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Growth from R5 million to R300 million may look like an overnight success story, but for Phoenix Distribution it’s actually been a 13-year ‘overnight’ success, filled with hiccups, hard work and millions lost along the way.

Juliet Pitman

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For ten years, software distribution company Phoenix Distribution showed what is normally described as ‘pleasing growth’. It signed distribution agreements for one big name software developer and then another. It forayed into the UK – disastrously at first and then with growing success – and moved north into the rest of Africa. And then suddenly, in the past four years, it went into orbit – growing its annual turnover from R40 million to over R300 million. Not bad for a start-up that began with R5 million. Pretty lucky, some might say.

But scratch the surface of Phoenix Distribution’s ‘overnight’ entrepreneurial success story and you’ll quickly discover years of slogging, sleepless nights over cash flow issues, near-wins and even closer near-misses – and an entrepreneur whose only comment about luck is that his portion of it increases in direct positive correlation with the amount of work he’s put in at the end of every day. This is Simon Campbell-Young’s story.

“The idea was sound but the technology wasn’t quite there yet,” says founder Simon Campbell-Young about the birth of Phoenix Distribution in 2000 – the ‘idea’ being to set up an online software distribution business. The Internet now delivers on all the promises it made in 2000, but back then South Africa’s limited broadband coupled with consumers’ lack of comfort about mobile Internet transactions meant Phoenix was playing in a very different space to the one it occupies today.

“We had to change the model pretty quickly, moulding it from being the exclusively online distribution business that we had envisaged to becoming a publisher of software titles,” says Campbell-Young. It was in this arena that the brand found its niche, developing close relationships with both developers and retailers and building a reputation for service excellence.

Phoenix represents almost every major software brand in the world, having been awarded the rights to burn, package, publish and print their products and take them to market. “The model allows software developers to focus on what they are good at while we focus on what we’re good at – which is finding good intellectual property and getting it to the end-customer through various channels,” says Campbell-Young.

Today those channels include mobile and online applications, in line with his first vision for the business. That’s in addition to the channel of 3 000 reseller partners. Campbell-Young has certainly been busy. In recent years Phoenix has expanded beyond retail into the electronic distribution of licensing in the business-to-business enterprise software space. It’s rapidly growing its African operations. And, unsurprisingly, its phenomenal growth in the past four years piqued the interest of a buyer.

In 2011, First Technology Holdings, the largest privately-owned IT company in Africa, purchased a 50,51% stake in the company.

But it hasn’t all been plain sailing. “There have been one or two hiccups along the way. This has been a 13-year ‘overnight’ success story,” says Campbell-Young.

“I lost all of the funding I put into starting the business in my UK venture,” he says of the first major hiccup. “I financed two guys in the UK that I hardly knew, who had a business idea that I hardly understood. To say it took me a while to recover would be an understatement.” Early on when Campbell-Young was just getting to grips with the idea of switching to becoming a publishing business, he saw a gap in the UK market. But it was a market that was far more sophisiticated than the South African market at the time and, critically, he didn’t know enough about the people his money was backing.

“Essentially they thought they could maximise the opportunity in the market so I put a whole lot of money behind them and set them loose, while I concentrated on things in South Africa,” he says. Things might have panned out if the individuals concerned had a similar idea of what constituted a full day’s work – what Campbell-Young describes as ‘making a million calls and seeing a thousand people’. As it happened, they didn’t and Campbell-Young went into ‘rescue mode’, moving to live in the UK and travelling back and forth over a period of five years before the business was stabilised. Which begs the question, why didn’t he throw in the towel and concentrate on what was still a fledgling South African business?

“Because I might have been wrong about the guys, but I was right about the opportunity. We knew we could be successful if we just persevered and put in the hours,” he says. The UK business is maturing rapidly and is expected to be a major contributor to revenue in the future. But the experience taught Campbell-Young a couple of lessons he’s unlikely to forget, and which have informed the company’s move into the rest of Africa.

“Our steps into Africa have been slow and careful,” he says. Africa’s economies might face some serious challenges, but a number of countries are among the world’s most rapidly growing economies. The need for ICT products and services in these growth areas is expanding accordingly.

The opportunities are immense. “Africa’s collective GDP, at $1,6 trillion in 2008, is now roughly equal to Brazil’s or Russia’s, and there is massive potential,” he adds. Telecommunications, banking, and retailing are flourishing. Construction is booming. This has had a knock-on effect, resulting in increased trade across many sectors, but especially in technology. Phoenix has used this potential to create opportunities and to satisfy the unmet demands of African businesses.

“When we embarked on our growth strategy, we initially focused on the South African market. But after repeated requests from African resellers who were purchasing from us, we actively evaluated potential opportunities on the continent. Not only did we have an established base of resellers in many of these countries, but Africa’s strong long-term growth prospects made it a sound business decision to expand our operations into a number of African countries. Now, our Zambian business has grown to the extent that we recently moved into new premises to better serve our customers, and our other African operations are showing steady returns too,” he explains.

It’s taken hard slog and groundwork to get there. Campbell-Young and his team started investigating Africa about two years ago: “We looked at where the gaps were, actively tried to find out who was doing what in each territory, who our competitors were and which brands were present that we represented. We spent a lot of time investigating the playing field, talking to customers, even talking to competitors at trade shows.

“Once we were ready we started setting up a database of customers, and getting to grips with the unique subtleties and nuances of each territory. And only then did we start pushing product into the regions we’d selected.” The move into Africa coincided with the business’s big growth kick.

“I guess our business model and methodology came home to roost – we hit the sweet spot at just the right time in the market,” says Campbell-Young. The company’s hands-on approach to servicing customers has played a fundamental role in its success. “We pride ourselves on the fact that we don’t just shift boxes. We provide all the support resellers need to make sales. They get specific, customised training for the company’s vendor products, end-user and channel partner on-site training and demonstrations, and pre-sales consulting, scoping and advice,” he explains, adding that he understood very early on that if the stock didn’t move off the retailer’s shelves, it would be coming straight back to him.

Being a value-added distributor has earned the company a reputation among retailers and developers alike. “When we picked up the distribution licence for Microsoft it was because customers had specifically requested that they be allowed to deal with us. When developers want to enter the South African IT retail market, our retailers send them to us because they know we’ll do a good job,” Campbell-Young explains. As the business moved into B2B electronic distribution of licensing in 2009, the achievement of his long-term vision must have been gratifying.  But Campbell-Young is frank about the personal journey he’s had to walk to get where he is today.

“There comes a point where you have to stop taking orders on the back of a cigarette box,” he says. “I’m a sales and big-picture strategic guy, not a detail person. But I realised that running a bigger business means needing to pay attention to the right amount of detail in various areas. Part of my journey has been to recognise my strengths, understand my weaknesses and then bring in the right people so that I could focus on what I was good at.”

Looking back, he’s pretty pleased with the way things have turned out. “Sometimes I think I’d like to cut out the mistakes. But then I think again and I realise that for the most part I wouldn’t change too much. I’ve been very happy with the slow burn it’s taken. Even the painful parts have been good.”

Vital Stats

Founder: Simon Campbell-Young

Company: Phoenix Distribution

Launched: 2000

Latest deal: Signing over 50% of the company to First Technology Holdings. The private equity deal will allow Pheonix Distribution to pursue its aggressive growth strategies.

Start-up capital: R5 million

Current turnover: R300 million

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

Twenty years after first wanting to own a business, Appanna Ganapathy launched ART Technologies, a business he aims to grow throughout Africa, starting with Kenya thanks to a recently signed deal with Seacom. As a high-growth entrepreneur with big plans, Appanna spent two decades laying the foundations of success — and now he’s starting to collect.

Nadine Todd

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Vital Stats

Like many entrepreneurs before him, Appanna Ganapathy hadn’t even finished school and he was already thinking about his first business venture. A friend could secure the licensing rights to open Nando’s franchises in Mozambique, and they were very keen on the idea — which Appanna’s mom quickly dampened. “You can do whatever you want,” she said. “As long as you finish your degree first.”

Unlike many other entrepreneurs however, Appanna not only finished his degree, but realised that he had a lot of skills he needed to develop and lessons to learn before he’d be ready to launch the business he wanted.

“We launched ART Technologies just over two years ago. If I had started any earlier, I don’t think I would have been as successful as I am now,” he says.

Here are six key lessons that Appanna has learnt along his journey, which have allowed him to launch a high-growth start-up that is positioned to make an impact across Africa.

1. You don’t just need a product – you need clients as well

Business success is the ability to design and execute a great product and solution, and then be able to sell it. Without sales, there is no business. This is a lesson Appanna learnt while he was still at university.

“I was drawn to computers. I loved figuring out how they worked, playing computer games — everything about them,” he says. “My parents lived in Mozambique, and during my holidays I’d visit them and a friend who had a computer business. I helped him assemble them and thought I could do this too while I was studying. I convinced my dad to buy me a car so that I could set up my business — and never sold or assembled a single computer. I delivered pizzas instead.”

So, what went wrong? The simple truth was that at the time Appanna had the technical skills to build computers, but he lacked the ability to sell his product.

“If someone had said, ‘I’ve got an order for 30 computers’, I would have filled it — but to go out and get that order — I didn’t really even know where to start.”

2. Price and solution go hand-in-hand

As much as you need the ability to sell your solution, you also need a market that wants and needs what you’re offering, at a price point that works for everyone.

In 2007, Appanna was approached by a former supplier whom he had worked with while he was based in Mozambique. The supplier had an IT firm and he wanted to expand into South Africa. He was looking for a local partner who would purchase equity shares in the company and run the South African business.

“I loved the opportunity. This was something I could build from the ground up, in an area I understood well,” says Appanna. The firm set up and managed IT infrastructure for SMEs. The value proposition was simple: “We could offer SMEs a service that they could use for a relatively low cost, but that gave them everything an enterprise would have.”

The problem was that although Appanna and his team knew they had a great product, they were competing on price with inferior products. “If we couldn’t adequately unpack the value of our solution, an SME would choose the cheaper option. It was a big lesson for me to learn. It doesn’t matter how good the solution is that you’re offering — if it’s not at a price point that your target market accepts, they won’t choose you.”

It was this understanding that helped Appanna and his team develop the Desktop-as-a-Service solution that ART Technologies now offers the SME market.

“While I was developing the idea and the solution, I needed to take three key things into account: What do SMEs need from an IT infrastructure perspective, what is the most cost-effective way to offer them that solution, and what will the market pay (and is it enough to cover our costs and give us a small profit margin)?”

Appanna’s experience in the market had already taught him how cost-conscious SMEs are, and so he started developing a solution that could deliver value at a price point SMEs could accept. His solution? A unique Desktop-as-a-Service product that combines all the processing power and Microsoft products a business needs, without any capex outlay for servers or software.

“It’s a Cloud workstation that turns any device into a full Windows computer,” Appanna explains. “We hold the licences, and our clients just access our service. A set-up that would cost between R180 000 and R200 000 for 15 users is now available for R479 per user per month.”

It took Appanna and his partners time to build the solution, but they started with the price point in mind, which meant a solution could be designed that met their needs as well as the needs of the market.

“Too many businesses set everything up, invest in the solution, and then discover they can’t sell their product at the price point they need. My time in the market selling IT and infrastructure solutions gave me invaluable insights into what we needed to deliver on, and what we could realistically charge for our service.”

3. Get as much on-the-ground experience as you can

appanna-ganapathy-art-technologies

The time that Appanna spent building the IT firm he was a part-owner of was invaluable. “I started as a technical director before being promoted to GM and running the company for three and a half years. Those years were very, very important for me. They’re where I learnt everything about running a business.

“When I started, I was responsible for sales, but I didn’t have to actually go out and find clients, I just had to meet them, compile quotes and handle the installations. Everything I did was under the guidance of the company’s CEO, who was based in Mozambique. Being the guy who did everything was the best learning ground for me. It set me up for everything I’m doing today. In particular, I learnt how to approach and deal with people. Without people and clients your business is nothing.”

Appanna didn’t just learn by default — he actively worked to expand his understanding of all facets of the business. “At the time I wasn’t planning on leaving to launch my own business,” he says. “I was a shareholder and I wanted to grow that business. That meant understanding as much as possible about how everything worked. If there was something I wasn’t sure of — a process, the numbers, how something worked — I asked. I took personal responsibility for any errors and got involved in every aspect of the business, including areas that weren’t officially ‘my job’. I wanted to really grow and support the business.”

4. Stay focused

Interestingly, while the experience Appanna has accumulated throughout his career has allowed him to build a high-growth start-up, it also taught him the importance of not wearing too many hats as an entrepreneur.

“I’m glad I’ve had the experience of wearing multiple hats, because I’ve learnt so much, but I’ve also learnt that it’s important to pick a lane, not only in what you do as a business, but in the role you play within your business. I also race superbikes in the South African Kawasaki ZX-10 Cup; through this I have learnt how important it is to focus in the moment without distractions and this is a discipline I have brought into the business.”

“If you’re the leader of an organisation, you need to let things go. You can’t be everything to everyone. When I launched ART Technologies, I knew the key to growth would be the fact that although I’m technical, I wasn’t going to run the technical side of the business. I have strong technical partners whom I trust, and there is an escalation framework in place, from tech, to tech manager, to the CTO to me — I speak tech and I’m available, but my focus is on strategy and growth. I believe this is the biggest mistake that many start-ups make. If you’re wearing all the hats, who is looking at where you’re going? When you’re down in the trenches, doing everything, it’s impossible to see the bigger picture.”

Appanna chose his partners carefully with this goal in mind.

“All the partners play a very important role in the business. Ruaan Jacobs’s strength is in the technical expertise he brings to the business and Terry Naidoo’s strength is in the support services he provides to our clients. Terry is our technical manager. He has the most incredible relationship with our customers — everyone wants to work with Terry. But there’s a problem with that too — if we want to scale this business, Terry can’t be the technical point for all of our customers.

“As partners we have decided what our blueprint for service levels will be; this is based on the way Terry deals with clients and he is developing a technical manual that doesn’t only cover the tech side of the business, but how ART Technologies engages with its customers.

“Terry’s putting his essence down on paper — a step-by-step guide to how we do business. That’s how you build a service culture.”

5. Reputation, network and experience count

Many start-ups lack three crucial things when they launch: Their founders haven’t built up a large network, they don’t have a reputation in the market, and they lack experience. All three of these things can (and should) be addressed during start-up phase, but launching with all three can give the business a valuable boost.

Appanna learnt the value of networks at a young age. Born in India, he moved to Zambia with his family as a young child. From there he moved to Tanzania and then Mozambique, attending boarding school in Swaziland and KwaZulu Natal. At each new school, he was greeted by kids who had formed strong bonds.

“I made good friends in those years, but at each new school I recognised how important strong bonds are, particularly as the outsider.”

Appanna’s early career took him back to Mozambique, working with the UN and EY on various projects. When he moved to South Africa, as a non-citizen he connected with his old boss from the UN who offered him a position as information officer for the Regional Director’s team.

His next move would be to the tech company that he would run for just over three years — also the product of previous connections. “Who you know is important, but how you conduct yourself is even more so,” says Appanna. “If your reputation in the market place is good, people will want to do business with you.”

Appanna experienced this first hand when he left to launch his own business. “Some key clients wanted to move with me,” he says. “If I had brought them in it would have settled our business, but I said no to some key customers who hadn’t been mine. I wasn’t ethically comfortable taking them with me.”

One of those multinational clients approached Appanna again six months later, stating they were taking their business out to tender and that they were hoping ART Technologies would pitch for it. “Apart from the Desktop-as-a-Service product, we also provide managed IT services for clients, particularly larger enterprise clients. Due to the client going out on tender and requesting for us to participate, we pitched for the business and won. The relationship with this client has grown, allowing us to offer them some of our services that they are currently testing to implement throughout Africa.”

“I believe how we conduct ourselves is essential. You need your own personal code of ethics, and you need to live by it. Business — particularly in our environment — is built on trust. Our customers need to trust us with their data. Your reputation is key when it comes to trust.”

Interestingly, although Appanna and his team developed their product based on a specific price point, once that trust is built and a certain standard of service is delivered, customers will pay more.

6. Start smart and start lean

Appanna was able to launch ART Technologies with the savings he and his wife, Kate, had put aside. He reached a point where he had ideas he wanted to take to market, but he couldn’t get his current business partners to agree to them — and so setting up his own business became inevitable.

Although he was fortunate to have savings to bootstrap the business, it was essential for the business to be lean and start generating income as quickly as possible. This was achieved in a number of ways.

First, Appanna and Kate agreed on a start-up figure. They would not go beyond it. “We had a budget, and the business needed to make money before that budget was reached.” The runway Appanna gave himself was only six months — highly ambitious given the 18-month runway most start-ups need. “Other than my salary we broke even in month three, which actually extended our runway a bit,” says Appanna.

Appanna had a server that he used to start with, and purchased a second, bigger server four months later. He also launched another business one month before launching ART Technologies — ART Call Management, a virtual PA services business that needed a PABX system, some call centre technology and two employees.

“I’d been playing around with the idea for a while,” says Appanna. “We were focused on SMEs, and I started noticing other challenges they faced. A lot of entrepreneurs just have their cellphones, but they aren’t answering them as businesses — it’s not professional.

“In essence we sell minutes — for R295 you get 25 incoming calls and 50 minutes of transferred calls. We answer the phone as your receptionist, transfer calls and take messages. How you use your minutes is up to you. For example, if you supply the leads, we can cold call for you. ART Technologies uses the call management business as a reception service and to do all of our cold calling. It’s kept the business lean, but it’s also brought in an income that helped us with our runway.” In 2017 ART Call Management was selected as one of the top ten in the SAGE-702 Small Business Awards.

The only problem with almost simultaneously launching two businesses is focus. “It’s incredibly important to know where you’re putting your focus,” says Appanna. “The call management business has been essential to our overall strategy, but my focus has been pulled in different directions at times, and I need to be conscious of that. The most important thing for any start-up is to know exactly where your focus lies.”


Into Africa

Thanks to a distribution deal signed locally with First Distribution, ART Technologies was introduced to Seacom, which has available infrastructure in a data centre in Kenya.

“It’s a pay-per-client model that allows us to pay Seacom a percentage of every client we sign up,” says Appanna. “First Distribution will be our sales arm. They have a webstore and resellers, and we will be opening ART Kenya with a shareholder who knows the local market.”

From there, Appanna is looking to West Africa and Mauritius. “We have the product and the relationship with Seacom gives us the foothold we need to grow into East Africa.”

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Entrepreneur Profiles

Kid Entrepreneurs Who Have Already Built Successful Businesses (And How You Can Too)

All over the world kids are abandoning the traditional notion of choosing a career to pursue until retirement. Gen Z aren’t looking to become employable job-seekers, but creative innovators as emerging business owners.

Diana Albertyn

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Do kids have an advantage or disadvantage when it comes to starting and building a company? It depends on how you look it. Juggling school, friends, family and other aspects of childhood and adolescence comes with its own requirements, but perhaps this is the best age to start.

“Being an entrepreneur means having to learn, focus, and connect to people and these are all traits that are valuable throughout life. Learning this when you are young is especially crucial, and will set you up for success and to be more open to other opportunities,” says billionaire investor, Shark Tank personality and author Mark Cuban.

Here are some of the most successful kidpreneurs who have cashed in on their hobbies, interests and needs to start and grow million dollar businesses borne from passion and innovation:

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30 Top Influential SA Business Leaders

Learn from these South African titans of industry to guide you on your entrepreneurial journey to success.

Nicole Crampton

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Entrepreneurship is said to be the answer to South Africa’s unemployment challenges and slow growth, but to foster entrepreneurship we ideally need business leaders to impact grass root efforts. Business leadership is vital to improved confidence and growth. These three titans of global industry say:

  • “As we look ahead, leaders will be those who empower others.” – Bill Gates
  • “Leaders are also expected to work harder than those who report to them and always make sure that their needs are taken care of before yours.” – Elon Musk
  • “Management is about persuading people to do things they do not want to do, while leadership is about inspiring people to do things they never thought they could.” – Steve Jobs

Here are 30 top influential SA business leaders forging the path towards a prosperous South African future.

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