I had always dreamed of starting a business that would enable me to earn a good living and gain financial independence, and allow me to build something that was tangible.
At 26, I was about to go into accounting, when I stopped, took stock, and realised that I wanted my own business. I did not come from a wealthy family. My dad owned a small import business and I had been exposed to the ups and downs he went through. I think that’s what drove me to succeed. When you grow up with limited resources, it makes you want to be able to afford the things that come with money. After school I did an accounting degree. Because I had limited resources I studied part-time through Unisa and was employed as an articled clerk at Pricewaterhouse. I completed the degree, but I did not write the board exams. I was not comfortable in accounting. I’m not saying I was too clever, but I looked around me and realised that I could never fit into that type of controlled and structured environment. It was too restrictive for a young, ambitious guy.
I knew even then that you don’t start a venture unless you are absolutely sure it will consume you. That is the only way to come close to any guarantee of success. And Softline has consumed me. From the start, I have been 120% committed to the business. People say that I am all about work, work, work, and it’s true, although I’ve probably become better at balance over the years. In the beginning I worked six days a week at the office and took my job home on Sundays. That’s a big sacrifice to make, but it’s been worth it. It’s quite hectic to be an insecure overachiever like I was then, but there were definitely some advantages to that too – I just never stopped. That’s what it’s like to be an entrepreneur who is truly consumed by the business. When you work for someone else, you have the opportunity to switch off, no matter how hard you may have to work; when it’s your business, there’s no chance of doing that. But it gave me a lot of fulfilment.
I was too driven to let anything stop me and I knew that I was creating something amazing. If you have a good business idea, get it off the ground, build your reputation, and grow your business by creating a satisfied client base. If your idea is so brilliant, the best thing you can do is invest in it yourself. That’s exactly what Allan Osrin and I did. He was my mate from school and varsity and today he’s the MD of Sage Software Australia and HandiSoft Software Australia. We had no set agenda, but we had a vision – we wanted to build a global company. Allan and I had grown up together. We came from similar homes and were great friends. Because we’d had to make do without a lot of things, we were equally driven to make something of our lives and we had many similar motivators. One of them was the fact that we wanted to make money. Back then, we didn’t have any lofty ideas about giving back to the community; we just wanted to see cash. That was why we agreed to build a business together, and then someone suggested that we go into software support because it was becoming quite popular.
We took a gamble and went to the bank. It was 1988, and the maximum they were prepared to loan us was the princely sum of R5 000, only because we had degrees. We certainly weren’t in a unique situation. Some 90% of entrepreneurs around the world struggle to get funding. There was no thinking about things too deeply; we had to go ahead and work with what we had. We were extremely careful about what we did with that small bit of money because we had to make it work for us, or fail. And failure was just not an option. That’s why it’s vital to have a vision and big ideas. We positioned the company for growth from the start. If you want to be the greatest company, you have to start acting the part from day one. I believe that nothing is impossible if you don’t know your limits. There was no great business plan.
Quite frankly, I did not believe in creating a five-year plan. But we were always chasing the same dream and we were always on the same page. We approached each challenge together as it arose. Because we knew each other so well, it was easy to communicate and to talk informally about problems and opportunities, especially as we were so determined to make the business work. We would discuss our course of action every day, make the strategy changes or adjustments needed to take the company forward, and re-adjust the business model along the way. Although we had no written document, our discussions provided us with a living, breathing roadmap for the business that guided our every move as we went from start-up to an established company. It’s essential to remember how important it is to revisit and re-evaluate your plan – whether it’s on paper or in your head – because that’s what enables you to execute it.
There was a computer distribution company which distributed an accounting package called TAS. They sold a lot of product, but there were few people around to set it up and where there is mystery, there is margin. So we went to them and said, “We know about accounting. You sell the product and bring us in to install it.” We had to work really hard to extract leads out of them, often promising clients that we would do the job for nothing and that they could pay us if they were happy with the outcome. You have no idea how important it is to be convincing. You need to find that one guy who will let you do the work, just so you can get the next one. Eventually, that company became convinced that we were doing a really good job, and we became contracted as their support outlet and installation and training organisation. But from our point of view the business was always vulnerable as we were entirely dependent on them. We had nothing that we ourselves could sell.
Six months after we started the business, Allan and I liked what we were doing and seeing. Sure, we were stressed out and working too hard, but it’s easy to work long hours when you are young. And you have to do that in the early years if you want to make a go of it. That was when we knew it was time to develop something ourselves – a solution that we owned and controlled. We employed a developer and eventually we got a product written for us that we branded Brilliant Accounting (and which later became Pastel). It was an entry-level, off-the-shelf solution that sold for around R1 000, and it complemented the more high-end installations we were doing. We took it to the few stores that had started opening. This was the time of the emergence of the computer retailer – they sold computers, printers and some software, including ours.
We built our reputation slowly, through good work, solid installations, and holding the client’s hand throughout the process. I remember sitting next to clients, one-on-one, teaching them to use the system. We’d bill them as soon as it was up. There was no 30-day invoicing – we had to collect the cash then and there, because we were bootstrapping the business. Within two years, Brilliant became the number two accounting product in the country. We set up branches in Cape Town, Durban and Bloemfontein. None of us were great technologists by any means, but we built the business through marketing. I can’t tell you what a kick it still gives me to see the brand we grew on billboards around the country. Then my brother-in-law Steven Cohen (today the MD of Softline Pastel) joined the business as our third partner in 1990. He’s an accountant who also has a great love for software. He really became the architect and glue behind our solutions. He was always looking at features and functionality, and we always believed that he would build a great product. We had such faith in each other; we did not do anything like a SWOT analysis or any of those other analyses that the business schools recommend.
In my experience, entrepreneurship is natural. People can learn the principles of entrepreneurship, but I think it’s very hard to train someone to be an entrepreneur. To really understand how it works, you have to do it yourself. It’s OK to have a mentor, but I think the most important thing you can do is trust your own gut. That’s what we did. Sometimes we got it wrong, but mostly we were right. I don’t read business books that tell you how to succeed because I don’t think they have any value for me, although many people find them motivational. I enjoy reading the biographies of successful people from around the world. That’s what I find inspirational.
I believe business is one part strategy, nine parts execution. We simply ran the business together on the basis of trust. Whatever we made or lost, we split three ways. There was rarely any jealousy or resentment of any kind. It’s one of the reasons why I cannot emphasise enough how important it is to choose the right partners. It would have been a lot more difficult had we not done so.
Allan handled sales – he was really good at that – he could convince a client to buy just about anything. I was constantly the one marketing the company. My vision for the business has always been five steps ahead of where it actually is at any moment in time. I always keep a close watch on what competitors are doing and I read about what is happening in my own industry and in the broader technological, economic and social environment. It’s critical to observe the world around you and to let those observations inform your goals for the future. You should always continue to build on your vision, but don’t forget that vision without execution is hallucination.
Some good fortune in the mix
Then we had a windfall: VAT was introduced in South Africa in 1991 to replace GST and every one of our clients had to buy our new system. That gave us some capital inflow and enabled us to finance the business going forward. The power of the upgrade has always been a big factor for Softline – when you have thousands of users who have to be upgraded, you automatically have access to cash flows.
At the same time, awareness of the computer was growing, and that worked in our favour too. Those were the formative years of computing. When we started the business, big corporates had huge mainframe systems and their software was developed in-house by their own engineers. For smaller businesses, technology then was mostly about hardware, DOS and word processing. The move from manual to automated accounts was largely by word of mouth – customers would tell their friends that they had bought a computer for their business to run their accounts and they would go, “wow, maybe I must do that too.” The client base just grew and grew. It was a fantastic combination of people and personalities, because we all drove and inspired one another in different ways. I used to be careful about phoning Steven on the weekend because I knew that once I got him going on the business, there was no way he would be able to switch off again. On one occasion during the change to VAT Steven stayed at our office right through the night to make sure the software was bug-free. That’s what you do when you are consumed by the business; there were a number of occasions where we worked through the night.
Together, we aspired to build a great, global company. We were doing extremely well in South Africa and we believed that our solutions could travel. Local technology development in general has been very successful and South African developers have a good reputation overseas. But even more important than that was the drive to build something global. We started with Australia because of the language, and because it was a place in which Allan was particularly keen on setting up a business. We found someone in Australia to sell our products there, but it was a failure as he was not committed and we did not really know how to set up the venture properly. But the important thing is that we always had a vision that we would do something huge. That’s vital – if you can’t see it from the start, there’s no way you’ll get it going. We had lots of ups and downs, and many tough times, but that dream helped us to keep it all together. The fact that we started as a team and we are all still here today as good friends who have built a hugely successful accounting and payroll solutions business is amazing.
We subsequently learnt that the best way to infiltrate an overseas market is to buy existing businesses which already have an established client base. We wanted to be sure, though, that we were able to do something different and better to improve the companies we bought. One of the first businesses we eventually acquired in Australia had a 35% market share. In addition, we were able to develop the next version of its software product far more cost-effectively from our South African research and development resources. The Australian market has turned out to be very good for us, but we made sure that we filled our management teams with Australians, as they understand the mentality and the business ethics of that country. The culture in Australia is very different from ours. It’s a far more regulated society which I find quite controlled, but Allan loves it.
Listing on the JSE
When we listed the company in 1997, I was 34. The technology boom was in full swing and companies everywhere were clamouring for IT stocks. It was a technology gold rush. As Softline’s customer base grew, so too did the industry we were creating in the country. I knew that to achieve real growth and global reach, we had to start buying other companies. To do that, we had to list so that we could get some cash into the business.
I didn’t realise what I was letting myself in for. The listing brought tremendous success to this business. It made Softline what it is today. But with listing comes other hurdles. I think that the JSE should run courses so that companies know what to expect and what will be expected of them. It’s unbelievably hard to move from the private into the public sphere. It’s not solely your company anymore – it has public shareholders and other stakeholders. I recall the time when a Merrill Lynch analyst came to see me; he was asking me about all sorts of facts and figures and I gave him most of what he was looking for, but there were some things I refused to tell him until he pointed out that I had no choice in the matter.
The listing and acquisition strategy worked brilliantly. By 2000, we had bought 35 companies – our policy was generally to buy 100% or nothing – and 60% of our revenues were generated offshore. One of our most successful competitors was a business called Pastel, which we acquired in 1999 for R220 million. It is now hugely profitable and successful under Steven’s leadership. Then in March 2000, the dotcom bubble burst. According to the Los Angeles Times, this wiped out $5 trillion dollars in market value for tech companies.
More than half of the Internet companies created since 1995 were gone by 2004 – and hundreds of thousands of skilled technology workers were out of jobs. Softline’s share price plummeted – even though our profitability kept going up, we were trading well, and the business was growing. We were a great company with great potential and we could not see the benefit of being listed anymore. To give you some indication of the situation we were in, Softline stock had been trading at R12,80 at the height of all the IT hype, but had fallen to between 85 cents and 95 cents by 2003.
The delisting debacle
A management buyout was considered because we felt the market had lost its appetite, and attitudes toward our sector were negative. Two unexpected things happened. First, our shareholders refused to sell their shares back to us. Although we offered a 35% premium to the share price at the time, they were not prepared to accept it because they felt it was not enough, even though the market was not recognising the value of the company. Maybe it’s true that we did not offer a good enough premium, but how was anyone going to measure that? With hindsight, it’s possible that our offer was too opportunistic.
We lacked commercial maturity in the context of the delisting. Second, a hostile takeover bid was launched against Softline by a company based in the Netherlands which was in cahoots with a former employee of ours. They saw the value of the company and that showed that we had become attractive to an international business. To give you an idea of how bad it was, they already owned 15% of Softline and we did not even know it until we learnt of the takeover bid. I had to think about what would be the best thing for Softline. Sage, which supplies business management software to SMEs, just like us, was a much better fit and would also give us global reach. I flew to the UK and met with the CEO of the Sage group. Our businesses were almost identical. They were decent people and had a great management team.
Sage was formed in 1981 and floated on the London Stock Exchange eight years later. They knew all about us and had heard what was going on. They saw value, good products and an equally great management team and so Softline was acquired by Sage in 2003. Although we were unsuccessful at the buyback, we weren’t prepared to give up. We had to make the best of the situation and selling to Sage turned out to be a very positive move for us, something we only fully appreciated later. So we went from being private, to being listed, to being part of a global group. The Sage business model is unique because it could be likened to a federation of companies. It allows individuals to take ownership of the business so that they achieve great results. People need that level of autonomy and independence to thrive – I know I do. But don’t ever believe that selling your company is easy, no matter how much money is involved.
After we closed the deal with Sage I was highly emotional and at first we felt a deep sense of loss. Thankfully, because we had already been listed, it was easier to get used to the idea of being a company that’s part of a worldwide group. Compromises are necessary sometimes in the best interests of the business. Today the Sage group has more than six million customers and 13 400 employees worldwide; it operates in 24 countries including the UK, Europe, North America, South Africa, Australia, India and China. All of our overseas business is under the Sage name, but our South African business continues to operate as Softline because we had already built such a strong brand. The biggest challenge to the group as a whole is how to collaborate better. There is duplication because we are spread so wide. If we manage to get that right, our profits will be even higher.
What the future holds
What drove me in the beginning was the desire to have financial freedom and security. When I started out I wasn’t driven to change the world like some entrepreneurs claim to be, but now that I have achieved some success I like to give back where I can. I continue to look ahead and to see beyond where the business sits today. Your interest should always lie in the future. That is, after all, where you are going to spend the rest of your life.
Softline recently bought 100% of Netcash, which provides secure, online transaction processing services for SMEs in South Africa. The potential synergies between our two businesses are clear. We both serve SMEs and the addition of Netcash’s transaction services to Softline’s products will enable our customers to have access to a broad service offering under a single banner. In addition to that, we have launched Pastel My Business. It’s an online accounting package built on the software-as-a-service model. We have 2 000 users and we are not making any money on it at the moment, but it’s the future of accounting. When the kids of today go into business, they are not going to buy software in a box, they are going to download it from the Net. We are getting ready to take advantage of the fast-growing Internet user base in this country and we will be ready for SMEs when they turn to cloud computing to manage their businesses.
It’s about continuing to focus on what your customers want, which is something we have done really well. It’s what we did to differentiate Softline from the start – always innovate to create new revenue streams and make more money. It’s important to be a visionary like Richard Branson. As a leader, I’ve learnt that you must have the power to inspire others to believe in the same dream – and that the only limit to your impact is your imagination and commitment. Our experience has also shown that to build an industry as we did, you must enlist the help of trusted partners.
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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