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Empire Builder Extraordinaire: Growth Lessons From Brett Latimer

Growth lessons from the man who turned R17 000 into R500 million, wasn’t ready to retire, and is now doing it all over again.

Monique Verduyn

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He’s already proven his entrepreneurial chops, but Durban-based Brett Latimer is at it again. By turning customers into fans, he’s shaken up the food business in South Africa’s most laidback city, taking his store’s turnover from R4 million to R34 million – in its first month.

Three steps to high-impact growth

1. Staff

Latimer cares for his employees as if they were family. He greets them every day, provides training and incentives to do well and, most importantly, he pays them well.

2. Customers

Latimer did his homework before opening the store, identifying that there was a gap in the LSM 5 to 10 market for a one-stop food shop that was a cut above the rest when it comes to variety, quality and customer service.

3. Price

By going direct to farmers and suppliers, Latimer has stripped out unnecessary layers from his business model, making it possible to pass the resulting cost-savings on to his customers.

From modest beginnings

Small taxi-rank butchery or high-quality foodmarket, Brett Latimer’s understanding of trends has fuelled growth.

Charismatic and super-energetic, Brett Latimer exudes the magnetism of a celebrity. Not quite what you would expect from your grocer. But that’s probably why he’s been so ridiculously successful.

Latimer’s father, a boxer, died when he was 11, but he taught him a very important lesson: When you get knocked down, get up again immediately. It’s a mantra that he’s lived by all his life. He struggled at school, and was no academic achiever.

After failing a couple of times, his mother sent him to Damelin, where he did commerce and typing. He had planned to study law at university, but he soon realised that tertiary education was not for him. Luckily, when he turned 18, he received an inheritance of R17 000. Both his father and grandfather had been butchers, so it was natural for him to follow suit, especially because he idolised both of them. But first he needed to learn the trade.

He joined the Avonmore Spar in Durban as a trainee manager. There he learnt all about how to buy meat, debone and cut it. He also got to work with staff at all levels, and gained experience in dealing with people from all walks of life, which taught him the value of being friendly and polite to everyone.

By age 22 he had invested his inheritance in a small butcher shop in Overport. Thanks to the position of the butchery close to the taxi rank, he sold a lot of pre-packed meat for busy consumers. Two years later, he sold the store for 100% profit. Oxford Freshmarkets

Next, in the early 80s, he bought a rundown store in Isipingo,  again catering for taxi commuters and blue collar workers. He set up braais outside the shop to attract shift workers with the aroma of meat on the fire, recognising a gap in the market that would develop into today’s highly popular shisa nyama fast-food craze.

Latimer stayed in the meat business for many years, at one point owning 17 butcheries including seven located inside Boxer Cash and Carry Stores, all of which catered to the working class. Over the years he consolidated these down to six Cambridge Food stores, which he sold for more than R500 million to JSE-listed Massmart between 2008 and 2010.

By that time, he says, he felt like he’d been driving the same car for years and it was time to trade it in for a new ride. After a short sabbatical, he got together with his business partner Paul Beltramo, and invested R75 million in a new store in Tara Road on The Bluff, one of the most densely traded streets in the area, and called it Oxford Freshmarket.

He made the move, he says, because he believes the future lies in high-quality food. Given the shift in the role that food plays in our lives and in our culture, he’s definitely on the right track. Food has become more than one of life’s great pleasures.

Think Masterchef. It’s a signifier of style, too. The notion that ‘you are what you eat’ extends beyond the virtues of a nutritious, well-balanced diet. Beyond the overwhelming popularity of reality TV cooking shows, food and cooking websites are attracting 70 million visitors each month.

These days, it often seems that you are what you buy in the supermarket, or at the organic farmer’s market. The grocery list has become a reflection of people’s values and identity. Food is the new fashion, and Latimer is cashing in on the trend.

Staffing solutions

Employees who shine

Latimer has tons of praise for his staff who, he says, make all the difference when it comes to customer service. We asked him what makes them so nice. “We pay people well. The entry level salary is R3 000 a month. We have employees who started on that and are now earning R8 000. Also, our staff are full-time and not on contract. We’ve created a family of around 350 people who are all 100% invested in the business.”

But how does he get that right?

“I engage with the staff every day. I greet all of them. We hug, we squeeze. I promise you that one thing I have learnt over time is that every single human being longs for some form of recognition. They want you to ask them how they are and to listen to the answer. That’s why we also employ for attitude, not excellence; we want friendly people who are looking for an opportunity and want to be part of our movie. We want people who are committed to improving themselves. They know that we are there for them. This is their Oxford university of life.”

What training do you provide?

The training is done by me and my partner Paul. It’s all based on hands-on experience that we have gained over many years in the business. We specifically avoided hiring an HR manager until now because we wanted to establish our own principles and values first and then have that person take those forward. The point is that we want our employees to be followers — we don’t want to beat people to get them to work.

The lesson: A strong growth strategy requires a focus on staff. Latimer has always encouraged his staff to feel like the business is a part of them. He cares about them, and they care about the business as a result.

Keeping Customers

The customer experience difference

There are several upmarket food retailers in the country. What’s different about Oxford Freshmarket compared to other food stores?

“Our customers love us. It’s what we call a destination store. It’s in a convenient location which makes it easy for people to drive right up to the shop and park outside. You walk into a store with a dramatic open plan flow, which has a fairly industrial feel with beautiful finishes, like a cross between a Woolworths and a Makro. It’s segmented into areas for fresh produce, a butchery, a bakery and a grocery section. Each area is staffed by people who have expertise in what they are selling. They are invested in what they do and behave as if it’s their own business.

Yeah, yeah… What else?

The store opens at 6.00am and it closes at 9.00pm. We’re all about convenience. Like our signage says, ‘We’ve done our homework with you in mind.’

When customers come to the store, they can see the staff working in the butchery section and they can watch the bakers making bread. At other stores, you don’t see that. Everything is pre-packaged and the process of buying is completely impersonal. Oxford Freshmarkets

Here, we treat customers like we want to be treated. We greet our customers. We thank them for coming to shop at Oxford Freshmarket. We help them put their purchases in their car and we wave them goodbye.

What’s with the mic and the PA system?

I love what I do. I’m over the top. I get on the mic and tell customers about our specials. When we’re busy and we have no time to meet, I give the staff updates on what they need to know.

We have nothing to hide from our customers. They’re part of the family. It’s all about talking to people all the time. A few weeks ago I went to a restaurant for dinner.

The owner walked past our table several times and did not greet us once. That’s terrible service and I won’t be going back. At Oxford Freshmarket, the customer experiences the exact opposite.

The lesson: When you devise a business model, think about the customer first. What do they really need? If you can answer this question and build something that really suits them, whether it’s a product, store or service, you will always have customers.

Pricing difference

Great prices without quality sacrifices

Latimer was forward-thinking enough when he sold Cambridge Foods to Massmart to ensure that he concluded a preferential procurement deal with them. It’s one of the factors that made it possible for Oxford Freshmarket to cater for the masses of customers who lined up outside the store in its first month.

What he’s also done is cut unnecessary layers out of the business and focused on connecting directly with suppliers and farmers as much as possible. This allows him to cut out extremely expensive financial and retail middlemen.

“It means we can sell a fillet for R109, compared to other retailers where customers pay R200 for the same cut. We go direct where possible, which enables us to cut out a lot of unnecessary expenditure. It requires you to work longer hours because you are driving to farms and markets, but it does mean you can pass the savings on to your customers. I’m a great admirer of Raymond Ackerman and he once said to me, “Remember that rich people like low prices and poor people need them.”

Latimer insists that Oxford Freshmarket is the only food retailer that sells everything under one roof, which also helps to ensure that savings are passed on to customers. “We do the shopping for the consumer so that they don’t have to go from store to store to get the freshest and best quality food items.”

The lesson: Finding the right price is all about understanding your customers and aligning their expectations with your prices. The next step is reviewing your business model carefully and seeing where you can curb unnecessary expenditure.

Super start-up opportunity

We asked Brett Latimer what he would do today if he was a young entrepreneur having to bootstrap himself to success.

“If I wanted to go into business as a young person today, the first thing I would suggest is make sure that every time you go into something, have an exit strategy, or what I call a back door.”

Why? Because you need to know whether you are trying to establish a lifestyle business that generates income without plans to sell it in the future, or you are building equity in a business that you may want to transform into cash.

Depending on your goals, the type of business you choose and the way you grow it should be aligned with your objectives. If, one day, you plan to exit your business and transform your equity into cash through a sale, you need to prepare for that every step of the way. You’ll need to build value and equity in your company by selling great products, backed by unique services and relationships.

The container concept

There are great opportunities for young entrepreneurs that Latimer wants to offer under the Oxford Freshmarket banner.

“In Durban there is a wonderful coffee shop called Freedom Café, which is housed in a converted red shipping container with a glass extension. It’s attractive and filled with quirky details like dachshund salt and pepper holders.

“I’d like to see young people who want to get into retail buying containers like this one and turning them into retail outlets equipped with a refrigerator. I’ve even registered a name for these stores — Hit ‘n Run — because they’ll cater for people who need to stop in quickly on the way home to buy meat, vegetables, bread and groceries.”

Latimer says he is a great believer in entrepreneurship and wants to encourage interested people to take the opportunity to go into supermarket retail. In line with the model he envisages, the container-based stores would be franchises of Oxford Freshmarket and operate under its banner. However, he says, he would not charge a franchise fee.

“Under our brand we would set rules about minimum hygiene standards and create a list of products to be sold. I would advise entrepreneurs who are keen on the concept to set aside R100 000 for stock. We would provide them with model stock and advise them what the top sellers are in the market they are trading into, and enable them to come to Oxford Freshmarket to buy their stock at wholesale prices from us. We’d act as a cash-and-carry for them, but strip out all the additional costs, which would make them more competitive than other retailers in the space.”

Latimer says he sees enormous potential for this type of business model in the KwaZulu Natal hinterland. “Business owners could position themselves at taxi drop-off points, set up an instant shop with instant signage, and get all the mentoring and support they need in merchandising from us. They would even have the opportunity to buy the rights for a particular area and grow the number of stores they have.”

It’s a subject he feels strongly about because, he says, it’s black economic enrichment that is being promoted by government, but not actual empowerment. “We want to help and encourage all people who are keen to get into the supermarket retail trade so that they can truly change their lives.”

For more information on this exciting new concept, contact Oxford Freshmarket at info@oxfordfreshmarket.co.za

Monique Verduyn is a freelance writer. She has more than 12 years’ experience in writing for the corporate, SME, IT and entertainment sectors, and has interviewed many of South Africa’s most prominent business leaders and thinkers. Find her on Google+.

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2 Comments

2 Comments

  1. Luke

    Aug 31, 2013 at 19:06

    Great article, Brett story is very inspiring and he seems like a very pleasant person.

    • Mbuyisa

      Jan 9, 2014 at 10:06

      Very inspiring article just like his iterview on CNBC.I would definately like to meet and learn from him.

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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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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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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.

building-houses

“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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