School in Madrid.

“I think it’s essential for all entrepreneurs and business owners to keep the pencil sharp and learn as much as possible. If I reached a stage where I didn’t think I was the right person for this position, I’d step back. We’ve built a team to complement each other; I’m not a details guy, but someone who is can fill that role. Part of my journey has been working my way out of a job by bringing in someone who can do what I’m doing, and often they do it better than me.

Related: How To Scale Your Business Effectively


LESSONS LEARNT

Become an expert in a niche

Our focus on the independent retailer space has given us a deep understanding of our customers and their needs. We’ve had international companies that are interested in acquiring us state that companies in other markets don’t have our level of understanding for each element of the business.

Look at problems with fresh eyes

We were naive about banking and financial businesses; we’re more retailers than bankers. This meant we didn’t have legacy systems when we launched, which allowed us to look at the independent retail sector without preconceived ideas and ask: What does this market need and how can we service it?

Always seek to remove pain points from your customers, no matter how small

In our sector, as businesses grow, their owners go back to the bank each year to renegotiate their fees. We removed this administrative burden by signing them up on a sliding scale, and as they grow, they automatically move into new segments and their fees drop — both new entrants and incumbent banks have copied this pricing model.

Understand where you’re innovating and why

We knew we didn’t need to innovate on the tech side. Everything we needed existed, and it was far more cost-effective to licence products than build from scratch. Instead, we innovated around our business model and service offering.

Everything starts with your people

Our employees are friendly and helpful, even though we now have a staff complement of 139 people. We foster a passion for learning, promote from within, where possible, and champion a can-do attitude. We’re a service-based organisation, which means everyone’s visions need to align with our service goal.

Pay attention locally and internationally

Read a lot, find out what’s trending, be well networked and have associations overseas. For example, Mastercard and Visa let us know what’s happening in other markets. We’re not at the forefront of technology, but we need to know what’s happening with technology to be able to follow it.

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