- Player: Paul Simon
- Companies: YDE (1995 – 2007), Über Flavour (2014 – present)
- Turnover: YDE had a turnover of R160 million at the time of its sale to the Truworths Group. Über Flavour is still in start-up phase.
- Visit: www.uberflavour.com
Some of the biggest names in today’s business landscape were launched out of desperation, or simply because the founder wanted the service for themselves.
Über is the product of its founders wanting to be able to get from here to there simply and cheaply, at the push of a button.
Closer to home, the founders of South Africa’s largest agency group, The Creative Counsel, were looking for anything to do that meant running their own business and not working for a boss.
And then there are those who are dragged, kicking and screaming, into business ownership. That’s the story of Paul Simon, who at the age of 21 launched Young Designers Emporium because he was scared his father was finally about to kick him out of the house once and for all.
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The leanest of lean start-ups, Simon sold YDE to the Truworths Group, ten years later in 2005. The purchasing price is undisclosed, but at the time turnover was a tidy R160 million, and the business was on a nice growth curve. Not bad for a kid voted ‘least likely to succeed’ in high school.
The Right Idea
Entrepreneurship is like that. In many ways it’s the great equaliser. You don’t have to have the best education, connections or even money to become a knock-out success.
Sometimes it really is about the right idea, at the right time, with a healthy dose of hard work and determination. It took Simon a while to find these things, but once he did, he hit them right out of the park.
It all started at a typical Jewish Friday night family gathering. Simon had been given a deadline five days earlier: Figure out what you’re doing with your life, or pack your bags.
He’d promised his dad he was working on a business plan to buy time, but he knew if the topic came up at dinner that night it would be clear that he had no plan, and that he hadn’t made any attempt in the last week to find one.
“I met everyone at the door and asked them to please not ask me what I was currently doing. I didn’t want anything triggering my dad’s memory,” recalls Simon.
“Unfortunately, I missed my uncle, and so of course, half way through the evening, he asked me what I was up to. My dad immediately joined in, ‘Yes, what are you doing, and how is your business plan coming along?’
“I was frozen with terror. My mind had never worked so fast in its life. If I admitted I wasn’t working on anything, I was out on my ear. My dad’s question was simple: ‘You’ve done two fashion courses, and you’ve created a range that no one wants. What’s your plan?’ I had no idea.”
Turns out, it was the first thing that came to mind, which ended up being the foundation for YDE: “I’m going to open my own store to sell my merchandise,” blurted Simon to a room full of guests.
An Unexpected Business
Where had that come from? Questions were fired Simon’s way in quick succession: Where was he going to get the money to do that? How was he going to manufacture his range? How could he possibly afford the retail space?
By now, his mouth was functioning completely independently of his brain. “I’ve been chatting to the guys I studied with, and we’re all in the same boat,” he wildly invented.
“We’re going to create a kibbutz type environment where we all share the costs. Alone, none of us can afford to do it, but together we can.”
Simon’s spur-of-the-moment idea wasn’t so far-fetched after all. “I found nine other young designers who were interested in operating in a retail environment with fitting rooms, credit card facilities and a proper retail store atmosphere, but couldn’t afford it.”
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A Search for Premises
“For a long time, I thought coming up with a good idea was the hard part. Turns out, it’s the actually building a business part that’s tough, and for me it started with finding premises.
“I had no contacts, no business acumen, and no track record. I didn’t even have a PowerPoint presentation, let alone 3D imaging of what the store would look like, which was just as well anyway, since I had no idea what the store would look like. I felt like Oliver, begging with open hands: ‘Excuse me sir, may I please have some premises.’
“Everyone said no until someone said yes. Here’s the thing – you only need one person to say yes. And sometimes, it’s just a numbers game. Ask enough people, look long enough, and eventually you’ll find what you’re looking for. We certainly did.
“Cavendish Square wouldn’t even give me an application form. Green Market Square said no. And then I found an empty store off a dingy thoroughfare leading away from Green Market Square. It was a white elephant that had stood vacant for too long, and wasn’t in a prime spot.
“By this stage, I’d come up with an idea of how the store would look – I’d seen something similar in London, with metal sheets for décor mimicking a warehouse look. I described it, but no landlords understood the vision.
“The landlords who eventually gave me the lease still didn’t understand my vision – but they didn’t care either. Any tenant was better than no tenant.”
Welcome to YDE
“I hung the sign first. I was incredibly proud of it, all edgy and metallic to suit the metalwork inside. I was so excited about the décor, I spent all the money I had and forgot about essentials, like a till. For months we had to use a fishing tackle box and an old PC at home to do the accounting.”
Simon had made sure that he had a sound system though. This seemed like a crucial element to the ambience he wanted to create: An edgy, vibey, party atmosphere.
“We weren’t trying to be a traditional store; we were a collaboration of young artists, and I felt that the space needed to reflect that attitude.”
Like everything else in that first year, opening night was as lean as it could be.
“We had one box of wine, and sandwiches that my gran made and my sister handed out. But it didn’t matter that it was low budget – it was fun and the press loved it. We were a group of young fashionistas, all 20-somethings who were doing it for ourselves. The story was golden. We generated millions of rands worth of buzz, all for the cost of a few sandwiches. What we had was a story and atmosphere. It was an early lesson to give people a story that they care about, and they’ll tell it for you.”
Open for Business
In his first month, Simon paid his dad back a loan of R10 000 and made the decision to never borrow money again. All growth would be organic, with each store generating sufficient cash to pay for the next one. He also never ended up creating his own range, but became the brand’s business mind.
“We divided the retail equally between designers. By splitting the costs, the rent was affordable. I stocked on a consignment basis, which meant my margins were low, but I carried no risk. Instead, I made a small commission on each garment sold. We also never put the YDE brand on the merchandise. YDE was the store only.”
Simon needed to share costs because he had no money, and today reflects on how innovative you can be when you have no cash.
“The solutions you find because you can’t simply throw money at a problem are the most enduring.” Unfortunately, it would take him years to learn this lesson, as subsequent start-up failures post YDE would prove.
Related: How Zelda Arnott Turned Fans Into Customers With Zellyco
The problem with a growing, mature organisation is that at some point it stops being a fast-paced start-up, and starts becoming a vehicle for managing people.
Investors and equity partners will put boards in place as an addendum to growth funding, and in many cases appoint an MD and advise the founder to step down.
The reason is simple: Entrepreneurs love building new things and finding innovative solutions to tough challenges. Few of them want to actually be managers.
“Ten years later, we had 12 stores nationwide and a turnover of R160 million,” says Simon, “and I was a glorified HR manager. I’d loved giving designers an introduction into the market, managing them, helping them grow their businesses because that grew our business too. We provided a full turnkey operation for our designers. All they had to do was do what they were good at – design and manufacture clothes. We did the accounts, marketing, shop fitting and so on. But as we progressed, put systems in place and perfected our back-end and supply chain, we also hired employees, and that takes a whole new set of management skills. I was in my early 30s and I realised that I was managing people and it wasn’t fun anymore. The brand had grown into a chain store, and also needed a new set of skills that I didn’t have.”
There were quite a few suitors. Truworths ended up buying 75% in a two year management buy-out, at which point they bought the remaining 25% in 2007. Simon was 30 and retired. He took a year off. It was the most miserable year of his life.
Simon’s next foray into business was a chance to prove that YDE wasn’t a fluke, and ended up being a complete failure.
“There had always been the nagging question, was YDE’s success a fluke? I didn’t think it was. The launch and first two years could have been. We had something fresh and new, and that got a lot of attention. But that’s no guarantee of long-term success. Ten years of consecutive year-on-year growth isn’t chance.”
Simon isn’t alone in following a great success with a failure. Many entrepreneurs struggle to replicate their success.
“Much of the problem is money,” he says.
“There’s a necessity of invention that comes with having no capital. When we launched YDE the concept of the Lean Start-Up didn’t exist yet, but that’s exactly what we were doing. It gave us a chance to test the market as we grew, and adjust our offering. We couldn’t overspend, and so we were careful about what was best for the business. When you have money, these things fall away. You can do anything, and you forget to pay close attention to your market.”
Searching for Customers
“Businesses need customers all of the time. It seems so crazy that I forgot this simple fact,” says Simon.
“I was a father now, so I was looking at the world very differently to a 21-year-old who wanted to create a party atmosphere while people bought fashion. Now it was all about the kids, and I spotted a gap in the market: A safe, beautiful place for kids to play while their parents enjoyed coffee and lunch. I thought I had a real winner.”
The most interesting factor of Simon’s subsequent failure is that it should have worked. Any parent will attest to the fact that in recent years restaurants and coffee shops have become more geared towards children. It’s a big market. If anything, Simon was ahead of the curve. So what went wrong?
For Simon, there were two red flags. “First, I overspent. Shooting from the hip with no plan had worked for me before, and so that’s what I did. The difference is that this time I had money, so I bought the most expensive of everything: Imported jungle gyms from the US and furniture from Italy, a huge 2000m2 space, an alarmed, fenced off space and every child was tagged. What this meant was that I didn’t test my idea before ploughing money into it, and the margins were literally impossible to meet.”
The next problem was market research. “We pumped on weekends but had no customers during the week.”
After incurring massive financial losses, Simon closed the business within the year. “My ego took a real beating and my confidence plummeted.”
Related: Bisila Bokoko On Shifting Your Perspective
Back in the Game
To boost his confidence again, Simon needed a personal win, and he found it in 2010 during the FIFA World Cup.
“I decided to focus on a six-month project, and it turned out to be my greatest success so far in terms of turnover and profit. The Makaraba mining helmets are very South African, and real artworks, which of course means they weren’t geared for the kind of mass production that an event like the World Cup needs. We created a mass production version. We manufactured a plastic projection moulding kit and customised them according to countries and teams. Fans bought the kit in pieces with stickers, and could ‘create’ their own Makaraba helmet.
“Chain stores and corporates loved them – we had contracts with PRASA, Coca-Cola, BP – they ordered thousands for their hospitality boxes.”
“I knew I was looking for a product that I could develop locally, create employment, and use the weaker rand to my advantage.”
The return of the lean start-up: Getting über Flavour off the ground
“I bought a South African product made in Stuttgart and it drove me nuts.” This time, Simon wasn’t in a rush to start his next venture. It needed to be the right idea, at the right time, and although he was always paying attention, looking for a gap, he wasn’t forcing the issue. And then inspiration struck.
“I knew I was looking for a product that I could develop locally, create employment, and use the weaker rand to my advantage by manufacturing here but exporting to an overseas market. I’d learnt that you can’t force these things though, and so for the time being I was just on the lookout for the right product.
“I found it in the EU of all places. My little girl is sensitive to sugar. We were at an airport, and she needed a juice, and I was looking for something with the least amount of sugar. I found a rooibos ice tea that was made in Stuttgart. What? This is a South African product! I was filled with righteous indignation. What the hell are we doing that Stuttgart is producing a rooibos ice tea?”
Simon had found his product, but he realised he wanted to create a craft version. “There’s a growing market for natural, craft products that don’t have any added sugars, flavourants and preservatives. It makes the product more expensive, but I wanted to target the international market, so that was okay.”
Simon got started. This time he would mimic his success with YDE. No intensive capital outlays, lean by design, and starting small, proving the product every step of the way.
Using real brewed rooibos tea as a base, Simon developed three flavours from a kitchen, using trial and error until he found the perfect blends, as well as a solution to the shelf-life dilemma.
Testing the market
“This time I tested the waters. And then he hit the streets, testing the market. I made the decision to launch locally so that we could pay our school fees, test the market and get a reaction to the product and flavours. In November 2014 we produced 10 000 bottles. I was really nervous. I thought the price point was too high for the local market, and I was worried I wouldn’t sell all the stock within the year before the shelf-life expired.”
Simon packed cases into his boot and started canvassing restaurants. “I needed people to try the product to know what consumers thought of the flavours and packaging. That was my goal, but it was a humbling experience. I was cold calling eating establishments, something I’d never done.”
Within six weeks he was out of stock. Turns out, it’s not just the international market that like craft goods, and are willing to pay more for a healthier alternative.
“Initially I was incredibly surprised by the sales. I wasn’t expecting local uptake of this rate at our price point. But it goes to show that people are paying attention to labels. They want to know what’s in the food and beverages they’re consuming, and they’ve learnt that if there are more than three ingredients and many of them you can’t pronounce, then it’s not good for you.”
Within eight months Über Flavour was in 150 locations in Cape Town and Joburg, from restaurants to grocery chains. “To catch up on production I needed to hire a planner, distributor and find a larger production plant so that we didn’t keep running out of stock.”
Simon’s secured six distributors in six countries, including Germany and Switzerland, he’s exported his first orders to Dubai and Australia, and is currently negotiating with Marks & Spencer.
Passion is Crucial
“This is the first time I’ve felt the same passion and buzz I did with YDE,” he says.
“I’ve realised that passion is a vital component of success. Your blood needs to tingle with excitement. But I’m also coming from a much wiser place. We’re staying lean, we’re not throwing money at problems, and I’ll only consider partners who add strategic value to the business.”
Simon has already received a few offers to purchase. His answer is a straight-forward no. This is his baby, and he’s planning to take it all the way.
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.
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.
- 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
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.
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.”
3. Understand — and leverage — your competitive advantage
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.”
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
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.
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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