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Blue Label Telecoms: Mark and Brett Levy

Growth and innovation has been the Blue Label Telecoms hallmark since its inception. In a few short years, co-founders Mark and Brett Levy have created a global company worth billions

Juliet Pitman

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Mark and Brett Levy of Blue Label Telecoms

Lining the wall of the newly listed Blue Label Telecoms boardroom are hundreds of Johnnie Walker Blue Label bottles. “You can track the company’s entire history in those bottles. Each one tells a story,” says Mark Levy, who, together with his brother Brett, started the company as Blue Label Investments in 2001.

The bottles tell a story worth listening to and one that will no doubt serve as inspiration to all entrepreneurs who dream of making it big. Looking at the wall, you’d be forgiven for thinking you were in the company of ardent whisky-lovers, but this is not necessarily the case.

The Blue Label bottles are important because of what they signify. “The bottles are part of a company tradition that started at our inception. Brett and I decided that every time we signed a deal, we’d buy a bottle of Johnnie Walker Blue Label whisky and write the details of the deal on the back.

It’s not so much because we love whisky (although we’ve both drunk our fair share of what that wall represents), but rather because Blue Label is such an exclusive and aspirational brand. It symbolised success to us,” Mark explains.

From that tradition came the company’s name, which today has brand equity of its own. And thanks to the many deals signed, it produces and distributes a wide variety of pre-paid secure electronic tokens of value and transactional services, including pre-paid airtime, pre-paid electricity, bill payment, electronic funds transfer, gift vouchers, loyalty programmes, stored value cards, location based services and other pre-paid tokens of value (both physical and virtual) that are allied to the telecoms, utilities, insurance, financial services and transport industries.

On listing in November last year, Blue Label Telecoms which has a global presence, bought out its minority shareholders, raised R1,3 billion and entered into a strategic partnership with Microsoft’s Unlimited Potential Group. So, it’s unsurprising that the Levys are currently riding the crest of a wave. But rewind a couple of years and you’ll find them selling radios out of the boot of a car. “We’ve always been traders.

Our mother used to joke that if something wasn’t nailed down, we’d sell it. So while I was studying and Brett was still at school we used to drive to Pretoria to buy stock and then sell it from the boot of the car,” recalls Mark. After building up some capital, the brothers registered the company as Sounds Alive, operated out of a house and then eventually owned their first store.

“They were humble beginnings but we learned two things that have remained important. Firstly, consumers are generally lazy so if you make it convenient for them, they’ll buy from you. Secondly, we learnt about the importance of building and interacting with a distribution network and to this day, that remains one of our strengths,” he says.

Within a short while the brothers started bringing in their own products to sell to chain stores. Over time they built up a national distribution footprint which was to stand them in good stead in 2001 when they tendered for a nationwide Telkom distribution license for public payphones.

“We already had some experience in the pre-paid environment and had started trading in handsets and pre-paid vouchers through what was then The Prepaid Company. So when we landed the Telkom deal, the distribution network was in place. We were at an advantage because no one else was really interested in focusing on Telkom,” says Mark.

Even in those early days, Blue Label was starting to innovate. “We realised early on that the physical world is very limiting when it comes to things like pre-paid cards and the like, and there are a range of challenges that physical cards pose,” he explains.

Among these, the brothers identified as key issues, card pilferage at both a manufacturer and merchant level, the logistics and cost of moving and distributing stock (especially to small-time merchants) and stock management. So they came up with a solution that no one else had thought of and did away with the physical card altogether.

“If you think about it, the card was just a vehicle to get the secure PIN to the customer and we realised that there were better, more efficient ways of doing that, and if we could bypass the physical world we could save on costs and logistics and pilferage, and all those other hurdles,” explains Mark.

It was the tipping point of a business that today is built on providing a range of different enablers that get a pre-paid product from a supplier to a customer, all in the virtual space. The devices vary but all have in common the fact that they bypass the physical world.

For one application, Blue Label developed software that could be integrated into the mainframe solution of chain stores, allowing them to print pre-paid airtime PIN numbers from their till points, thus obviating the need for pre-paid cards. Another application is built into an ordinary credit card machine, turning it into a vending device that connects to Blue Label’s own back-end, thus providing smaller merchants with the ability to sell pre-paid products.

The company also pioneered the development of virtual vending machines that print pre-paid airtime PINs but don’t stock any physical cards. “The beauty of these is that you never miss a sale because you never run out of stock as you ordinarily do with a regular pre-paid vending machine,” explains Mark.

South Africa’s pre-paid market holds almost unlimited potential, particularly in the emerging sector and it was here that Blue Label turned its attention next, developing an application for informal pre-paid public phone street vendors. Mark explains:

“We wrote software for a very inexpensive handset that would allow a pre-paid vendor on the street to resell pre-paid minutes, decide how much he wanted to charge for them so he could make a small profit and tell him how much change to give a customer. The only thing it couldn’t do was print, but that wasn’t important because the customer writes the PIN down and uses it immediately.” The next major breakthrough came with the development of a bulk printing solution for pre-paid PIN numbers. “Still focusing on the emerging market, we developed a printing solution for wholesalers that allowed them print pre-paid products on demand. Because there is no physical stock and the numbers are printed only as and when they are required, there is no pilferage risk for the wholesaler, and they can sell the pre-paid PIN numbers in bulk to smaller spaza shop owners,” he explains.

But while Blue Label was first out the blocks with innovation, it had to wait for the market to catch up. One of the biggest challenges the Levys faced was how to re-educate the market about virtual pre-paid products. As Mark says: “People were used to a physical card that they felt held a store of value, and it has been a constant re-education process to convince customers that the value is held in the PIN and that it doesn’t matter what format the PIN comes in. We also had to gain the confidence of the merchants.”

But importantly, he goes on to add that once the market had accepted the new method of transacting in pre-paid, the sky was literally the limit. “It enables you to sell other things in the same way and when it comes to pre-paid, we haven’t even started,” he says.

Blue Label’s view is that the world will move increasingly towards greater use of pre-paid applications and that South Africa is a prime market. “There are tens of thousands of South Africans with cash who don’t have bank accounts or credit cards and they are willing to transact in First World products if you only provide them with the opportunity to do so. And we believe there’s no reason why they shouldn’t, so we’ve developed things like pre-paid funeral insurance in partnership with Hollard, and there are other opportunities in pre-paid electricity or pre-paid tickets to events such as soccer games. Although telephony is where pre-paid started, the future is in no way limited to that sector. Once you’ve built the environment, the doors start to open and in cash dominant emerging markets, the possibilities are almost endless,” he says.

The First World too is increasingly making use of pre-paid products. “In the UK for example, you can buy pre-paid bus tickets.” Where pre-paid buyers were once penalised because they weren’t loyal to a particular service provider, this practice is becoming less frequent, particularly when it comes to products that are not loyalty dependant.

Going global has been both exciting and challenging. “The challenge has been to find the right partners in the countries where we have a presence but in all instances we’ve been very lucky in this regard. I believe in the laws of attraction and I think that we’ve managed to attract the right people because of what the company is,” says Mark.

Undoubtedly one of its most important partnerships is the one with Microsoft. The relationship will further the company’s strategy of establishing a global transactional services platform in emerging markets and with Microsoft’s support, it aims to increase its global footprint of contact points with customers.

Microsoft will provide the company with advertising services, and access and licenses to various web-based and mobile technologies and services. “They’re a fantastic partner to have on board and we intend making the most of the synergies that exist,” says Mark.

The deal came at the time that the company listed in November 2007, a development that Mark says has definitely lent it credibility and weight in the global arena. The listing was, however, somewhat marred by reports and an investigation into directors’ contraventions of the JSE Limited Listing Requirements.

Three directors of a major subsidiary were found to be in contravention of the requirements and have been since been disciplined. The company has accepted the JSE’s findings and points out that the trades did not take place during a closed period or in respect of which there were any insider trading irregularities. The brothers are confident that the matter is now behind them.

Mark describes the listing process as very positive, particularly because of the growth opportunities it has created. “A number of factors influenced our decision to list, including the desire to eradicate some debt, create additional visibility on the global stage, incentivise staff, buy out some of our minorities and create a bigger coffer of expansion and organic growth funds,” he says.

R450 million is now available for growth, and he indicates that the company will be looking at different vertical growth opportunities and strategic acquisitions, both locally and internationally, that dovetail with what it hopes to achieve across a number of markets.

“I think the biggest challenge now is to manage that growth, but what’s exciting is that we’re not under pressure to do anything yet. The R450 million has not been earmarked and there’s no need for it to burn a hole in our pockets. We need to grow for the right reasons.”

Growth and innovation has been the company’s hallmark since its inception. In a few short years, the Levys have created a global company worth billions (its interim results for the year showed pro-forma revenue of R6,17 billion). Looking to the future, Mark concludes:“We’ve only just begun.”

Learn cash management early on

Blue Label’s business has always been about cash management, says Mark Levy, and the company’s accountants still run a tight financial ship. He believes that the best time to learn effective cash management and good financial habits is early on.

“When you’re making big money, you don’t notice if you lose money here and there. But when you’re small and you’re making small margins, those losses hurt you, so you learn to manage your money wisely,” he says. “Because we didn’t have money and our margins were small, it really taught us to watch our money, because every missing buck was a big one. That culture and mind-set is now a part of the company and has filtered down everywhere. What we’ve lost in stock in seven years of trading is minimal because of that culture,” he concludes.

Juliet Pitman is a features writer at Entrepreneur Magazine.

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Entrepreneur Profiles

Rich List: 2019 Richest People In The World

They’re worth billions, and their wealth continues to grow each year. Here’s the top 10 richest people globally in 2019.

Catherine Bristow

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jeff-bizos 10. Jeff Bezos

Net Worth: USD 139,5 billion

Jeff Bezos founded e-commerce giant Amazon in a garage in Seattle, USA in 1994. He also purchased The Washington Post for $250 million in 2013.

Bezos believes in always taking a long-term view and living in the present moment.

“I think this is something about which there’s a lot of controversy. A lot of people — and I’m just not one of them — believe that you should live for the now.

I think what you do is think about the great expanse of time ahead of you and try to make sure that you’re planning for that in a way that’s going to leave you ultimately satisfied. This is the way it works for me. There are a lot of paths to satisfaction and you need to find one that works for you.”

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Entrepreneur Profiles

7 Self-Made Teenager Millionaire Entrepreneurs

These teenager entrepreneurs have already made their first million and more. How did they do it and what’s their secret to success?

Catherine Bristow

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1. Evan of YouTube

evan-of-youtube

Evan and his father Jarod started a youtube channel ‘Evantube’ to review kids’ toys. The channel was a resounding success with other kids – so much so that today it boasts just over 6 million subscribers.

Evantube brings in more than USD1.4 million a year from ad revenue generated on the channel.

How did it start? With a father-son fun project making Angry Birds Stop Animation videos, and morphed into doing reviews on toys and video games. But Jarod’s dad is aware of the responsibility of Evan’s sudden fame and hopes to teach Evan about the importance of being a good role model for others.

“Most recently, we had the opportunity to work with the Make-a-Wish Foundation, and were able to fulfill the wish of a young boy whose dream was to meet Evan and make a video with him at Legoland,” explains Jared. “It was a really incredible experience. YouTube has definitely opened many doors, and the kids have gotten to do some pretty amazing things.”

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Entrepreneur Profiles

Expert Advice From Property Point On Taking Your Start-Up To The Next Level

Through Property Point, Shawn Theunissen and Desigan Chetty have worked with more than 170 businesses to help them scale. Here’s what your start-up should be focusing on, based on what they’ve learnt.

Nadine Todd

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shawn-theunissen-and-desigan-chetty

Vital Stats

  • Players: Shawn Theunissen and Desigan Chetty
  • Company: Property Point
  • What they do: Property Point is an enterprise development initiative created by Growthpoint Properties, and is dedicated to unlocking opportunities for SMEs operating in South Africa’s property sector.
  • Launched: 2008
  • Visit: propertypoint.org.za

Through Property Point, Shawn Theunissen and his team have spent ten years learning what makes entrepreneurs tick and what small business owners need to implement to become medium and large business owners. In that time, over 170 businesses have moved through the programme.

While Property Point is an enterprise development (ED) initiative, the lessons are universal. If you want to take your start-up to the next level, this is a good place to start.

Risk, reputation and relationships

“We believe that everything in business comes down to the 3Rs: Risk, Reputation and Relationships. If you understand these three factors and how they influence your business and its growth, your chances of success will increase exponentially,” says Shawn Theunissen, Executive Corporate Social Responsibility at Growthpoint Properties and founder of Property Point.

So, how do the 3Rs work, and what should business owners be doing based on them?

Risk: We can all agree that there will always be risks in business. It’s how you approach and mitigate those risks that counts, which means you first need to recognise and accept them.

“We always straddle the line between hardcore business fundamentals and the relational elements and people components of doing business,” says Shawn. “For example, one of the risks that everyone faces in South Africa is that we all make decisions based on unconscious biases. As a business owner, we need to recognise how this affects potential customers, employees, stakeholders and even ourselves as entrepreneurs.”

Reputation: Because Property Point is an ED initiative, its 170 alumni are black business owners, and so this is an area of bias that they focus on, but the rule holds true for all biases. “In the context of South Africa, small black businesses are seen as higher risk. To overcome this, black-owned businesses should focus on the reputational component of their companies. What’s the track record of the business?”

A business owner who approaches deals in this way can focus on building the value proposition of the business, outlining the capacity and capabilities of the business and its core team to deliver how the business is run, and specific service offerings.

“From a business development perspective, if you can provide a good track record, it diminishes the customer’s unconscious bias,” says Shawn. “Now the entrepreneur isn’t just being judged through one lens, but rather based on what they have done and delivered.”

Related: Property Point Creates R1bn In Procurement Opportunities For Small Businesses

Relationship: “We believe that fundamentally people do business with people,” says Shawn. “There needs to be culture match and fluency in terms of relations to make the job easier. As a general rule, the ease of doing business increases if there is a culture match.”

This relates to understanding what your client needs, how they want to do business, their user experience and customer experience. “We like to call it sharpening the pencil,” says Desigan Chetty, Property Point’s Head of Operations.

“In terms of value proposition, does your service offering focus on solving the client’s needs? Is there a culture match between you and your client? And if you realise there isn’t, can you walk away, or do you continue to focus time and energy on the wrong type of service offering to the wrong client? This isn’t learnt over- night. It takes time and small but constant adjustments to the direction you’re taking.”

In fact, Desigan advises walking away from the wrong business so that you can focus on your core competencies. “If you reach a space where you work well with a client and you’ve stuck to your core competencies, business is just going to be easier. It becomes easier for you to deliver. Sometimes entrepreneurs stretch themselves to try to provide a service to a client that’s not serving either of their needs. This strategy will never lead to growth — at least not sustainable growth.”

Instead, Desigan recommends choosing an entry point through a specific offering based on an explicit need. “Too often we see entrepreneurs whose offerings are so broad that they don’t focus,” he says. “Instead, understand what your client’s need is and address that need, even if it means that it’s only one out of your five offerings. Your likelihood of success if you go where the need is, is much higher.

“Once you get in, prove yourself through service delivery. It’s a lot easier to on-sell and cross sell once you have a foot in the door. You’re now building a relationship, learning the internal culture, how things work, what processes are followed and so on — the client’s landscape is easier to navigate. The challenge is to get in. Once you’re in, you can entrench yourself.”

Desigan and Shawn agree that this is one of the reasons why suppliers to large corporates become so entrenched. “Once you’re in, you can capitalise from other needs that may have emanated from your entry point and unlock opportunities,” says Shawn.

Building a sustainable start-up

While all start-ups are different, there are challenges most entrepreneurs share and key areas they should focus on.

Shawn and Desigan share the top five areas you should focus on.

1. Align and partner with the right people

This includes your staff, stakeholders, partners, suppliers and clients. Partnerships are the best thing to take you forward. The key is to collaborate and partner with the right people based on an alignment of objectives and culture. It’s when you don’t tick all the boxes that things don’t work out.

2. Make sure you get the basics right

Never neglect business fundamentals. Do you have the processes and systems in place to scale the business?

3. Understand your value proposition

Are you on a journey with your clients? Is your value proposition aligned to the need you’re trying to solve for your clients? Are you looking ahead of the curve — what’s the problem, what are your clients saying and are you being proactive in leveraging that relationship?

Related: Want To Start A Property Business That Buys Property And Rents It Out?

4. Unpack your value chain

If you want to diversify, understand your value chain. What is it, where are the opportunities both horizontally and vertically within your client base, and what other solutions can you offer based on your areas of expertise?

8. Don’t ignore technology

Be aware of what’s happening in the tech space and where you can use it to enable your business. Tech impacts everything, even more traditional industries. Businesses that embrace technology work smarter, faster and often at a lower cost base.

Ultimately, Desigan and Shawn believe that success often just comes down to attitude. “We have one entrepreneur in our programme who applied twice,” says Shawn. “When he was rejected, he listened to the feedback we gave him and instead of thinking we were wrong, went away, made changes and came back. He was willing to learn and open himself up to different ways of approaching things. That business has grown from R300 000 per annum to R20 million since joining us.

“Too many business owners aren’t willing to evaluate and adjust how they do things. It’s those who want to learn and embrace change and growth that excel.”

Networking, collaborating and mentoring

Property Point holds regular networking sessions called Entrepreneurship To The Point. They are open to the public and have two core aims. First, to provide entrepreneurs access to top speakers and entrepreneurs, and second, to give like-minded business owners an opportunity to network and possibly even collaborate.

“We believe in the power of collaboration and networking,” says Desigan.

“Most of our alumni become mentors themselves to new entrants to the programme. They want to share what they have learnt with other entrepreneurs, but they also know that they can learn from newer and younger entrepreneurs. The business landscape is always changing. Insights can come from anywhere and everywhere.”

The To The Point sessions are designed to help business owners widen their network, whether they are Property Point entrepreneurs or not.

To find out more, visit www.ettp.co.za

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