Franchises don’t always begin as franchises. More often than not they start off as a single restaurant, fast-food store, retail shop or, in the case of Chas Everitt, a husband and wife team launching their own real estate agency.
Charles (Chas) Everitt and his wife Tilla started their real estate company in 1980. Mother and father ran the business together, and although their youngest son Berry had been exposed to property all his life as a result, he did not immediately think of joining his father in the family business once his stint in the army was over. Instead, he moved to Durban, the city where he had spent the majority of his childhood before his parents relocated to Johannesburg. Little did he know that not only would he be the Everitt who turned the family business into a franchise, but that he would do it through a unique franchising model as well.
“As a youngster, I wanted to surf and live by the sea,” he explains. “I wasn’t against the idea of working with my father, I just didn’t think about it.” Instead, taking a position as a trainee liquidator at Arthur Young Trust and Management and studying a CIS in Durban, he began to develop his skills in the financial and business arena. These selfsame skills serendipitously ended up taking him straight to his father’s door.
“By 1990 Chas Everitt had grown and was still growing under mom and dad’s guidance, but my parents needed someone to handle the financial side of the business,” says Berry. “Not only was this squarely in my area of expertise, but the financials of a business are not something you entrust to just anybody. Charles and Tilla wanted someone they could trust.”
By this time it was his wife to be, Tracey, who convinced him that it was time to move back to Joburg and join his father’s team. “The first thing I did was help my father computerise the business and develop systems and processes. My previous experience had exposed me to a myriad of business processes that did and did not work, and I used this knowledge to add value to the company.”
By 1996, Chas Everitt had seven successful agencies to its name, and father and son were considering their next move. The industry as a whole was moving towards a franchising model, and while Berry and Chas both agreed that this was the way forward, their opinions on how to get there, and what the model would look like, differed.
Choosing a Direction
“The business was doing well, but in order to grow further we needed to put a structure in place that could be disseminated across a number of businesses. The franchise model was the obvious way to do this, and to secure a national footprint, but I didn’t want to implement a traditional franchise model,” says Berry. “Because we were already an established business, we didn’t need head office owned stores to generate revenue for the franchise.” Berry believes that head office owned stores can create an ‘us and them’ mentality between the franchisor and franchisees. “No one store should hold more value or significance to the franchisor than another,” he explains. “We were in a position to just be a franchisor, and not also a store owner. This gave us a unique opportunity to create a family where all franchisees are equal, with absolutely no danger that other franchisees could assume that the needs and success of any stores are more important than their own.”
While Charles was not wholly convinced in the beginning, favouring a more traditional franchising model, Berry’s persistence and belief in his model won out, and Charles made the decision to sell the company to his son, handing over the reigns to the next generation. An undisclosed sum was agreed upon, and Berry would make the payments over four years, starting in 1997. Charles remains the chairman of Chas Everitt’s board, but Berry is the principal decision maker of the business’s day-to-day operations.
The Franchise Model
Berry’s plan had two phases. First, he wanted to restructure the existing seven agencies into individual business units. This would decentralise the real estate operations’ day-to-day
decision making and focus the core real estate revenues in the franchise operations, allowing for the individual strengths of each business leader to emerge. An agency that was doing very well could use its own profits to incentivise its staff, instead of those profits being used to support another, less successful agency within the group. “This was really step one towards franchising the business. Each agency takes control of its own success, and in so doing becomes more flexible as well. Customer-centric markets require agencies to be able to match their clientele’s specific needs — many markets need many different shoes to fit them. A franchisor offers a brand name, stability and strong, proven systems, but franchisee-owned agencies offer clients flexibility and tailored solutions. And of course, owning an agency and its profits is a great incentive to succeed.”
The first seven agencies were consolidated into five, and Berry offered the managers equity on an earn out basis. “When you find great people you need to keep them, and ownership is one way to do that. Those agencies became our first franchises. I am personally invested in them along with the managers who run them. Our franchising head office has no link to them other than the franchisor-franchisee relationship.”
Tested on the first five agencies, the model proved successful, and in 2003 Berry and his team started a national rollout. “Franchisor infrastructure control develops, implements and maintains systems, training and operations manuals,” he says. “We ensure each of our franchisees has the best business infrastructure possible, are kept up to date on the latest industry developments and changes, as well as sourcing, training and retaining great and well looked after agents.”
Even though it is a franchise with 108 franchisees, Chas Everitt began as a family business, and that ideology continues to permeate the way the group does business today. “Existing franchisees in an area are invited to meet a prospective franchisee before we sign any deals with them,” says Berry. “They have a veto right. If they don’t think the person suits our organisation, we won’t sign a deal with them.” According to Berry this has only happened once in the franchise’s history, but it does mean that new franchisees are immediately accepted and welcomed into the Chas Everitt community. “Our strength and power lies in our team of franchisees and agents around the country — we select them carefully and work hand in hand developing and innovating continuously.”
“One of our core focuses is on fostering our ‘family’,” Berry explains. “This means keeping communication channels open between head office and franchisees, agents and admin staff across the country, as well as being available as head office to clients who have questions and queries. If you complain at a franchise level you will deal directly with me, and we sell between 500 and 600 houses a month. Every client is important to the group as a whole.
“Barry Davies, the group’s franchising director, isn’t just head office’s contact with new and existing franchisees. He is available to agents who are having personal problems. He speaks to clients of franchisees and he is always, always available to a franchisee, as are the rest of the support team.”
Riding Out the Recession
Chas Everitt has emerged from the recession, where the industry as a whole dropped by 50%, with its franchisees largely intact, thanks to a focus on consolidation rather than trying to sell new franchises during a downturn.
“Our core focus was to keep our existing franchises open and help them weather the storm,” says Berry. “The last two years haven’t been easy. Our revenues dropped by 45% — but we managed to cut our costs by 55%.”
New technology, a renewed focus on operational efficiency and plain old innovation allowed the group to face the recession head-on and come out on top.
“One of our best moves was approaching FNB and helping them to develop their FNB Quick Sell product,” says Berry. “Today all the major banks have a similar product, but we piloted it.” The idea behind Quick Sell is simple: traditionally, banks put houses whose bonds cannot be furnished on auction. Typically they suffer a 50% loss in so doing.
The recession presented a unique problem, however. Loyal customers who had never defaulted on their loans suddenly could not pay their instalments. The banks did not want to penalise these customers, but they could not simply ignore the fact that bonds were not being paid either. Quick Sell offers a solution to both parties. The bank agrees to let the homeowner remain in the house until it is sold, which means the sell does not look like a forced sale, but a normal sale. The house is put on the market, and the real estate agent takes a very small commission. In exchange for cooperating, the bondholder gets a ‘forgiveness’ package from the bank.
“We sell for less, and everyone in the value chain accommodates the distressed customer, it also means that everyone wins in a bad situation,” says Berry. “It also opened a great new market for our agents. Yes, their commissions are much lower, but they prospered through the slump.” l
Buying the Business
Berry and Charles agreed on the terms under which Berry would buy Chas Everitt in 1997. At the time, market predications were soaring, with economists expecting interest rates to drop from 16% to 14%. Instead the unthinkable happened, and interest rates soared to 25% in the space of a few short months.
“It was probably the craziest time to try and buy a property business,” Berry recalls. “The decentralisation of agencies certainly helped, but on the whole it was a really tough time. I spent between 12 and 22 hours a day at work, and a lot of time praying and believing that we would make it through to the other side unscathed.”
At this point in his life and career, Berry was, in his own words, “a young bull, full of ideas and probably a fair share of arrogance.” He didn’t want to use Charles’s good reputation with the banks or his contacts. He wanted to raise the funds he needed to buy the business himself. And so he approached financiers as an unknown, which required him to put up much higher surety. “In hindsight, I made things much harder for myself than they needed to be,” says Berry. “I was putting unnecessary pressure on myself during a very difficult time. But it turned out to be a phenomenal character building exercise to go through what I did restructuring Chas Everitt during such a massive downturn and coming out on the other side as one of the top five estate agents in South Africa.”
Karl Westvig Of Retail Capital Shares His Insights Into A Year-On-Year Double-Digit Growth Business
Here’s how Karl has negotiated the many challenges of building a high-impact growth organisation that currently has a turnover of R150 million, which expects to double within the next three years.
- Player: Karl Westvig
- Company: Retail Capital
- Launched: 2011
- Turnover: R150 million (2017)
- Visit: www.retailcapital.co.za
Anyone who has successfully navigated a business from a R5 million turnover to R30 million, then to R100 million, and heading towards the billion rand mark knows that growth might be the goal, but it’s also where businesses stumble and fall.
When you’re on a growth trajectory, there will always be some areas of your business outpacing others. The trick is to hang on, and bring your customers, employees, investors and directors on your journey with you, improving the business each step of the way.
Here’s what Karl Westvig, co-founder of Retail Capital, has learnt along his journey, and why he’s continuing to enjoy year-on-year double-digit growth.
Differentiators determine market penetration
Retail Capital’s core product is a merchant cash advance. When the company launched in 2011, there was limited competition in South Africa, but Karl knew that would change. “South Africa is a high card-usage market, which is what you need for merchant cash advance products to work. You need to be able to track the monthly income of an SME to determine the size of cash advance they qualify for, and collect the loan repayments through POS (or point of sale) card machines.
“My founding partner, Dave Lewis saw the product in the UK, and believed it would work here, thanks to our high card penetration. That meant other competitors would soon join the field. The product itself wasn’t our differentiator, but that didn’t mean it wasn’t a business worth pursuing.” In any industry, you need to evaluate competitors and whether the market is big enough for you. Karl and Dave believed it was, and that SME finance was under-served, but they also knew they needed a differentiator.
“We brought the concept to South Africa and built our own back-end. The way to differentiate is through channels and distribution, as terms and pricing structures are the same.
“Our differentiator is our people. It’s about who we are and how we train. We have 40 sales consultants nationwide who conduct face-to-face visits with our customers. We don’t push product, we provide a solution. We work hard to understand each owner’s business, and whether they will get a return on investment from a cash advance. We evaluate what the money’s for, what the margin on it is, and whether it makes commercial sense. There’s no point taking money unless you can make more from it. For example, if it’s used to procure much-needed stock, or gain a large settlement discount from a supplier, that’s an opportunity. But, plugging a cash flow hole to pay salaries doesn’t make sense. You should always ask what the benefit of cash in hand is, and then determine if a cash advance makes sense.
“We’ve developed the tools we use to evaluate this in-house. We’ve gone from zero to 40 sales consultants and we’ve been testing our processes and learning from them throughout that journey. We manually underwrote our early deals, and tracked what the advance was used for, how long the terms were and whether there was a return.
“This process has been automated in recent years, and we now have a wealth of data available to us, but we also have consistency. This means our clients can walk their journey with us. They understand the cost of the money, why they are getting it and their ROI. By the time they deploy the cash, they understand exactly how they’re using it.”
Longevity is built on the right partnerships
Retail Capital’s first product was a premium offering targeted at restaurant owners, franchisees and independent retail stores. “There are 200 000 POS systems in independent chains and single stores across the retail and restaurant sectors in South Africa, and 50 000 franchise stores,” explains Karl. “This was our target market.”
The offering suited the first segment of their market, but they struggled with franchise owners. “The independent space works for us. We’re almost like private bankers for SMEs. Our consultants understand the SME space — many of them have first-hand experience running a small business — and we work closely with our clients. We have business owners who have used us for seven years and have significantly grown their businesses over that time.”
Franchising was a much tougher nut to crack. “We faced a lot of resistance from franchisors who didn’t understand why their franchisees would need to borrow money — particularly a premium, and therefore more expensive product. We realised there was a disconnect between franchisors and their franchisees. Franchisors saw the product as too expensive. Franchisees had experience in trying to secure loans when they didn’t have assets to borrow against, and banks lend against balance sheets, not cash flow. We realised we needed to stop fighting the franchisors and partner with them instead.”
Retail Capital approached a number of franchisors and explained the pricing structure of merchant cash advances, particularly that higher risks for them meant higher interest charges for their (Retail Capital) clients. “We said we could bring the price down if the franchisors could help us derisk their franchisees with pre-vetting, and letting us know who the good operators who used their cash reserves well were. We brought franchisors into the fold and could pass on better pricing because we were taking on less risk.”
Karl has taken a similar approach to the micro segment of the market. “There are 50 000 micro retailers in South Africa, but this segment is growing rapidly,” he explains. “Within the next five years that 50 000 will be 250 000.”
It’s a segment that also benefits from cash advances, but not at the price point of Retail Capital’s premium product.
“We watched the development of mPOS (mobile points of sale) devices overseas and found local producers like iKhoka and Yoco. Our approach is simple; they have the devices, we have the capital and the system to disperse funds. It’s too expensive for us to service this sector face to face. It needs to be a fintech play, which was why we partnered with companies that had the devices.
“There are three sides to a deal. The originator (the device), the capital and the operator. The data that runs through the devices allows us to pre-approve micro vendors for a specific amount over relatively short payment terms. The risks are higher, but we mitigate them with cost-free delivery of the loans.
The systems and processes to get the funding to a micro operator and collect payments is our area of expertise, but we recognise that the originators will also want to hold the book.
“Yoco for example is building scale. To truly grow they need to become lenders themselves. This is going to happen whether we like it or not. Our current joint venture model allows them to partner with us, and eventually we will just be the operator. Within this particular market, we’d rather have that than nothing, which is why we’re flexible.
“There are other business benefits for us. Our technology is our platform, and this can be used in many other ways. We’re operating in a minefield of opportunity, collecting risk data on industries across the SME sector that we will be able to apply to other products. You don’t need to own every channel of a value chain. Working with the right partners can be much more valuable, and opens doors to new opportunities.”
Leverage existing platforms for growth
“The most exciting part of Retail Capital for me is re-imagining the business. Dave built a great business before he exited to sail around the world. It was profitable and well-managed, but with a single product.
“When I walked in I took a different approach. I started by asking what our customers were looking for, and listening to what they were telling us, instead of pushing them into nine-month products.
Whenever you launch a new product, you need to start with a profitability framework. For us, this meant asking what our return on capital requirements needed to be across three to 18 months. Once we knew that, we could build it and offer adapted products to the market.
“Adapted products require adapted training. Too often companies add products, but don’t walk their teams through the new offerings, and so everyone sticks to what they know.
“We also looked at what other markets we could enter, which led us to franchises and the micro segment.
“What you really need to understand is your core. Financial services are all about distribution. Can you give it out, and can you get it back? Everything else is the framework that supports this core.”
According to Karl, the question ‘can you give it out?’ is about creating a product that you deliver where customers want it, whether that’s on the phone, online, or through face-to- face engagements. “You need to give your customers touchpoints at places convenient to them. Great businesses build capacity around their customers. Understanding their routines and what’s convenient to them allows you to invest where it makes sense.
“By listening to our customers, we could give them what they were looking for. We built new products and extended existing products based on this data.”
The second question, ‘can you get it back?’, involves underwriting and collections, and this is where Retail Capital’s IP resides. “You need to be able to set different limits and risk levels for different industries. There’s no such thing as one solution fits all in the SME space,” explains Karl. “Fashion stores and restaurants can afford to repay 10% to 12% of their credit card turnover, but FMCG stores wouldn’t have cash flow if their repayments were that high. Industries have differing risk profiles and require different terms. This develops over time. The longer you spend in the market, the more you can increase your efficiencies and reduce risk.”
Impactful growth doesn’t happen overnight
Two of the institutions that fund Retail Capital’s book are Ashburton and FutureGrowth, both large and established investment funds. “Today we are a rated business. Our returns are healthy. We’re a high-yield alternative investment,” explains Karl. “As our rating goes up, our interest rate falls, and we are able to pass that saving onto our customers. But that takes time.” You don’t go from being a start-up to funded by Ashburton overnight. You need a good track record, a professional and experienced team and stable loss rates. In short, you have to prove yourself in the market. Building something of value takes time and patience.
There have been challenges along the way, matching the balance sheet. “If you’re doubling the size of your business year on year, you need to be able to fund the growth of your book. The problem is that customers and money are seldom in balance. One is always stronger than the other. If you get funding, you need to find customers. If you suddenly have an influx of customers, you need funding.
“Then it’s down to distribution. You’re doing great, signed deals go up, your volume takes off, and now you need to run to your funders for more cash.”
Retail Capital doesn’t only have investment funds backing its book, but also equity investors. The management team owns 51% of the business, but various funders have been involved since the business’s inception.
“From a corporate perspective, growth triggers changes in a business, and those require investment. However, while we were experiencing rapid growth, our profits went backwards. People, systems and marketing are all significant costs, and they were all happening together. At the same time, I had to keep the confidence of my board and investors.
“As an entrepreneur, you sell your vision. Mine was that we would grow between 70% and 100%, and we weren’t hitting the numbers. It’s tough to keep the faith in a high-growth environment, and you really only get three strikes. How do you explain your vision, inner workings and full pipeline to a board that’s removed from your business, is risk-averse and doesn’t understand your sector? There was a six-month lag between where we were and where we said we’d be, but I knew we’d get there. However, confidence was waning because of the mismatch between the business and its investors.
“I realised I needed to find shareholders who understood where we were going. FutureGrowth was already funding our book. They understood our business, and we’d worked well together. They wanted a stake in the business, and they supported a management buy-out that would exit an investor who wasn’t comfortable in the business, and enable management to increase their stake.
“Ultimately, it all comes down to patience. Build the business that you envision, step-by-step. It takes time, but if you do it right, and lay strong foundations, the right people who share your vision will come on board.”
South Africa is a high card-usage market, which is what you need for merchant cash advance products to work. You need to be able to track the monthly income of an SME to determine the size of cash advance they qualify for, and collect the loan repayments through POS (or point of sale) card machines.
How Bertus Albertse Overcame Adversity To Build A R80 Million Franchising Business
This is how an entrepreneur who is still under 30, and who launched Body20 from his living room when he was 24, has built a R80-million business that has just gone global.
- Player: Bertus Albertse
- Company: Body20 Global
- Launched: 2013
- Franchised: 2014
- Turnover: R80 million
- Visit: www.body20.co.za
At 29, Bertus Albertse has built a R80-million franchising business that launched in the US a year ago. He’s been an over-achiever since school, and his approach to business has been no different. Over the past 12 months however, there has been a personal shift in Bertus’ life and mindset. Just over a year ago, he realised that his childhood wasn’t something to be embarrassed about or buried. In fact, the adversity he’s lived through is a big driving force behind a need for control and success.
“It was a part of myself I’d never shared. I didn’t discuss it in school, and once I started training people and then building a business, I didn’t talk about it either,” says Bertus. “
You’re focused on giving people the best customer experience possible, and that means putting your best foot forward, all the time. Admitting you aren’t always sure of what you’re doing, that you aren’t as confident as you look, or that you’ve struggled and needed to overcome real hardships — that’s just not part of the package.”
Bertus is driven — he got good marks at school, was captain of any team he played in, and would train on Friday nights when everyone else was out having a party. This same drive has led him to learn as much as possible about business, and the more he read, the more he realised that one of the things top entrepreneurs have in common is the fact that they’ve shared their stories. Who they are and what they’ve been through are big contributing factors to their success.
“We’re made to believe that, to a large degree, our adversity is not part of what we project to the world. What do you tell a client that walks in, or a franchisee, or someone that has to be motivated on your team — do you tell them the worst part of your journey, or do you share something that will motivate them? This was always my approach. But the more I started accepting my story, the more I realised that the power of my story made me who I am today.
“Books like Simon Sinek’s, Start With Why, and A Storyteller’s Secret have had a massive impact on me. We shouldn’t ignore the fundamental things that have brought us to where we are today. Mindset, willpower, discipline, the ability to pick ourselves up when we fail — these are all critical success factors, and they’re all mental. If you want to build a strong business, you need to start with your mind. You need to know who you are, how you react to challenges, and why you are the way you are. Then you can harness your strengths, and hopefully work on your weaknesses — or at least be aware of them.
“Every time you solve a problem, it makes you realise there’s a bigger problem that you didn’t know you didn’t know. The things that you don’t know hurt you the most. This has been my biggest learning curve with franchising. You might know what it takes you to be successful, but what’s to say what it takes someone else to be successful? You’re now supporting other people who aren’t like you. The more honest you can be with yourself, and the more you can interrogate why you’ve been successful, and what lessons you can share with others, the higher everyone’s chances of success.”
It was within this context that Bertus realised the dangers of being placed on a pedestal. “When your success starts to grow, people naturally want to know more about you. What I found was that I’d been so busy putting my best foot forward, an assumption had grown that I knew everything; that I’d had everything in life, and that this had all been easy. The opposite was true. I knew that if I was going to inspire franchisees to believe in their own journeys, I had to let them into mine. Nothing comes easy. In fact, adversity can often be your greatest gift, provided you know how to harness it.”
With that understanding, Bertus started delving into his personal psyche, motivations, habits and the driving force behind his actions. It’s been an interesting journey, filled with pain and rewards. He now has a much stronger understanding of his personal motivations and actions though, and he’s sharing these lessons with fellow entrepreneurs.
From humble beginnings
Other than a good education, Bertus’s childhood years are characterised by having as little as you can possibly start with. His childhood is shaped by memories of the all-too familiar feeling of a car running out of petrol, or of his mother waking him and his sister up in the middle of the night, so that she could take them home for a few hours before returning them to their 24-hour créche before starting her next shift as a traffic cop. These were all factors that the future entrepreneur buried when he went to school, directing his energy into his studies and sports instead.
“There were so many things we couldn’t control growing up. My mother did the best she could do, but the reality was that we had very little. I realised that control was important to me, and that I could create my own success if I was disciplined, and so I focused on the things I could influence: My marks and how much I trained. I’d grown up watching a level of perseverance in my mom that influenced the way I viewed work as well.”
In fact, Bertus has a keen understanding of the various influences in his life and how they have shaped him. When he was nine years old, his mother married his step-father, and later, in his teenage years, he reconnected with his father. The men are vastly different in the way they view work and success, and yet Bertus learnt a lot from both of them — not necessarily to emulate either of them, but rather in what he wanted from life.
“Both the men in my life had started out without degrees. They worked and studied at night. They achieved success through sheer hard work — and they’d both been indoctrinated to work for someone else, because that gave you stability.”
For a kid who had known very little stability in his life outside of what he could personally control, working for someone else wasn’t very appealing, and his father agreed. “My father realised that if you truly want to be successful, you need to work for yourself. He really encouraged me to be an entrepreneur. One of the first things he taught me was ‘buy low, sell high, collect early, pay late’. That’s how you make money. It’s obviously not that simple, but it’s a good way for you to start thinking about business. I realised that if you’re good at something, don’t do it for free. That’s rule number one. Rule number two is understanding how you generate income and making sure that your income is higher than your expenses. But I didn’t know about assets and balance sheets and how to generate wealth at that point. I was just starting to think about what a business would entail.”
While his father was pro-entrepreneurship, Bertus’ step-father was the opposite. “My step-father is a careful man. He’s got a good job, but he’s also frugal. He doesn’t take risks, and he has no debt. He’ll buy a smaller car, but he’ll pay cash. That’s how he operates. He instilled extreme positivity in us, and always put family first, but watching him made me realise that I’m not risk averse. If anything, I have a high impulse and risk appetite. The combination of these traits can lead you to taking good risks, or bad risks — it’s all about where your focus lies. I’ve always been aware of that and tried to channel my energy into the good risks — areas of my life that I could grow, build on, and hopefully also create an avenue of wealth for others.”
For Bertus, the secret is discovering what motivates you. “I believe in living life to the fullest. I live freely. One of the first decisions I made when I started earning my own money was buying a car I couldn’t afford. This was 150% against the advice of both of my dads — but it motivated me and made me run. I ran for my life. I could have it easier, with less stress — I create stress for myself — but it keeps me focused and driven. There are so many influences around us all the time. You need to find what matters to you. Mostly it’s trial and error. That’s okay. Just keep looking for it — you will find the answers you’re looking for.”
A strong sense of self
Key to Bertus’ journey has been understanding, and to a degree mastering, his own triggers. This isn’t always possible — but the more you understand why you do what you do, the more you can learn to harness that energy.
“I grew up in an OCD household. It was always fine, because I’m also OCD — I didn’t realise how much until I got to hostel and discovered it wasn’t normal to never want to sit on my perfectly made bed, or to shower for 45 minutes or brush my teeth for two hours. Sharing a room with other boys forced me to get rid of some of those habits, and I needed to channel that desire for control elsewhere, so I shifted it to sports and academics.
“This level of discipline is still massive for me, even today. I measure my day on zero to 100 every day. And each new day I’m back on zero — it doesn’t matter how productive I was the day before, or how big a deal we closed. I feel a sense of urgency to make extraordinary things happen today, each and every day.”
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This sounds positive, but it has a dark side as well. “If I don’t wake up at 5am to start dealing with emails I feel like I’ve started on the wrong foot, which quickly makes me spiral and feel like a failure,” Bertus explains. “I’ve had to find ways to balance my OCD nature. I can be very disciplined, but if I start spiralling, I’m the most unproductive person on the planet. I need to keep myself in check.”
To find that balance, Bertus has learnt to choose his battles. “I can be very obsessive about one thing, and care nothing about something else. I can’t be obsessed about everything, so I have to choose where my obsessions will lie. I try and make these as positive as possible, focusing on training and supporting my clients and now franchisees.”
Bertus might be OCD, but self-discipline is a muscle just like any other — the more you work it, the stronger it becomes. “For me, it’s all about directing my energies to the right place. For other entrepreneurs, it’s choosing where they can make the greatest impact, and then being consistent in their efforts. Routine is everything.”
Bertus does have a caveat though: “Discipline alone, with no clear direction, can actually be a bad thing. You can easily become too focused on things that don’t drive success.”
24 And taking risks (to reap the rewards)
Bertus has never been employed. He started out self-employed while still at university. He chose to discontinue his studies and dive into entrepreneurship instead, opening a supplements store in Cape Town. “As an underweight kid I’d taken supplements to get my weight up. That, combined with training, was where my expertise lay.”
But Bertus knew it wasn’t enough. “I was just making ends meet. What I had wasn’t a wealth building mechanism at all. I wanted to make a bigger impact in my own life, and in the lives of my clients. I believed a more holistic approach focused on training was a way to do that.”
Bertus wasn’t alone. He was 24 years old, and had a young wife and three children, one of whom was from his wife’s previous relationship. Given the risks involved in trying something new, many people would have stuck with the business opportunity that wasn’t a significant success, but that was paying the bills.
Bertus had different plans. “You need to run for your life,” he says. “That stress, the risks involved — they’re what drive me. I always tell our young trainers that if they really want to be successful, they need to move out of their parents’ homes. The most basic necessities should be at risk. There’s nothing like fear to motivate you.”
With this in mind, Bertus launched Body20 from his living room in 2013. He had
R85 000 in an Allan Gray investment fund that he’d started while he was still studying. He decided the time had come to draw that cash, but it still wasn’t enough. A friend had introduced him to Electro Muscle Stimulation (EMS) technology, and the whole set-up was R220 000. Luckily, this friend believed in the concept, and agreed to invest in Bertus’ business idea. “I paid the loan back within a year, but he was really investing in the purpose, and he and his wife received free training. It was exactly what I needed to get me started.”
From the word go, Bertus understood a key element that would ultimately lead to Body20’s success: When it comes to EMS technology, the tech itself isn’t a differentiator. “There’s no exclusivity,” Bertus explains. “There are multiple tech providers available, and no one holds patents. There were also already competitors in the market, so I knew this wasn’t my competitive advantage.”
What Bertus also recognised was that the players in the market were focusing on their offerings as niche. He believed it could be a more mainstream addition to training programmes, working in conjunction with conventional gym sessions, and to help pro and amateur athletes prepare for big events. He went in with a different differentiator in mind: Service.
“At the time, I just wanted to move out of my living room and into a studio. I had no plans to franchise. I believed that my passion and willingness to serve would set me apart.”
And it did. “My clients saw how much I loved what I did, and they started asking me how I’d started out. They were intrigued by the lifestyle I lived — yes, success was growing, but I was also living my passion. That drew them.”
Slowly, Bertus’ clients started enquiring about franchising opportunities, and the idea started to take shape that not only was franchising an opportunity to scale the business, but it would help Bertus to share his passion with others, empower them and provide them a means to also build wealth.
The shift to franchising
Franchising has been an incredible experience for Bertus and Body20 has gone from strength to strength, growing from one studio in 2013, to franchising in 2014 and encompassing 38 studios in early 2018, including three studios in the US. But there have also been a multitude of lessons for the young entrepreneur to learn.
“Franchising as a growth strategy has never been about the capital — if that was the case, we could be a corporate that raises funds through investors. But this is a service business, and that means you need someone in the studio who is passionate about the business and their clients, and franchising enables that. We want to create opportunities for other people. This means supporting franchisees, and in some cases, even investing in the right operators who don’t have the capital to set up their own stores.”
The shift from studio owner and personal trainer to franchisor has not been without its own significant growth hurdles.
“The most interesting lesson I’ve learnt is that franchising is a completely different business model to operating your own business,” says Bertus. “That’s the problem; there’s no one bridging the gap for you. You can go to a franchise attorney to draw up your franchise agreement, but that doesn’t tell you how to operate your franchise. How do you suddenly put up an operational infrastructure to support other people to be as successful as you, when you don’t yet know what they need? It’s difficult to know what someone else needs in their business, even if it’s the same business that you were in.
“Everyone comes at business from a different perspective. We’re all indoctrinated in different ways. I had momentum in this industry. How do you carry that through to someone else who is a mechanic, an attorney, a teacher, or a CA? What do they each need? How do different studios operate in different areas? There are so many variables to consider, and we didn’t always get them right.”
Bertus understood he knew nothing about franchising — but he had no idea of the lessons that lay in store for him until he took the plunge. “This is the biggest difference between corporate and entrepreneurship,” he says. “In a corporate environment, you get clarity first, before you take action. In entrepreneurship, you only get clarity through action. You only know where you’re going once you start moving — clarity comes from doing.
“When you start taking action, you’re already on the path to finding answers — you’re hitting the problems you’re going to encounter, which gives you the opportunity to find the solutions you need to keep moving forward. You won’t always get it right — the path to successful business is littered with failures, but you can’t overcome obstacles unless you’re encountering them.”
One of Bertus’ biggest learnings has been that effort alone isn’t enough to carry you through. “I used to believe that effort equals success in battle,” he says. “This was my guiding mantra — that if you worked hard enough, anything was possible. Franchising took me from being a sole operator to a business owner, and I now know that effort equals a lot of work and a lot of lessons learnt, but that you’ll still get nowhere if you don’t have a solid strategy in place.
“Success equals strategy plus effort. Busyness and success are not the same thing, nor are busyness and effectiveness. Effectiveness happens when you’re busy with the right strategy. This has been huge for me — finding the balance between strategy and effort.
“In 2014 I used to receive no less than 100 phone calls a day. I had to deal with clients, solve franchisee problems and be available for all the people looking for me hourly. I used to think ‘how do you upscale from this?’ I couldn’t take any more calls and I didn’t have a second of the day to think about anything other than getting back to people. I knew I needed to have those problems — if you don’t, you’re not on the right wicket, but how do you upscale from taking a hundred calls to five calls?
“I once had someone tell me that the day would come when I wouldn’t receive a single call. I just thought they didn’t understand my business. After all, my primary role is sales and marketing — how could I not get that many calls? I still believed that effort equalled income. The moment I started focusing on strategy though, this started shifting. With a focus on strategy came systems, processes, well-documented operations. These all empowered people, and the ‘busyness’ started to fall away. I started to find the time to work on key areas that would drive the business forward. My phone didn’t ring as much, because there were systems and processes in place that meant the entire operation was starting to flow. I’ve learnt that the more successful you are, the less busy you’ll be. This doesn’t mean you work less, just that you do less busy work. It’s replaced with focused, strategic work. When you’re busy, you’re just dealing with what’s in front of you. A strategic focus is looking at three, five and ten years down the line.”
Body20’s next big growth move has been into the United States. “Like any growth strategy, we’ve had highs and lows, and we’ve needed to learn a lot of lessons,” says Bertus.
“The interest and uptake has been incredible, not just within the US, but from local entrepreneurs looking to expand into international markets as well.”
At the time of going to print, Body20 had already sold three franchises in Florida, with another four in the works. These have brought strong capital contributions into the business as a whole, but not everything has been smooth sailing.
“On the one hand, the first store broke even within four months, when our projected time frame was eight months,” says Bertus. “That’s incredible. But we’ve also learnt that no two markets are the same.
“South Africa is geared for business. We love it here. We sell a lease and the studio can be open within three weeks. There’s no permitting, no inspections, none of that exists here. The US on the other hand is an extremely regulated environment. For example, we signed a lease in February 2017, expecting to be open in June and excited about a great leasing deal that gave us four months’ beneficial occupation to set up the store. Except it took us nine months to get up and running.
“In South Africa, this would have taken us under a month. It was an expensive lesson. Not only were we burning through cash, but the franchisee needs to stay motivated while you wait. The project flow and milestones are inherently different.”
From a franchisor perspective, operating across two continents also has its challenges. “We’re essentially selling our time. This is a services business, and our clients are our franchisees. What we didn’t take properly into account when we started was the incredible travel times involved in doing business in the US. It took us 20 hours just to get to Miami, and a further six to California. You have to factor in all that time when you’re planning your schedules. It’s been a huge adjustment.”
That said, it’s also clearly been a rewarding one, and Body20 is still only just getting started.
- Clarity comes from action. You need to start to figure out what you need to do next.
- Success is the result of effort plus strategy. Effort alone won’t get it done.
- Systems and processes are essential if you want to move from ‘busy’ work to strategic work.
Going The Extra Mile With Neil Robinson Of Relate Bracelets
In business, your offering is only as good as your relationships. Neil Robinson from Relate Bracelets explains how FedEx Express has helped the business grow into Africa and beyond.
- Who? Neil Robinson
- Company: Relate Bracelets
- Position: Managing Director
- Visit: relate.org.za
Neil Robinson, MD of Relate Bracelets understands the importance of business relationships. While Relate is a non-profit organisation, it is run like a business. It does not rely on donors, but instead produces and sells a product.
For each bracelet sold, one third of the income goes towards the materials and operating costs, one third supports the people who produce the bracelets, and one third goes to the charity for which that particular bracelet is branded.
In order for the business model to work and be sustainable, Relate’s partners are incredibly important. These include the retail chains that stock the product and who provide prime point-of-sale positioning, the charities who Relate works with, and most importantly, Relate’s logistics service provider, FedEx Express.
“Retail is all about visibility and availability,” explains Neil. “A brand is a living, breathing thing. People can see it, use it, and comment on it, but if they can’t access it, it’s all for naught. And so, at the point of purchase, it’s both visible and available, or it’s not.
“Logistics is key. You need to get your product to the retailer on time, 100% of the time. The expertise and focus that FedEx displays in supply chain and logistics encompasses far more than just retail, they understand our specific needs, making them a strategic partner, rather than merely a supplier.”
Building a relationship
The FedEx/Relate Bracelets relationship stretches back to 2009, when Relate Bracelets launched its first campaign with ‘Unite Against Malaria’ leading up to the 2010 FIFA World Cup.
“We did the first campaign in partnership with Nando’s,” says Neil. “Robbie Brozin was passionate about the cause, and he pulled in strategic partners to launch the campaign. Within two years we’d shipped hundreds of thousands of bracelets. FedEx was an incredible partner, ensuring the integrity of our product and time-sensitive deliveries, and we’ve worked with them ever since.”
As with all good B2B relationships, the FedEx and Relate Bracelets teams understand that regular strategy sessions and updates are important.
“FedEx understands the inner workings of our business,” says Neil.
“A successful campaign has multiple elements, from planning and strategy, to marketing support, pricing and distribution planning. Of these, distribution planning is the most critical. For us, the bridge between our brand and the consumer is logistics. FedEx have delivered beyond expectations. They literally and figuratively go the extra mile for us.”
Protecting a brand
FedEx has customers across different industries and each of their needs are different. In the case of Relate, who operate in the retail sector, buying patterns are important. “Retailers run a tight ship,” explains Neil.
“They have planning cycles and seasons. Besides the fact that penalty clauses are built into contracts, you can’t miss a deadline by two days, or you’re in the next cycle, and that might be two weeks later. Not only are you missing out on valuable shelf time, but this can affect an entire campaign. Lost sales can also influence the retailers’ buying decision the following season. FedEx has made it their business to understand our business, so they know what’s at stake and what’s important to us.”
FedEx has also played an integral role in the overall expansion of Relate Bracelets, particularly into new markets. “As a global organisation, FedEx has been absolutely critical in supporting us to grow our business into Africa, the US, Australia, the UK, Western Europe, and now New Zealand. They play an enormous role in the delivery of our products, with sophisticated tracking systems ensuring that the quality and integrity of our products are maintained.”
Through the relationship with FedEx, Relate experiences the benefits of working with a globally recognised and credible brand. “When you work with quality, you get quality.”
If you’ve ever bought a beaded bracelet that supports a cause (for example: United Against Malaria, Operation Smile SA or PinkDrive), chances are it was a Relate Bracelet. If you bought it at Woolworths, Clicks, Sorbet or Foschini, it most definitely was.
To date, Relate Bracelets has raised more than R40 million, which supports various charities and ‘gogos’, women living on government grants and supporting their grandchildren, and who desperately need the additional income Relate Bracelets provides.
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