I grew up in Sekhukhune in Limpopo, the third child in a family of seven – four boys and three girls. Our mother took care of us and we were supported by our father who was a migrant labourer in Johannesburg. We were poor and there were many hardships.
Our school was ten kilometres from where we lived, and every day we had to hike up and down rocky paths and through a river to get there. It was very difficult in winter when we had to wake up in the dark, at 4.00am, to make sure we got to class on time.
I know that my thinking as a child was different. From the age of about eight, back in 1973, I remember being concerned about taking care of the family. I was nine when I started getting temp jobs, either gardening or doing piece work at the local factories.
I would earn R20 and take it to my mother. Children usually think of buying things for themselves, but I bought curtains for the house at a jumble sale. I liked shopping at jumble sales because I saw that I could buy so much more there than at a regular shop. I bought clothes for myself which was a big thing for us because we would otherwise only get clothes once a year at Christmas, when my father came home with clothing and a school uniform for each of us.
Poverty was a strong driving force for me and it pushed me to work harder. I became committed to ensuring that somehow I would build a better future for my family and continue to be a giving person. In high school, I continued to do part-time work to help the family with the basic necessities.
I would give some money to the local bus driver when he was on his way into town. He bought boxes of apples for me which I sold at school for a small profit. These things started to help me develop a business mind over time.
A little later I started selling Putco bus tickets. I used to buy about five weekly tickets, as well as one for myself, and go to the bus stop before sunrise to catch the commuters who were going from Kwa-Ndebele to Marabastad.
The weekly tickets were convenient and good value for the bus passengers, as they were cheaper than the daily fare. I would find the commuters who needed only a single ticket, and would allow them to use one of the weekly tickets at the reduced price, but I would travel with them so that I could take my tickets back once they reached their destination. I would then do the same thing with commuters travelling from Marabastad to KwaNdebele.
I managed to earn about R800 a month this way.
Becoming a teacher
When I finished high school, my parents chose teaching as a career for me. It was a highly respectable profession at the time, and education was seen as a good field to go into. My parents had saved the money to pay for my tuition, but there was little left for anything else.
We had second-rate schooling, no facilities, and huge discrepancies between rural and urban education. In addition, the high fees made it almost impossible for people from my background to study. I became an activist and a student leader at college and I was committed to fighting the education system that was being imposed on us by the apartheid government.
I was fighting for equality and aiming to change the rules so that they could be more favourable to the needy. But I managed to keep focused on my studies too, and graduated with a secondary school teaching qualification.
I got my first teaching job in Tembisa in 1989, but I continued to be an activist and I helped to organise the operation of banned organisations in the schools. I paid dearly for that. At the beginning of the next school year, I discovered that the Department of Education had fired me from my position – I still remember it was post number 14.
They employed somebody else and no-one had bothered to tell me. I then discovered I had been banned in Gauteng, and in my home province of Limpopo. I remained unemployed for four months and I went into arrears on the payment for the first thing I had bought on my teacher’s salary – a bed from Price and Pride. Being unemployed led to numerous financial difficulties.
I lived on half a loaf of bread a day and a 5-litre bottle of Oros which would last me two weeks.
Luckily, there was a shortage of teachers in Mpumalanga at the time and I managed to get a job in KwaNdebele. But the salary was low; I was making R16 000 a year, and I needed to earn more money just to survive. I started selling insurance part-time almost immediately. I was selling to teachers who knew and trusted me and I did very well. Within a few months I became the top part-time rep in my region and I was earning 12 times my teaching salary every month.
The move to insurance
In 1992 I decided that enough was enough and I went into insurance full-time. I worked for Sanlam and soon became one of their top reps in Mpumalanga. A year later I moved back to Polokwane because I wanted to be closer to my family, but I continued to work for Sanlam until 1995.
In my time there I learnt that when you sell, you’re selling yourself first, and then the product. People are buying you, which is why it is so important to build good relationships and have strong networks.
In 1995, I took the leap and decided to open my own brokerage. By then, the ANC Government had been in place for a year. New opportunities became available to black people for the first time. It was a good time to take advantage of this business opportunity as Government was employing public servants across various departments and new public service organisations that had been established. This gave me access to a whole new market.
I also wanted to start my own business because when you are employed by a company, you can only sell their products – I wanted the freedom to sell other insurance products and I also wanted to be independent. I had done really well and I didn’t see the need to report to anyone else anymore.
My own business strategy was to target pensioners and the uninsured low end of the market who were not being serviced by the big companies. I financed the launch of a brokerage firm – Morethi Insurance Brokers – with the commission I had been making.
For that type of business, all you need is a desk, a laptop, four walls and a PA. I basically continued to do what I had been doing, just for myself. But there are major challenges involved in shifting from one gear to the next – I went from the security and recognition that comes with a big insurance company to a small independent brokerage.
That kind of move can really mess you up emotionally and financially. Cash flow needs required me to recapitalise the business from time to time, which was stressful. I was alone and I suffered for the first few months as I built my client base, but I was determined not to borrow money.
As a result, some of my credit accounts were compromised. Everything I was paying on instalments, like my house and car, was in arrears. The sheriff was threatening to attach all my possessions. But I knew that if I borrowed money from the loan sharks, I would then be threatened from both sides, so I paid what little I could when I could, and starved and suffered my way through. The determination not to borrow money became a fundamental part of my business philosophy. I said to myself, “I’m down now, but I’ll push to bring in the business and then I’ll be up again.”
And that’s what I did. Because insurance is about relationships, I would wake up at 3.00am, go to my office, and prepare breakfast for my clients with bread I had bought the night before. I packed the sandwiches in my car and spent the mornings on the road selling. I knew this would work as a value add because when people do not have a lot of money, they are hungry and food is received like a gift. By midday I would be back at my desk doing admin.
At the end of the day I went straight home and I would go to sleep early because I had to be up again before dawn. I travelled vast distances between Limpopo and Mpumalanga, Gauteng and the hinterlands of KwaZulu Natal. Challenging as it was, my efforts paid off. Within six months the business was doing well and I had proved my ability to sell once again by acquiring many new clients.
At this point, my vision began to unfold and I started believing that something really great was going to happen. I had been learning every step of the way and my hard work was starting to pay off. It was then that I knew I wanted to create a meaningful and sustainable business that would enable me to help lots of people in my community.
Building on opportunities
In 1996 I took advantage of Government’s drive to empower previously disadvantaged people and I established a company called Tebeila Building Construction, today known as Tebcon Developers, which does building projects in Gauteng, Limpopo, Mpumalanga and North West.
The provincial governments were faced with massive infrastructure backlogs that needed to be addressed. They invited companies to help roll out the development of government buildings and housing. As a result, between 1997 and 1998 Tebcon became the biggest black construction company in Limpopo.
I ran the business alongside the brokerage firm very successfully for a few years, but then I got bored and I started investigating opportunities to take on new challenges and find ways to contribute meaningfully to the mainstream economy. That was how I moved into the mining sector.
The new Government had started opening up the country’s mineral resources and the Mining Charter had come into being. The Limpopo provincial government was selling shares in Anglo Platinum. They called for bids and I put in an offer. In December 2002, I led Sekoko Platinum, a company that successfully bid for the acquisition of 480 000 shares in Anglo American Platinum through a public tender process. This laid the foundation for Sekoko Resources.
But I also realised that I wanted to find a sustainable way to create new wealth from resources, and not just to own shares. I saw that in mining when you buy into an existing opportunity, the interest is very high. I wanted to build my own Anglo American in a way that would enable local communities to profit too. I had courage because I had already become a successful businessman, and the time was ripe to seize the opportunities that were being made available.
I developed an interest in resources and started to read and learn about the industry. I still had many political connections from my days as a student leader and trade unionist, but I refused to build my business on political connections. I wanted to do it by taking advantage of my own talents, skills and credibility. I am a firm believer in the fact that a business is built on the strengths of its founder.
Learning some tough lessons
I decided that the best way forward was to buy my own mineral rights. To do that, I consulted a geologist who helped me to identify various areas in Limpopo. Because the construction business had been so successful, I had managed to save R100 000.
I used this to pay the geologist’s fees and to cover the cost of submitting the application. I then put forward my application for mineral rights to Government. Not all prospecting rights requests submitted were successful, however, and mine was rejected.
That day, I was devastated. It was all the money I had saved; I had worked very long hours for it and there was nothing left. I spent the day alone, locked in my office. But by the end of that day I had reflected long and hard and I was resolute that there was no way I was going to let everything go down the drain.
The process of putting the application together had taught me a lot, and I had been doing my own research into the mining and exploration sectors as well. I sat with my PA and we put together another application. This time it was successful, and I secured my first prospecting rights in the Soutpansberg.
Of course, once you have rights you have to use them or you lose them. But I had no money to develop the land I had acquired the rights to, so I went back to my community and I approached the local chiefs, women’s groups and disabled groups to become shareholders in the business.
We went on a two-day bosberaad during which we discussed ways to raise the money to enable exploration of the area I had secured. Within ten months, we managed to raise R1,5 million between us all, with me as the major investor and shareholder. The money came in dribs and drabs, a few thousand here and a few thousand there. But we got it.
Next, I appointed a consulting company to do the exploration. This is where I made the biggest mistake of my life. Money was so limited and as a new business I had no resources with which to do research into the contractors and their business history.
Needless to say, there was an internal dispute among the consultants and one of them disappeared overseas with the money I had raised from the community. To this day, he has never been found. It had been difficult enough for me to deal with losing my own money early on in the game, but now I had to go back to a group of vulnerable people who had invested everything they owned in the business and tell them I had lost their money. There was just no way I was going to admit defeat. I could not let them down.
Building a mining empire
By this time, I had become very hands-on in the business and I was participating physically in all the site visits and going to the labs.
I had collected all the lab test results and kept copies of them in my own files. These pieces of information turned out to be a lifesaver. I started meeting with prospective investors and showing them that although I had no formal reports, I had the test results proving that there were vast coal deposits in the area.
The first company to understand the value of what I was holding in my hands was mining operator, Coal of Africa, which invested R55 million in the business there and then, laying the foundation for growth for Sekoko Resources.
The investment was amazing because it not only enabled the company to begin exploration, but it also meant that we had the capital to start on other exploration projects too. Today we have projects on the go in the Soutpansberg, the Waterberg, Capricorn and the Eastern and Western Bushveld complexes in Limpopo. We have gone on to acquire the rights to vast holdings of the country’s rich coal, platinum and iron ore deposits.
Our shareholding, which includes the original members who continued to believe even after the loss of their R1,5 million, ensures that local communities in the area also benefit from the natural wealth of South Africa. This is a key consideration for me. Sekoko also promotes empowerment through preferred procurement and we work extensively with local businesses wherever possible. It’s vital to include local communities in this business so that they too can benefit.
My father is a priest and he taught us that on dry soil, no-one can reap a harvest. You have to provide people with opportunity if you want them to succeed. Our empowerment model was developed because I did not want the ordinary people living in and around the mining areas to be excluded from our mining empowerment transactions.
I never imagined that my life would turn out this way, or that I would be part of such a big mining company, but as the business opportunities unfolded my vision grew and I followed the dream. I am driven by a sprit of entrepreneurship and by my faith, both of which have enabled me to look beyond what people normally see. Eight years down the line, Sekoko Resources is well funded and has never had to borrow money from the banks.
It is often said that your job is your second home, and I like my staff to feel that this is their second family. I see myself as a father figure, and I want to be respected as such. I think I have proved that I am not just a businessman who wants to enrich himself alone. We employ 32 people, all of whom have shares in the business.
I believe it is critical for them to know that they have ownership in everything they do. We have created a friendly work environment. I encourage our people to respect and trust one-another. In addition to the permanent employees, we have hundreds of consultants in the field so we provide employment for many people.
In 2008 we entered into a joint venture for two Waterberg coal projects with Firestone Energy, a Perth-based exploration company listed on the Australian and South African stock exchanges. Sekoko is now the majority shareholder of Firestone Energy and I am a director of the company. The Waterberg coal joint venture is playing a major role in helping to alleviate poverty in Limpopo, which has a high unemployment rate.
We are now working on listing Sekoko on the London Stock Exchange. There is a huge appetite for coal assets in the UK. We have prospecting rights on 27 coal farms measuring nearly 36 000 hectares in the Soutpansberg, and on eight farms measuring about 8 000 hectares in the Waterberg. Considering the future fuel and energy requirements in this country and abroad, this is of great strategic value to the company.
I am a spiritual person and my faith is an important part of my life. Last year The Tim Tebeila Foundation donated R7 million for the building of a church in Sekhukhune, the first of its kind in a rural area. The foundation helps feed the needy, including pensioners, the disabled and children in Limpopo.
I also sponsor a number of students at various universities. I am passionate about human development and helping to fight poverty. We regularly hand out clothing and food parcels to people who need them. Whatever we get from life, we must plough back into our communities and it will be multiplied many times. I believe that if Nelson Mandela could give the best of himself to this country, who am I not to do the same?
Related: Adrian Gore – The Disrupter
Invest your own sweat
Make sure your principles are clear and established. Then, stick to what you know best to generate income and save money. Do not borrow from others, but learn to create your own wealth. It’s vital to build your income on what you know how to do best. That’s what I did when I was in the insurance business, and it’s a principle I continue to apply even now.
It takes time to make money this way – it’s not something that can be achieved overnight or without much hard work and personal sacrifice – but it can be done. You cannot depend on government handouts if you want to create sustainable wealth for yourself and your investors.
Being able to earn money is fundamental to operating a successful business. I was prepared to invest my own sweat and my own efforts, and I believe that is what convinced others to come on board. Also, if you are serious about your business, don’t spend money on cars and big houses. Don’t confuse working capital with profit. First you must make the business work, then you can develop expensive tastes.
Discipline is key
In addition to my teaching diploma, I have participated in many specialised courses in marketing, business management and mining over the past years, but I have learnt my most valuable lessons in the course of doing business. I don’t believe that the spirit of entrepreneurship can be taught, but I do believe you can learn the principles and then apply them in your business.
I draw a lot of inspiration from the stories of international entrepreneurs like Donald Trump. But I am also inspired by mining companies around the globe.
I am a disciplined person by nature, which is probably a result of the way I grew up. My wife Pollett and I married in 1998, and we now have four children. When I was single and focused on making money to survive, I worked solidly from Monday to Friday and kept any socialising strictly to weekends.
These days my free time is devoted to my family. I have also found it vital to spend time only with people who are positive. There are many negative detractors out there who do not have your best interests at heart. As a business person, it is advisable to keep away from them as their gossip brings nothing into your life. Surrounding yourself with children is a good way to ensure that you only hear optimistic stories.
A long and winding road
Tim Tebeila qualifies as a teacher and his first post is at a high school in Tembisa. At the end of that first year he is fired by the Department of Education for being an activist for change.
He finds work as a teacher in Mpumalanga and supplements his meagre income by selling insurance in the evenings and on weekends.
He leaves teaching and joins Sanlam where he becomes a successful broker, later moving back to Limpopo.
He leaves Sanlam and opens his own brokerage, Morethi Insurance Brokers.
Tebeila Building Construction is launched, carrying out building projects in Gauteng, Limpopo, Mpumalanga and North West. Between 1997 and 1998 it becomes the biggest black construction company in the country.
Tebeila starts to develop an interest in mining and resources and loses R100 000, his life savings, by making an application for prospecting rights that is rejected.
He raises R1,5 million from his own funds and from local community groups in Limpopo – who remain shareholders in the business to this day – to begin prospecting. The money is lost to an unscrupulous consultant.
Armed with lab test results, he secures R55 million in capital from Coal for Africa. This paves the way for the expansion of Sekoko Resources.
Sekoko enters into a joint venture for two local coal projects with Firestone Energy, a Perth-based exploration company listed on the Australian and South African stock exchanges. Sekoko becomes the majority shareholder of Firestone Energy.
Karl Westvig Of Retail Capital Shares His Insights Into A Year-On-Year Double-Digit Growth Business
Here’s how Karl has negotiated the many challenges of building a high-impact growth organisation that currently has a turnover of R150 million, which expects to double within the next three years.
- Player: Karl Westvig
- Company: Retail Capital
- Launched: 2011
- Turnover: R150 million (2017)
- Visit: www.retailcapital.co.za
Anyone who has successfully navigated a business from a R5 million turnover to R30 million, then to R100 million, and heading towards the billion rand mark knows that growth might be the goal, but it’s also where businesses stumble and fall.
When you’re on a growth trajectory, there will always be some areas of your business outpacing others. The trick is to hang on, and bring your customers, employees, investors and directors on your journey with you, improving the business each step of the way.
Here’s what Karl Westvig, co-founder of Retail Capital, has learnt along his journey, and why he’s continuing to enjoy year-on-year double-digit growth.
Differentiators determine market penetration
Retail Capital’s core product is a merchant cash advance. When the company launched in 2011, there was limited competition in South Africa, but Karl knew that would change. “South Africa is a high card-usage market, which is what you need for merchant cash advance products to work. You need to be able to track the monthly income of an SME to determine the size of cash advance they qualify for, and collect the loan repayments through POS (or point of sale) card machines.
“My founding partner, Dave Lewis saw the product in the UK, and believed it would work here, thanks to our high card penetration. That meant other competitors would soon join the field. The product itself wasn’t our differentiator, but that didn’t mean it wasn’t a business worth pursuing.” In any industry, you need to evaluate competitors and whether the market is big enough for you. Karl and Dave believed it was, and that SME finance was under-served, but they also knew they needed a differentiator.
“We brought the concept to South Africa and built our own back-end. The way to differentiate is through channels and distribution, as terms and pricing structures are the same.
“Our differentiator is our people. It’s about who we are and how we train. We have 40 sales consultants nationwide who conduct face-to-face visits with our customers. We don’t push product, we provide a solution. We work hard to understand each owner’s business, and whether they will get a return on investment from a cash advance. We evaluate what the money’s for, what the margin on it is, and whether it makes commercial sense. There’s no point taking money unless you can make more from it. For example, if it’s used to procure much-needed stock, or gain a large settlement discount from a supplier, that’s an opportunity. But, plugging a cash flow hole to pay salaries doesn’t make sense. You should always ask what the benefit of cash in hand is, and then determine if a cash advance makes sense.
“We’ve developed the tools we use to evaluate this in-house. We’ve gone from zero to 40 sales consultants and we’ve been testing our processes and learning from them throughout that journey. We manually underwrote our early deals, and tracked what the advance was used for, how long the terms were and whether there was a return.
“This process has been automated in recent years, and we now have a wealth of data available to us, but we also have consistency. This means our clients can walk their journey with us. They understand the cost of the money, why they are getting it and their ROI. By the time they deploy the cash, they understand exactly how they’re using it.”
Longevity is built on the right partnerships
Retail Capital’s first product was a premium offering targeted at restaurant owners, franchisees and independent retail stores. “There are 200 000 POS systems in independent chains and single stores across the retail and restaurant sectors in South Africa, and 50 000 franchise stores,” explains Karl. “This was our target market.”
The offering suited the first segment of their market, but they struggled with franchise owners. “The independent space works for us. We’re almost like private bankers for SMEs. Our consultants understand the SME space — many of them have first-hand experience running a small business — and we work closely with our clients. We have business owners who have used us for seven years and have significantly grown their businesses over that time.”
Franchising was a much tougher nut to crack. “We faced a lot of resistance from franchisors who didn’t understand why their franchisees would need to borrow money — particularly a premium, and therefore more expensive product. We realised there was a disconnect between franchisors and their franchisees. Franchisors saw the product as too expensive. Franchisees had experience in trying to secure loans when they didn’t have assets to borrow against, and banks lend against balance sheets, not cash flow. We realised we needed to stop fighting the franchisors and partner with them instead.”
Retail Capital approached a number of franchisors and explained the pricing structure of merchant cash advances, particularly that higher risks for them meant higher interest charges for their (Retail Capital) clients. “We said we could bring the price down if the franchisors could help us derisk their franchisees with pre-vetting, and letting us know who the good operators who used their cash reserves well were. We brought franchisors into the fold and could pass on better pricing because we were taking on less risk.”
Karl has taken a similar approach to the micro segment of the market. “There are 50 000 micro retailers in South Africa, but this segment is growing rapidly,” he explains. “Within the next five years that 50 000 will be 250 000.”
It’s a segment that also benefits from cash advances, but not at the price point of Retail Capital’s premium product.
“We watched the development of mPOS (mobile points of sale) devices overseas and found local producers like iKhoka and Yoco. Our approach is simple; they have the devices, we have the capital and the system to disperse funds. It’s too expensive for us to service this sector face to face. It needs to be a fintech play, which was why we partnered with companies that had the devices.
“There are three sides to a deal. The originator (the device), the capital and the operator. The data that runs through the devices allows us to pre-approve micro vendors for a specific amount over relatively short payment terms. The risks are higher, but we mitigate them with cost-free delivery of the loans.
The systems and processes to get the funding to a micro operator and collect payments is our area of expertise, but we recognise that the originators will also want to hold the book.
“Yoco for example is building scale. To truly grow they need to become lenders themselves. This is going to happen whether we like it or not. Our current joint venture model allows them to partner with us, and eventually we will just be the operator. Within this particular market, we’d rather have that than nothing, which is why we’re flexible.
“There are other business benefits for us. Our technology is our platform, and this can be used in many other ways. We’re operating in a minefield of opportunity, collecting risk data on industries across the SME sector that we will be able to apply to other products. You don’t need to own every channel of a value chain. Working with the right partners can be much more valuable, and opens doors to new opportunities.”
Leverage existing platforms for growth
“The most exciting part of Retail Capital for me is re-imagining the business. Dave built a great business before he exited to sail around the world. It was profitable and well-managed, but with a single product.
“When I walked in I took a different approach. I started by asking what our customers were looking for, and listening to what they were telling us, instead of pushing them into nine-month products.
Whenever you launch a new product, you need to start with a profitability framework. For us, this meant asking what our return on capital requirements needed to be across three to 18 months. Once we knew that, we could build it and offer adapted products to the market.
“Adapted products require adapted training. Too often companies add products, but don’t walk their teams through the new offerings, and so everyone sticks to what they know.
“We also looked at what other markets we could enter, which led us to franchises and the micro segment.
“What you really need to understand is your core. Financial services are all about distribution. Can you give it out, and can you get it back? Everything else is the framework that supports this core.”
According to Karl, the question ‘can you give it out?’ is about creating a product that you deliver where customers want it, whether that’s on the phone, online, or through face-to- face engagements. “You need to give your customers touchpoints at places convenient to them. Great businesses build capacity around their customers. Understanding their routines and what’s convenient to them allows you to invest where it makes sense.
“By listening to our customers, we could give them what they were looking for. We built new products and extended existing products based on this data.”
The second question, ‘can you get it back?’, involves underwriting and collections, and this is where Retail Capital’s IP resides. “You need to be able to set different limits and risk levels for different industries. There’s no such thing as one solution fits all in the SME space,” explains Karl. “Fashion stores and restaurants can afford to repay 10% to 12% of their credit card turnover, but FMCG stores wouldn’t have cash flow if their repayments were that high. Industries have differing risk profiles and require different terms. This develops over time. The longer you spend in the market, the more you can increase your efficiencies and reduce risk.”
Impactful growth doesn’t happen overnight
Two of the institutions that fund Retail Capital’s book are Ashburton and FutureGrowth, both large and established investment funds. “Today we are a rated business. Our returns are healthy. We’re a high-yield alternative investment,” explains Karl. “As our rating goes up, our interest rate falls, and we are able to pass that saving onto our customers. But that takes time.” You don’t go from being a start-up to funded by Ashburton overnight. You need a good track record, a professional and experienced team and stable loss rates. In short, you have to prove yourself in the market. Building something of value takes time and patience.
There have been challenges along the way, matching the balance sheet. “If you’re doubling the size of your business year on year, you need to be able to fund the growth of your book. The problem is that customers and money are seldom in balance. One is always stronger than the other. If you get funding, you need to find customers. If you suddenly have an influx of customers, you need funding.
“Then it’s down to distribution. You’re doing great, signed deals go up, your volume takes off, and now you need to run to your funders for more cash.”
Retail Capital doesn’t only have investment funds backing its book, but also equity investors. The management team owns 51% of the business, but various funders have been involved since the business’s inception.
“From a corporate perspective, growth triggers changes in a business, and those require investment. However, while we were experiencing rapid growth, our profits went backwards. People, systems and marketing are all significant costs, and they were all happening together. At the same time, I had to keep the confidence of my board and investors.
“As an entrepreneur, you sell your vision. Mine was that we would grow between 70% and 100%, and we weren’t hitting the numbers. It’s tough to keep the faith in a high-growth environment, and you really only get three strikes. How do you explain your vision, inner workings and full pipeline to a board that’s removed from your business, is risk-averse and doesn’t understand your sector? There was a six-month lag between where we were and where we said we’d be, but I knew we’d get there. However, confidence was waning because of the mismatch between the business and its investors.
“I realised I needed to find shareholders who understood where we were going. FutureGrowth was already funding our book. They understood our business, and we’d worked well together. They wanted a stake in the business, and they supported a management buy-out that would exit an investor who wasn’t comfortable in the business, and enable management to increase their stake.
“Ultimately, it all comes down to patience. Build the business that you envision, step-by-step. It takes time, but if you do it right, and lay strong foundations, the right people who share your vision will come on board.”
South Africa is a high card-usage market, which is what you need for merchant cash advance products to work. You need to be able to track the monthly income of an SME to determine the size of cash advance they qualify for, and collect the loan repayments through POS (or point of sale) card machines.
How Bertus Albertse Overcame Adversity To Build A R80 Million Franchising Business
This is how an entrepreneur who is still under 30, and who launched Body20 from his living room when he was 24, has built a R80-million business that has just gone global.
- Player: Bertus Albertse
- Company: Body20 Global
- Launched: 2013
- Franchised: 2014
- Turnover: R80 million
- Visit: www.body20.co.za
At 29, Bertus Albertse has built a R80-million franchising business that launched in the US a year ago. He’s been an over-achiever since school, and his approach to business has been no different. Over the past 12 months however, there has been a personal shift in Bertus’ life and mindset. Just over a year ago, he realised that his childhood wasn’t something to be embarrassed about or buried. In fact, the adversity he’s lived through is a big driving force behind a need for control and success.
“It was a part of myself I’d never shared. I didn’t discuss it in school, and once I started training people and then building a business, I didn’t talk about it either,” says Bertus. “
You’re focused on giving people the best customer experience possible, and that means putting your best foot forward, all the time. Admitting you aren’t always sure of what you’re doing, that you aren’t as confident as you look, or that you’ve struggled and needed to overcome real hardships — that’s just not part of the package.”
Bertus is driven — he got good marks at school, was captain of any team he played in, and would train on Friday nights when everyone else was out having a party. This same drive has led him to learn as much as possible about business, and the more he read, the more he realised that one of the things top entrepreneurs have in common is the fact that they’ve shared their stories. Who they are and what they’ve been through are big contributing factors to their success.
“We’re made to believe that, to a large degree, our adversity is not part of what we project to the world. What do you tell a client that walks in, or a franchisee, or someone that has to be motivated on your team — do you tell them the worst part of your journey, or do you share something that will motivate them? This was always my approach. But the more I started accepting my story, the more I realised that the power of my story made me who I am today.
“Books like Simon Sinek’s, Start With Why, and A Storyteller’s Secret have had a massive impact on me. We shouldn’t ignore the fundamental things that have brought us to where we are today. Mindset, willpower, discipline, the ability to pick ourselves up when we fail — these are all critical success factors, and they’re all mental. If you want to build a strong business, you need to start with your mind. You need to know who you are, how you react to challenges, and why you are the way you are. Then you can harness your strengths, and hopefully work on your weaknesses — or at least be aware of them.
“Every time you solve a problem, it makes you realise there’s a bigger problem that you didn’t know you didn’t know. The things that you don’t know hurt you the most. This has been my biggest learning curve with franchising. You might know what it takes you to be successful, but what’s to say what it takes someone else to be successful? You’re now supporting other people who aren’t like you. The more honest you can be with yourself, and the more you can interrogate why you’ve been successful, and what lessons you can share with others, the higher everyone’s chances of success.”
It was within this context that Bertus realised the dangers of being placed on a pedestal. “When your success starts to grow, people naturally want to know more about you. What I found was that I’d been so busy putting my best foot forward, an assumption had grown that I knew everything; that I’d had everything in life, and that this had all been easy. The opposite was true. I knew that if I was going to inspire franchisees to believe in their own journeys, I had to let them into mine. Nothing comes easy. In fact, adversity can often be your greatest gift, provided you know how to harness it.”
With that understanding, Bertus started delving into his personal psyche, motivations, habits and the driving force behind his actions. It’s been an interesting journey, filled with pain and rewards. He now has a much stronger understanding of his personal motivations and actions though, and he’s sharing these lessons with fellow entrepreneurs.
From humble beginnings
Other than a good education, Bertus’s childhood years are characterised by having as little as you can possibly start with. His childhood is shaped by memories of the all-too familiar feeling of a car running out of petrol, or of his mother waking him and his sister up in the middle of the night, so that she could take them home for a few hours before returning them to their 24-hour créche before starting her next shift as a traffic cop. These were all factors that the future entrepreneur buried when he went to school, directing his energy into his studies and sports instead.
“There were so many things we couldn’t control growing up. My mother did the best she could do, but the reality was that we had very little. I realised that control was important to me, and that I could create my own success if I was disciplined, and so I focused on the things I could influence: My marks and how much I trained. I’d grown up watching a level of perseverance in my mom that influenced the way I viewed work as well.”
In fact, Bertus has a keen understanding of the various influences in his life and how they have shaped him. When he was nine years old, his mother married his step-father, and later, in his teenage years, he reconnected with his father. The men are vastly different in the way they view work and success, and yet Bertus learnt a lot from both of them — not necessarily to emulate either of them, but rather in what he wanted from life.
“Both the men in my life had started out without degrees. They worked and studied at night. They achieved success through sheer hard work — and they’d both been indoctrinated to work for someone else, because that gave you stability.”
For a kid who had known very little stability in his life outside of what he could personally control, working for someone else wasn’t very appealing, and his father agreed. “My father realised that if you truly want to be successful, you need to work for yourself. He really encouraged me to be an entrepreneur. One of the first things he taught me was ‘buy low, sell high, collect early, pay late’. That’s how you make money. It’s obviously not that simple, but it’s a good way for you to start thinking about business. I realised that if you’re good at something, don’t do it for free. That’s rule number one. Rule number two is understanding how you generate income and making sure that your income is higher than your expenses. But I didn’t know about assets and balance sheets and how to generate wealth at that point. I was just starting to think about what a business would entail.”
While his father was pro-entrepreneurship, Bertus’ step-father was the opposite. “My step-father is a careful man. He’s got a good job, but he’s also frugal. He doesn’t take risks, and he has no debt. He’ll buy a smaller car, but he’ll pay cash. That’s how he operates. He instilled extreme positivity in us, and always put family first, but watching him made me realise that I’m not risk averse. If anything, I have a high impulse and risk appetite. The combination of these traits can lead you to taking good risks, or bad risks — it’s all about where your focus lies. I’ve always been aware of that and tried to channel my energy into the good risks — areas of my life that I could grow, build on, and hopefully also create an avenue of wealth for others.”
For Bertus, the secret is discovering what motivates you. “I believe in living life to the fullest. I live freely. One of the first decisions I made when I started earning my own money was buying a car I couldn’t afford. This was 150% against the advice of both of my dads — but it motivated me and made me run. I ran for my life. I could have it easier, with less stress — I create stress for myself — but it keeps me focused and driven. There are so many influences around us all the time. You need to find what matters to you. Mostly it’s trial and error. That’s okay. Just keep looking for it — you will find the answers you’re looking for.”
A strong sense of self
Key to Bertus’ journey has been understanding, and to a degree mastering, his own triggers. This isn’t always possible — but the more you understand why you do what you do, the more you can learn to harness that energy.
“I grew up in an OCD household. It was always fine, because I’m also OCD — I didn’t realise how much until I got to hostel and discovered it wasn’t normal to never want to sit on my perfectly made bed, or to shower for 45 minutes or brush my teeth for two hours. Sharing a room with other boys forced me to get rid of some of those habits, and I needed to channel that desire for control elsewhere, so I shifted it to sports and academics.
“This level of discipline is still massive for me, even today. I measure my day on zero to 100 every day. And each new day I’m back on zero — it doesn’t matter how productive I was the day before, or how big a deal we closed. I feel a sense of urgency to make extraordinary things happen today, each and every day.”
Related: Join The Fitness Revolution
This sounds positive, but it has a dark side as well. “If I don’t wake up at 5am to start dealing with emails I feel like I’ve started on the wrong foot, which quickly makes me spiral and feel like a failure,” Bertus explains. “I’ve had to find ways to balance my OCD nature. I can be very disciplined, but if I start spiralling, I’m the most unproductive person on the planet. I need to keep myself in check.”
To find that balance, Bertus has learnt to choose his battles. “I can be very obsessive about one thing, and care nothing about something else. I can’t be obsessed about everything, so I have to choose where my obsessions will lie. I try and make these as positive as possible, focusing on training and supporting my clients and now franchisees.”
Bertus might be OCD, but self-discipline is a muscle just like any other — the more you work it, the stronger it becomes. “For me, it’s all about directing my energies to the right place. For other entrepreneurs, it’s choosing where they can make the greatest impact, and then being consistent in their efforts. Routine is everything.”
Bertus does have a caveat though: “Discipline alone, with no clear direction, can actually be a bad thing. You can easily become too focused on things that don’t drive success.”
24 And taking risks (to reap the rewards)
Bertus has never been employed. He started out self-employed while still at university. He chose to discontinue his studies and dive into entrepreneurship instead, opening a supplements store in Cape Town. “As an underweight kid I’d taken supplements to get my weight up. That, combined with training, was where my expertise lay.”
But Bertus knew it wasn’t enough. “I was just making ends meet. What I had wasn’t a wealth building mechanism at all. I wanted to make a bigger impact in my own life, and in the lives of my clients. I believed a more holistic approach focused on training was a way to do that.”
Bertus wasn’t alone. He was 24 years old, and had a young wife and three children, one of whom was from his wife’s previous relationship. Given the risks involved in trying something new, many people would have stuck with the business opportunity that wasn’t a significant success, but that was paying the bills.
Bertus had different plans. “You need to run for your life,” he says. “That stress, the risks involved — they’re what drive me. I always tell our young trainers that if they really want to be successful, they need to move out of their parents’ homes. The most basic necessities should be at risk. There’s nothing like fear to motivate you.”
With this in mind, Bertus launched Body20 from his living room in 2013. He had
R85 000 in an Allan Gray investment fund that he’d started while he was still studying. He decided the time had come to draw that cash, but it still wasn’t enough. A friend had introduced him to Electro Muscle Stimulation (EMS) technology, and the whole set-up was R220 000. Luckily, this friend believed in the concept, and agreed to invest in Bertus’ business idea. “I paid the loan back within a year, but he was really investing in the purpose, and he and his wife received free training. It was exactly what I needed to get me started.”
From the word go, Bertus understood a key element that would ultimately lead to Body20’s success: When it comes to EMS technology, the tech itself isn’t a differentiator. “There’s no exclusivity,” Bertus explains. “There are multiple tech providers available, and no one holds patents. There were also already competitors in the market, so I knew this wasn’t my competitive advantage.”
What Bertus also recognised was that the players in the market were focusing on their offerings as niche. He believed it could be a more mainstream addition to training programmes, working in conjunction with conventional gym sessions, and to help pro and amateur athletes prepare for big events. He went in with a different differentiator in mind: Service.
“At the time, I just wanted to move out of my living room and into a studio. I had no plans to franchise. I believed that my passion and willingness to serve would set me apart.”
And it did. “My clients saw how much I loved what I did, and they started asking me how I’d started out. They were intrigued by the lifestyle I lived — yes, success was growing, but I was also living my passion. That drew them.”
Slowly, Bertus’ clients started enquiring about franchising opportunities, and the idea started to take shape that not only was franchising an opportunity to scale the business, but it would help Bertus to share his passion with others, empower them and provide them a means to also build wealth.
The shift to franchising
Franchising has been an incredible experience for Bertus and Body20 has gone from strength to strength, growing from one studio in 2013, to franchising in 2014 and encompassing 38 studios in early 2018, including three studios in the US. But there have also been a multitude of lessons for the young entrepreneur to learn.
“Franchising as a growth strategy has never been about the capital — if that was the case, we could be a corporate that raises funds through investors. But this is a service business, and that means you need someone in the studio who is passionate about the business and their clients, and franchising enables that. We want to create opportunities for other people. This means supporting franchisees, and in some cases, even investing in the right operators who don’t have the capital to set up their own stores.”
The shift from studio owner and personal trainer to franchisor has not been without its own significant growth hurdles.
“The most interesting lesson I’ve learnt is that franchising is a completely different business model to operating your own business,” says Bertus. “That’s the problem; there’s no one bridging the gap for you. You can go to a franchise attorney to draw up your franchise agreement, but that doesn’t tell you how to operate your franchise. How do you suddenly put up an operational infrastructure to support other people to be as successful as you, when you don’t yet know what they need? It’s difficult to know what someone else needs in their business, even if it’s the same business that you were in.
“Everyone comes at business from a different perspective. We’re all indoctrinated in different ways. I had momentum in this industry. How do you carry that through to someone else who is a mechanic, an attorney, a teacher, or a CA? What do they each need? How do different studios operate in different areas? There are so many variables to consider, and we didn’t always get them right.”
Bertus understood he knew nothing about franchising — but he had no idea of the lessons that lay in store for him until he took the plunge. “This is the biggest difference between corporate and entrepreneurship,” he says. “In a corporate environment, you get clarity first, before you take action. In entrepreneurship, you only get clarity through action. You only know where you’re going once you start moving — clarity comes from doing.
“When you start taking action, you’re already on the path to finding answers — you’re hitting the problems you’re going to encounter, which gives you the opportunity to find the solutions you need to keep moving forward. You won’t always get it right — the path to successful business is littered with failures, but you can’t overcome obstacles unless you’re encountering them.”
One of Bertus’ biggest learnings has been that effort alone isn’t enough to carry you through. “I used to believe that effort equals success in battle,” he says. “This was my guiding mantra — that if you worked hard enough, anything was possible. Franchising took me from being a sole operator to a business owner, and I now know that effort equals a lot of work and a lot of lessons learnt, but that you’ll still get nowhere if you don’t have a solid strategy in place.
“Success equals strategy plus effort. Busyness and success are not the same thing, nor are busyness and effectiveness. Effectiveness happens when you’re busy with the right strategy. This has been huge for me — finding the balance between strategy and effort.
“In 2014 I used to receive no less than 100 phone calls a day. I had to deal with clients, solve franchisee problems and be available for all the people looking for me hourly. I used to think ‘how do you upscale from this?’ I couldn’t take any more calls and I didn’t have a second of the day to think about anything other than getting back to people. I knew I needed to have those problems — if you don’t, you’re not on the right wicket, but how do you upscale from taking a hundred calls to five calls?
“I once had someone tell me that the day would come when I wouldn’t receive a single call. I just thought they didn’t understand my business. After all, my primary role is sales and marketing — how could I not get that many calls? I still believed that effort equalled income. The moment I started focusing on strategy though, this started shifting. With a focus on strategy came systems, processes, well-documented operations. These all empowered people, and the ‘busyness’ started to fall away. I started to find the time to work on key areas that would drive the business forward. My phone didn’t ring as much, because there were systems and processes in place that meant the entire operation was starting to flow. I’ve learnt that the more successful you are, the less busy you’ll be. This doesn’t mean you work less, just that you do less busy work. It’s replaced with focused, strategic work. When you’re busy, you’re just dealing with what’s in front of you. A strategic focus is looking at three, five and ten years down the line.”
Body20’s next big growth move has been into the United States. “Like any growth strategy, we’ve had highs and lows, and we’ve needed to learn a lot of lessons,” says Bertus.
“The interest and uptake has been incredible, not just within the US, but from local entrepreneurs looking to expand into international markets as well.”
At the time of going to print, Body20 had already sold three franchises in Florida, with another four in the works. These have brought strong capital contributions into the business as a whole, but not everything has been smooth sailing.
“On the one hand, the first store broke even within four months, when our projected time frame was eight months,” says Bertus. “That’s incredible. But we’ve also learnt that no two markets are the same.
“South Africa is geared for business. We love it here. We sell a lease and the studio can be open within three weeks. There’s no permitting, no inspections, none of that exists here. The US on the other hand is an extremely regulated environment. For example, we signed a lease in February 2017, expecting to be open in June and excited about a great leasing deal that gave us four months’ beneficial occupation to set up the store. Except it took us nine months to get up and running.
“In South Africa, this would have taken us under a month. It was an expensive lesson. Not only were we burning through cash, but the franchisee needs to stay motivated while you wait. The project flow and milestones are inherently different.”
From a franchisor perspective, operating across two continents also has its challenges. “We’re essentially selling our time. This is a services business, and our clients are our franchisees. What we didn’t take properly into account when we started was the incredible travel times involved in doing business in the US. It took us 20 hours just to get to Miami, and a further six to California. You have to factor in all that time when you’re planning your schedules. It’s been a huge adjustment.”
That said, it’s also clearly been a rewarding one, and Body20 is still only just getting started.
- Clarity comes from action. You need to start to figure out what you need to do next.
- Success is the result of effort plus strategy. Effort alone won’t get it done.
- Systems and processes are essential if you want to move from ‘busy’ work to strategic work.
Going The Extra Mile With Neil Robinson Of Relate Bracelets
In business, your offering is only as good as your relationships. Neil Robinson from Relate Bracelets explains how FedEx Express has helped the business grow into Africa and beyond.
- Who? Neil Robinson
- Company: Relate Bracelets
- Position: Managing Director
- Visit: relate.org.za
Neil Robinson, MD of Relate Bracelets understands the importance of business relationships. While Relate is a non-profit organisation, it is run like a business. It does not rely on donors, but instead produces and sells a product.
For each bracelet sold, one third of the income goes towards the materials and operating costs, one third supports the people who produce the bracelets, and one third goes to the charity for which that particular bracelet is branded.
In order for the business model to work and be sustainable, Relate’s partners are incredibly important. These include the retail chains that stock the product and who provide prime point-of-sale positioning, the charities who Relate works with, and most importantly, Relate’s logistics service provider, FedEx Express.
“Retail is all about visibility and availability,” explains Neil. “A brand is a living, breathing thing. People can see it, use it, and comment on it, but if they can’t access it, it’s all for naught. And so, at the point of purchase, it’s both visible and available, or it’s not.
“Logistics is key. You need to get your product to the retailer on time, 100% of the time. The expertise and focus that FedEx displays in supply chain and logistics encompasses far more than just retail, they understand our specific needs, making them a strategic partner, rather than merely a supplier.”
Building a relationship
The FedEx/Relate Bracelets relationship stretches back to 2009, when Relate Bracelets launched its first campaign with ‘Unite Against Malaria’ leading up to the 2010 FIFA World Cup.
“We did the first campaign in partnership with Nando’s,” says Neil. “Robbie Brozin was passionate about the cause, and he pulled in strategic partners to launch the campaign. Within two years we’d shipped hundreds of thousands of bracelets. FedEx was an incredible partner, ensuring the integrity of our product and time-sensitive deliveries, and we’ve worked with them ever since.”
As with all good B2B relationships, the FedEx and Relate Bracelets teams understand that regular strategy sessions and updates are important.
“FedEx understands the inner workings of our business,” says Neil.
“A successful campaign has multiple elements, from planning and strategy, to marketing support, pricing and distribution planning. Of these, distribution planning is the most critical. For us, the bridge between our brand and the consumer is logistics. FedEx have delivered beyond expectations. They literally and figuratively go the extra mile for us.”
Protecting a brand
FedEx has customers across different industries and each of their needs are different. In the case of Relate, who operate in the retail sector, buying patterns are important. “Retailers run a tight ship,” explains Neil.
“They have planning cycles and seasons. Besides the fact that penalty clauses are built into contracts, you can’t miss a deadline by two days, or you’re in the next cycle, and that might be two weeks later. Not only are you missing out on valuable shelf time, but this can affect an entire campaign. Lost sales can also influence the retailers’ buying decision the following season. FedEx has made it their business to understand our business, so they know what’s at stake and what’s important to us.”
FedEx has also played an integral role in the overall expansion of Relate Bracelets, particularly into new markets. “As a global organisation, FedEx has been absolutely critical in supporting us to grow our business into Africa, the US, Australia, the UK, Western Europe, and now New Zealand. They play an enormous role in the delivery of our products, with sophisticated tracking systems ensuring that the quality and integrity of our products are maintained.”
Through the relationship with FedEx, Relate experiences the benefits of working with a globally recognised and credible brand. “When you work with quality, you get quality.”
If you’ve ever bought a beaded bracelet that supports a cause (for example: United Against Malaria, Operation Smile SA or PinkDrive), chances are it was a Relate Bracelet. If you bought it at Woolworths, Clicks, Sorbet or Foschini, it most definitely was.
To date, Relate Bracelets has raised more than R40 million, which supports various charities and ‘gogos’, women living on government grants and supporting their grandchildren, and who desperately need the additional income Relate Bracelets provides.
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