- Players: Craig Bright and Brian Little
- Company: Seed Experiences
- Turnover 2014: R70 million
- Visit: www.weareseed.co.za and www.rockingthedaisies.com
Some businesses and industries have an in-built ‘cool’ factor that mundane but often more important sectors do not.
Try as we might, it’s tough to make commercial transport, construction or farming sound sexy, but where would we be without these valuable industries?
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When choosing to launch a business, entrepreneurs are often drawn to the industries that modern society simply cannot do without — after all, there will always be a market.
Unfortunately, there is usually a multitude of competitors doing exactly what you’re doing, and it becomes difficult to differentiate your offering.
The Road Less Travelled
Craig Bright and Brian Little didn’t go this route. They chose an industry virtually unknown in South Africa.
One with notoriously low profit margins, a propensity to not break even, and with no local players to learn from — good or bad. But man, the cool factor was off the charts.
They wanted to host music festivals, the likes of which form part of the backbone of European and American culture, but were not common in South Africa a decade ago.
They knew it would fulfil multiple passions, from business ownership to creating events with international acts they wished they could attend in South Africa – but most of all, they wanted to find a way for their dreams to make money in an incredibly tough industry.
Ten years later, Rocking the Daisies is a mainstream event that thousands of people attend every year. Festivals like Sowing the Seeds and Vodacom In the City are well-known, mainstream brands. Bright and Little are responsible for bringing international acts like The Lumineers, The Kooks, UB40 and Bastille to South Africa, with many more surprises up their sleeves.
Their turnover has tripled year-on-year for the past three years, and they’ve figured out a way to make the business sustainable and profitable.
They’ve also continued to learn tough lessons, and are consolidating the business to maximise revenue streams and ensure they’re never solely reliant on ticket sales. Their festivals bring in a captive audience, and financial sustainability comes from other, integrated verticals.
Here’s how they took a cool but not-so-lucrative idea, and are creating a new model that’s breaking rules and shaping an industry.
From 700 to 22 500 Fans
When Brian Little and Craig Bright first decided to host a music festival, they knew they’d have a few challenges. They had no money, no venue and no acts, and while a few isolated events existed, there was no music festival culture in South Africa.
They decided to do it anyway. Step one was choosing a date. Spring in the Western Cape seemed like a good time, and they could align it with the Namaqualand flowers. Now they needed a venue.
“We started calling our old boarding school mates to see who had a farm we could use. One guy said yes. It would take us four years to pay him the rental fee we agreed on, but at least we had a venue,” says Bright.
Next, they needed cash. Bright sold his house and Little sold his car. They both borrowed cash from their parents. “We were so inexperienced we ended up spending money on all the wrong things,” says Little. “We put a full 2kms of fencing up,” recalls Bright.
“We were very, very ambitious about how many people would attend, and we didn’t want anyone sneaking in. That fence cost us R20 000 and a lot of time and hard work because we put it up ourselves. And then 700 people arrived,” he laughs.
Through contacts they secured new local acts the Parlotones and Goldfish, printed fliers and hoped for the best. All in all, the event cost R1,1 million to put on. They had R350 000 in cash.
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After selling everything else they could, and Little moving out of his house and onto a mate’s couch so that he could rent it out, they were still R400 000 short.
Turning Things Around
“We owed on the venue, the bands and the equipment,” says Little. “We worked with some very understanding people who basically waited a long time to be paid.”
Based on those numbers, the future of Rocking the Daisies seemed uncertain at best, but Bright and Little didn’t let it deter them.
“We knew we’d lose cash; we’d made the decision to view it as an investment and lose it well,” says Bright. “We had such great feedback and support, and that motivated us to keep going, despite our losses.”
The following year they had 4 500 people and partnered with Cloof Wine Estate for the first time. To this day, Rocking the Daisies continues to be held in this beautiful setting.
By year three, 10 000 people attended the event. Today the title sponsorship has grown from R40 000 in year one to over R3,5 million.
“We’ve learnt so much about perseverance, following your passions and organic growth. We’ve been patient, and we’ve grown this incredible brand as a result,” says Little.
Creating a Showcase
A showcase can be anything, from the ideal client to a situation where your product works seamlessly. You need to be able to show potential clients what you can do, and ideally have a space where you can keep testing and refining your offering.
When Little and Bright first went into business, they knew their ultimate goal was music events, but the reality was that bills needed to be paid.
Bright had been organising sporting events in Durban, and so initially they focused on hosting school rugby tournaments and beach volleyball events, supported by a strong relationship with Vodacom. Within a year they took the plunge and opened an office in Cape Town. The KZN events continued, but they wanted to build new relationships.
The reality was daunting. Despite a track record in Durban, no one was hiring them, and they experienced very little growth. “It became the only thing we thought about or talked about,” says Bright.
“It became a discussion over braais and beers with our mates — what could we do to showcase ourselves? How could we get noticed?” And then one night an idea began taking shape. “It was a weird situation,” says Little.
“We were building the business on client and sporting events to develop the capital and experience we needed to launch music events, but we realised that to win clients, we needed a branded music event that showcased what we could do.”
That night, the first pieces of Rocking the Daisies began to take shape, and although it was a financial disaster, it delivered strategically — Bright and Little had their showcase. They had also planted the seed for what was to become South Africa’s largest annual multiple-day music festival.
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Celebrating its tenth year in 2015, title sponsorship at Rocking the Daisies is now over R3,5 million, 22 500 people attend each year and the event has won multiple local and international greening awards.
Plot the Lessons
It might sound strange to plot a curriculum within your own business, but the more focused your approach to identifying and then filling in gaps, the greater your foundations and ultimate sustainability and market domination will be.
Great businesses rarely happen by accident, and part of a winning strategy is continuous growth.
Bright and Little knew this, and were willing to learn. They took hard knocks, including one memorable occasion in their first year of business, when they hosted a big screen IMAX event, showcasing the Springboks vs Australia. “It was my first event,” recalls Little.
“We were screening the game in Durban and Cape Town, and Craig was at one venue, which meant I was flying solo for the first time. Nick Mallett and Dave Campese agreed to unpack the game at half-and full-time, and eTV were covering the whole thing, which was a major coup.”
It was a disaster. The power at Little’s event went out, and no one, including the commentators, saw a single minute of the first half. “I was in a complete panic,” says Little.
“Not only did our guests and eTV see nothing, but Nick and Dave were actually writing sports columns for major news outlets based on the game and they saw nothing. It was one of the worst experiences of my professional life.”
However, it taught Little that not everything goes as planned, and sometimes you have to pick yourself up and move on. As a team, Bright and Little also learnt how important fail-safes and contingencies are.
“You’ll never be able to plan for every eventuality, but we’re a lot better now at predicting worst-case scenarios,” laughs Bright.
The School of Life
These are the on-the-fly lessons that all businesses learn and Bright and Little have taken their schooling very seriously.
“We had two key areas that we needed to work on,” says Little, “growing our business acumen — which for me was non-existent — and learning the ins and outs of music events. Our strategy was to build the business on corporate events to create a stable income, but we couldn’t lose sight of the ultimate goal.”
And so they started formulating a very specific product. Bright’s background was sports psychology.
He had contacts in the sporting world, and they’d built up a solid client relationship with Vodacom. Vodacom’s Durban July stand and Vodacom Beach Africa became the year’s staple events. Everything else was focused on the music scene.
“We crafted brand experiences around music,” explains Bright.
“That was our niche. It was our way of learning about musicians, booking acts, dealing with managers and agents and understanding how people respond to music in a branded, experiential marketing framework, while still paying the bills.”
Even more important, the business was steadily building relationships with a number of consumer brands, particularly alcohol brands like Smirnoff and Mainstay, and other consumer brands like Wrigley 5Gum, Converse and Durex.
“We crafted exclusive, branded music events,” says Little. Each event taught the partners something new, taking them closer to their ultimate goal.
“We weren’t tapping into traditional marketing spend, which meant we could work well with each brand’s agencies instead of competing with them,” says Bright.
“We created live experiences at each event and worked with advertising agency DDB who created buzz around pre-campaign tickets and the digital experience. They got the interest, held it and got people sharing it.”
Bright and Little believe they have succeeded with both their branded client events and their own festivals because they’ve always put the consumer first in their planning. The lesson is a simple one: Start with your customer and build from there.
As Little’s background is in advertising, he approached each event from a brand messaging perspective while also considering the complete eventing experience.
“We always approached each event with a single core question: If I was at this event, what would I want from the brand?”
“Or ultimate goal is to create an experience that’s inextricably linked to the brand, but that only works if the consumer is getting real value from the brand engagement. Once that happens, they do your marketing for you, because they want to share the experience,” says Bright.
Bright and Little used the dual platforms of client events and Rocking the Daisies to perfect their theories. “The festival was our testing ground,” Little explains.
“We were very careful about sponsor selection, because we were creating a specific brand with Daisies, and then we took those lessons and applied them to our client events.”
“Daisies was our showcase,” adds Bright. “It wasn’t a money spinner at that stage, but it was a great place to test ideas, show what we could do, get brands involved and prove the value of our ideas.”
Most great and sustainable businesses are built on solid foundations, and that takes time and patience. In 2009, Bright and Little were lucky enough to be invited to one of Europe’s largest outdoor music festivals, Paleo, held over six days each year in Switzerland.
With the 2010 FIFA World Cup fast approaching, the organisers wanted an African theme for their World Stage the following year, and so they reached out to the company doing the most in the South African festival space.
“The timing worked out really well,” says Bright. “We were guests of the organisers, which meant we got to see how a huge festival operated behind the scenes.”
Even more beneficial to the two budding festival entrepreneurs was hearing about Paleo’s history. “We faced similar challenges, trying to grow a festival culture from the ground up,” says Little. “What really struck home was when they told us that the first time they made a profit was in their sixth year.
“This giant of a festival, one of the largest in Europe, took six years to make a profit. We realised that there was hope for us, and that struggling was normal. If anything, we were in a better position, because we had our corporate clients paying the bills while we grew Daisies.”
With assurances from the Paleo team that they were on the right track, Bright and Little returned to South Africa and decided to let the growth of Rocking the Daisies plateau.
“Your instinct is to keep pushing to grow, grow, grow, and get as many people to your event as possible — after all, more people equals more money. The reality was that if we wanted to grow a festival brand that’s loved and trusted, we needed to take things slow and not over-extend ourselves,” says Little.
“We had to plateau,” agrees Bright. “The year before we’d grown to 10 000 people, a massive jump from the previous year’s 4 500. We weren’t equipped or experienced enough to handle those numbers. We let it grow organically instead of pushing it, giving ourselves time to learn before getting too big, too fast.”
The partners also recognised the need to start bringing more experienced people on board. “We identified our gaps and filled them,” explains Little.
“We were still green, and we needed to learn from people more experienced at production. This would also allow us to focus on the areas where we added value.”
But Bright and Little were effectively leading the charge when it came to the local festival space — there were no experienced people they could hire. “We needed to look beyond South Africa for the skills we needed,” says Bright.
“We found someone who specialised in festival production in the UK and Europe and could come to South Africa on a contract basis during our summer months when his season was over.”
Bright and Little were now free to concentrate on other areas of business growth, but they needed to start employing a team that could learn and bring those scarce skills in-house.
“These are all expenses, often before you can actually afford them, but they were necessary if we wanted to become leaders in this space. We were always looking long term,” they say.
Partnerships come in many forms. Bright and Little work well together because their areas of expertise align but aren’t the same. As the business started growing, they recognised the need to bring in a partner whose financial experience exceeded their own.
“When Craig’s brother, Marc Bright joined us, he started by sorting out our books, which were a disaster,” says Little.
As the business grew, so did Marc Bright’s role. “We now had someone who was thinking strategically about the numbers, which made a big impact on our decisions, and how we viewed our income versus expenses,” adds Bright.
Like the founders, Marc Bright is acutely aware of his strengths and weaknesses, and has recently appointed an FD to take his place.
“In many ways, we’ve been victims of our own success, learning where our gaps lie as we’ve grown,” says Little.
“It’s important to be aware of these areas if you want the business to scale, and so we’ve focused on finding them and implementing solutions. As our turnover has grown, cash flow has become even more important, which has made strong systems and processes vital. This has required a new skill set.
“An established business needs different decisions, and a more careful focus on the bottom line. Every decision we make focuses on bottom-line growth.”
There are other external decisions and partnerships that are vital to growth. “Our main draw card from the beginning has been international acts, and that takes a lot of relationship building, with agents, managers and even companies doing what we’re doing on different continents,” explains Bright.
“Paleo opened a lot of doors for us, connecting us to international agents and managers. We’ve fostered those relationships, because they’re so crucial to our business, not just to get acts to South Africa, but for when we have an emergency as well — if someone drops us at the last minute for whatever reason, we need ticket insurance, but we generally try to find a replacement act that the audience will also love — and that takes assistance from agents. We can’t do what we do in isolation.”
South Africa is off the beaten track as far as concert tour schedules are concerned. “We’ve been working with companies in Dubai and Australia to be able to offer a full tour leg to international acts,” says Little.
“First, we added additional shows locally, so when someone comes out they play at least two or three different venues. Together with our partners, we offer a comprehensive tour leg, which makes the trip to the southern hemisphere more worthwhile.”
Create a Brand
“When we started out, we would do anything for cash, even weddings,” says Bright. As the brand activations side of the business grew and full year campaigns were signed, the partners were able to specialise in the music space, carving a niche for themselves, but the ultimate goal remained the same.
“We were waiting to hit a turning point when the festivals started making enough for us to drop events completely and focus on where we wanted to be,” says Little.
“We didn’t rush it, and when the time came it was a big decision. We were walking away from money, secure long-term contracts and a solid track record for an industry that was still in its infancy in South Africa.”
Passion won out and the entrepreneurs took the plunge. “By 2010, we had the knowledge, the connections, and the brand sponsors to do activations at the festivals we created, but that were branded as our own. We focused exclusively on festivals.”
Part of this fresh start was a strong focus on the brand. “In this space, the brand is all important,” explains Little. “We focused on building Seed Experiences, our brand, as well as the festival brands.”
International acts didn’t perform under the artist’s brand, but a Seed Experiences brand.
“We built our IP, brand awareness and sponsorship relationships,” says Bright. It’s an important step towards creating a strong brand, and Bright and Little knew they needed to concentrate on creating a predictable consumer experience, particularly around what music they brought to South Africa, and the unique look and feel of the annual festivals they hosted.
It’s an established business principal: To deliver an amazing customer experience, the brand experience must be personal and meaningful, deliver consistency, be responsive to audience needs and reliable.
To achieve this, the team needed branded vehicles, each with their own distinct personality. Rocking the Daisies was already established.
Now two new festivals were added, Sowing the Seeds, which was Cape Town and Joburg based, and In the City, a unique platform for Joburg that runs concurrently with Rocking the Daisies.
“We’ve always done activations, but only at our events, under our brands,” says Little. “It’s a necessary revenue stream that’s integral to our strategy, but ultimately our first priority is to build our brands. Everything else is built on those.”
Leverage Your Brand
There are three key elements to the Seed Experiences business model. First, create a vehicle that you can use to upsell other products with much bigger margins.
Second, find amazing, passionate partners who want your product to succeed as much as you do. Third, create experiences that no one wants to miss. If you offer value, you’ll have clients.
“We knew from early on that we don’t own our festivals alone. Many passionate people make these brands possible — the artists, the suppliers, the sponsors and organisations like Greenpop, who assist the greening of Rocking the Daisies. It’s a collaborative effort. Without them, this business wouldn’t exist,” says Little.
“In a way, we’ve reached a point where we can have the best of both worlds,” says Bright.
“We’ve led the way in building a festival culture in South Africa, and we host music events. That’s what we’ve always wanted to do. But we’ve also found a way to take an industry with historically tight margins, and make money.”
“We’re building a big machine here; it needs the right foundations,” says Little.
“What are we good at? Where are our skills? What aligns? And what’s good versus sexy? It’s easy to get seduced by the sexy, but is it right for the business? Does it align with our strategy? A key learning for us has been when to say no. It’s often tempting to take on a project to prevent another promoter from doing it or to please a sponsor, but that doesn’t mean it’s right for the business.”
Keeping a Balance
A big part of that strategy is consolidation on the one hand, and then spin-off businesses on the other. It’s a fine balance, particularly as the founders don’t want to dilute their focus and offering, but enhance it.
“We’ve brought all marketing, digital and social media and PR in-house, and will be creating a new entity to service clients through digital campaigns and activations geared towards music lifestyle and youth culture — which are our niche and wheelhouse. We’re sticking to what we know,” says Little.
Another new business within the group is The Bandwagon. “For years we’ve booked international acts, created travel itineraries and experiences for them, and yet travel agents have benefited from the bookings. We’ve hired an industry expert with all the connections and package rates, and we’re now bringing this in-house,” says Bright, whose primary focus is this new enterprise.
“This also means we can sell festival packages to international travellers. Oversees, whole holidays are built around festivals. We bought The Vic Falls Carnival, and launched this new offering with 100 package deals for fans, where everything is planned and covered, including transport, accommodation, the festival and activities before and after the festival.
“Once again we’re doing what we do best — selling an experience. We sold out almost immediately, and now we’re rolling it out on a larger scale.”
Kumaran Padayachee Of Spartan SME Finance Unpacks When You Should Apply For Funding And What Strategies To Have In Place To Secure It
There’s a big difference between funding that will help you grow your business, and trying to plug a self-inflicted cash flow problem. Kumaran Padayachee unpacks the difference, as well as what funders look for and how businesses can build better cash flow bases.
- Player: Kumaran Padayachee
- Company: Spartan SME Finance
- What they do: Growth finance, bridging finance and specialised asset finance for the SME sector
- Visit: spartan.co.za
When do most business owners apply for funding? For some it’s because they suddenly — and urgently — need cash. For others, it’s the culmination of a long-term growth strategy that requires additional working capital to invest in new equipment, people, premises or marketing.
The difference can make or break a business. Do you have a strong base to build from, or are you trying to plug a hole in a leaking ship?
Spartan SME Finance is an alternative funder that focuses on the SME market, ranging from businesses with a turnover of R5 million right through to hundreds of millions. The key to alternative funding solutions though, is that they should be accessed to help you grow.
Spartan CEO, Kumaran Padayachee, unpacks the key elements business owners should have in place to build sustainable businesses with healthy cash flows, and how this will place them on a better footing to secure growth funding as well.
1. Know your numbers
A key success factor in all growth businesses is a focus on internal financial management. “As businesses move from start-up phase into a growth phase, considerations around financial management, forecasting and overall strategic decisions require a higher-level resource than a bookkeeper whose role is to do the books,” says Kumaran. “Someone must be responsible for the business’s financial portfolio, whether that’s a senior financial manager or a financial director.”
Kumaran and his team interview hundreds of business owners each year, and this key area is a clear gap for many businesses. “Entrepreneurs come from many diverse backgrounds. A few have accounting or BCom backgrounds, but most are subject matter experts. They have marketing backgrounds or industry-specific skills. They’ve never studied finance and their decision-making isn’t influenced enough by the numbers.
For example, we often analyse a business that has applied for finance and discover that their pricing is incorrect and they are actually undercharging for their product or service. There are clear gaps in their strategy and understanding of product/market fit and a lack of access to market. There are also gaps in how gross profits, margins and pricing formulas work. Put this all together and you have a business that is making less profit than it should, which means less cash is coming into the business, resulting in cash flow problems. Additional financing won’t fix the problem — but financial insights will.”
The lesson is simple: Invest in a financial manager or director sooner rather than later. “Having a financial head offers SMEs two clear advantages. First, their financial housekeeping is in order and up-to-date. You can’t apply for finance if you don’t have up-to-date management accounts and realistic forecasts. We often find business owners applying for funding and they need the cash immediately because they haven’t had a clear view of their financials to see what was coming; the problem is that these businesses tend to have poor management accounts, which delays the process because we can’t get a clear view of the business.
“Second, if the business owners had a tight hold on their financials, they could plan for future requirements, or not need financial assistance in the first place. Finance should be for growth — not to plug cash flow problems.”
2. Focus on a healthy working capital cycle
It’s an all-too-familiar scenario: A manufacturing business needs to purchase raw materials and pay their suppliers within 30 days. Meanwhile, it takes 30 days to manufacture the product, they sell it after a further 60 days, and then another 30 days pass before they are paid. It takes 120 days before the manufacturer sees their cash, and yet they need to be able to fund a production cycle and pay their suppliers.
“The key is to recognise your cash flow cycle and through forecasting be able to manage it,” advises Kumaran. “You can approach your suppliers and negotiate 60-day terms. You can negotiate with your debtors to pay earlier. These are the levers of the working capital cycle that need to be managed to minimise your cash crunch.”
From Kumaran’s perspective, a strategic view of working capital is essential if you want to scale, but there are many basic areas that need to be addressed before a business owner can start focusing on strategy.
“For instance we have businesses with a R30 million turnover that approach us for R5 million in finance. These are not small start-ups. They’re established businesses with decent turnovers. And yet they can’t give us up-to-date management accounts. We need debtors, creditors, management accounts and the last set of financials to evaluate a business and whether it can service the loan. Financials aren’t good enough. We live in a volatile world and a lot changes quickly.
“Management accounts and a debtors report shows us who owes you money, but more importantly, how you manage the people who owe you money. We see this more often than we can count: business owners who are owed a lot, and yet they aren’t collecting their cash.
“A company’s debtors age tells us a lot. We can see how you’re exposed, how many people owe you money, how good or bad you are at managing that, and who your bigger customers are. We can see the balance between your debtors and suppliers. Any accounting system today can capture this information, but is it up-to-date and are you reviewing it? Without these figures at your fingertips, you can’t have a firm grip on the health of your organisation. A healthy working capital cycle is the lifeblood of a business. It doesn’t matter how much money you’re owed if you can’t pay your bills.”
3. Realistic forecasting can make or break you
When you’re in a scale or growth phase, it’s essential that you lift your head beyond simply the survival of the month or month-end. “Many entrepreneurs get stuck in the trenches, working on the day-to-day challenges and requirements of their businesses without looking ahead.
If you want to grow, you need to be focused on the future: How many people do you need to hire to achieve certain goals; how much funding do you need; where are your growth opportunities? Answering any of these questions requires a forecasting ability that takes into account cash flow, sales forecasts, your pipeline and any opportunities to increase revenue and margins.”
A great example of forecasting is a company that Spartan recently assessed.
“This business is a niche wholesale supplier to the confectionery industry. This sounds like an incredibly narrow offering, and yet they did their research and found a machine that can improve their margins by 75% — after paying for the machine. They needed to finance the machine, and they approached us with full financials, including sales forecasts and the improvements that importing the machine would make on their margins. They had also calculated whether or not they could service the loan.”
4. Be able to service the loan
Your cash flow forecast demonstrates past and future cash flow. It shows how you’re managing the business, how you’re managing cash flow and debtors, and the residual cash that’s available to pay a loan.
“If you’re approaching a funder, make sure you have these figures on hand. If you don’t, the funder needs to figure it out, and more importantly, you might not be able to service the loan. Having the numbers on hand impresses the funder instead — you’ve determined your payability and whether the loan makes sense. You’ve reviewed your options and evaluated the best course of action for your business — these are all clear markers of success.”
According to Kumaran, more often than not, growth requires funding. Businesses that ensure they are in a constant state of readiness, whose financials are always up-to-date and who understand their needs are far more likely to access that funding for the right reasons. More importantly, they’re far more likely to access funding they can afford.
5. Use funding for growth
There is a key to growth funding that can be summarised in a sentence: Will this help me make money? If the answer is yes, you’ve ticked the growth-funding box. If you’re not sure, relook your financials and forecasting. If the answer is no, you’re trying to solve a cash flow problem that will not be fixed by taking on more debt funding.
“As a funder, we care about what entrepreneurs want the money for,” says Kumaran. “We look at business models and strategy. We take a view of the entire picture, which gives us insight into whether the funding will be used in a growth context, or to plug a gap created by a strategy, cash flow, sales, marketing, management or access-to-market problem.
“Why does a business need funding? Is it because they’ve given customers 90 days to pay when the industry norm is 30 days? Is it because they have poor debt collection processes in place? Are they asking for money because their cash flow systems are inefficient? Is a big contract not paying you, and now you need funding to cover a delinquent client?
“On the other hand, is there a legitimate need? One of the key areas we look at is contracts. Project and contract-driven businesses have become the norm in today’s economy. A six-month contract with no prospect of additional work shouldn’t be used as a reason for large capex expenditure. A three-year contract, on the other hand, can be justification for finance to purchase additional machines or to hire more people. You now have three years to build up your pipeline while you service the first contract.
“We also evaluate each business’s strategy. A company that competes with cheaper imports and has no discernible value proposition shouldn’t be securing funding to do more of the same at poor margins, particularly in a highly challenged sector. On the other hand, a company in a commoditised sector that needs funding to pursue a new niche where they can improve margins, play in a space with far fewer (if any) competitors and even start exporting to other markets has a good case for securing funding.
“Can you creatively engineer yourself based on your knowledge, sector expertise and skills base? Or are you trying to bridge a self-inflicted cash flow problem? Too many business owners don’t adequately research their markets. Do you understand the market you’re in? Is your product or service unique? Does it allow you to be insulated against competition and charge a higher premium? Remember, healthy profits equal healthy cash flow, which in turn allows you scope for expanding the business.”
6. Grow slow
Where does growth go wrong? Accessing finance doesn’t automatically ensure success. “Growth is like placing a big bet, and the reality is that in most cases, an incremental bet is better,” says Kumaran. “Are you hiring one staff member every six months or 20 in one go? Will you buy one machine every two years or three in one year?
If you’re focused on incremental growth, the chances of falling are lower. We’ve seen business owners go big, and then they lose a key contract. The debt burden of that funding they’ve taken to service that growth buries the business, instead of boosting it. We evaluate every assumption business owners make relating to growth, because that’s the last thing we want to see happen.”
A problem Kumaran often encounters is when entrepreneurs use one positive sign as an affirmation for an entire strategy. “Entrepreneurs may get anxious that if they don’t ‘seize the day’, they’ll miss out on a big opportunity. The result is that they do things too quickly and over-expand.
“Ego also plays a role, particularly when it comes to opening multiple offices. Our advice is to watch yourself and your ego when making these expansion decisions. Get feedback from two or three alternative sources, whether that’s from your board of non-executive directors, mentors or a business group. Ask others for red flags. Review your decisions from every angle.
“Big bets should be slow; they should be the result of considered decisions rather than impulsive ones. You won’t always get everything right. You can plan ahead and still need to plug gaps. But at least start from a solid, sustainable base, with a clear strategy in place.”
7. Know when to fund your growth — and what funding to access
When is the right time to apply for growth funding? For starters, when the growth you’re planning can’t be funded organically, or simply through unlocking more cash within the business.
“Retail businesses and restaurants are a good example of this,” says Kumaran. “A retail business’s growth is often dependant on multiple locations or sites. You reach a point where you’re reasonably confident that your brand and business model works, you’ve piloted your first store for a few years and now you’re ready to expand.
To organically build up the cash to fund a second location will take another five or ten years. If the business has the margins to pay for debt funding over the next five years however, you can have two stores operating at the end of that cycle, with both turning a profit.
“Just consider your burn — there will always be a period where you are not making money from the investment. Is it six months, nine months, 12 months? You need adequate cash flow to support the debt and the burn.
“Go back to your strategy. It’s not just about your market, margins, product, uniqueness and so on. We’ve found that a lot of businesses are poor in their sales and marketing strategies. They want to grow — they have a plan and have pinpointed where to invest — but they can’t fill their sales pipelines. If you aren’t bringing in sales to support your growth investment, you’ll just increase your burn.
“In this economy, rather operate under capacity than over capacity. You’ll never be able to match supply and demand perfectly, no business can. No business can afford redundancies though. When you’re considering your growth options, focus on what you absolutely need to push the needle, and make do with what you can as you build up your pipeline.
“In every case ask the question: Do the costs involved make sense? Will this help drive growth? How? Once you’ve ticked those boxes, consider all your funding options. There are a lot of solutions available to you, from bank funding, which is the cheapest to access but requires a lot of collateral, to private equity funding, which involves giving away equity in the business.
“Alternative funders play in the middle of these two traditional options. Alternative funders tend to be niche and specific, focusing on specific sectors or industries. They carry more risk and don’t require collateral, which is why they’re more expensive than banks, but they bring industry and sector-specific insights as well — and it’s debt funding, which means you aren’t giving away equity in your business.
Their processes tend to be efficient as well, largely due to the niche nature of the funder. When you’re ready to grow, find a funder that matches your needs and understands your business.”
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.
- Player: Margie Carr
- Company: In Touch Media
- Est: 2008
- Visit: intouchmedia.co.za
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.
“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.
“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.”
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.
- 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.
“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.”
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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