- Player: Bevan Ducasse
- Company: wiGroup
- Launched: 2008
- Turnover: R100 million+
- Visit: www.wigroupinternational.com
“I had enough belief in myself to be able to get it right, and I could see it in the eyes of my team that they were hungry for it too. The simplicity of it is that either you throw all the money you’ve already put into the business away, give up and go get a job, or you try a new angle.”
It was 2010, and 26-year-old Bevan Ducasse was about to have one of the most painful conversations of his life. He was meeting with his team — five dedicated, passionate people who had been as devoted to his start-up over the past two years as he had been — and they had some difficult decisions to make.
The problem was that the business they had built was based on some key assumptions that weren’t working out. Bevan had a solution. They needed to pivot, and he had a plan for what they needed to do, and how they could do it. But they’d already put two years of their lives into the company, and they all ran the risk of putting in two more, and still having nothing to show for it.
“We’d gone from an absolute high a few months earlier when I’d paid for my first coffee using the mobile wallet we’d built, to realising that our entire revenue model wasn’t going to work,” says Bevan. “We were too early, and we weren’t going to scale quickly enough to break even. It’s soul destroying. We thought we were going to change the world. We shared a sense of failure because we had failed. But there’s also no point in continuing down a path once you recognise that it’s the wrong path.
“We were all in it together though. Our wins were wins together, and so were our failures. That didn’t make the conversation or the decision to pivot any less painful, but it helped. We were all willing to take the risk and carry on.
“I had enough belief in myself to be able to get it right, and I could see it in the eyes of my team that they were hungry for it too. The simplicity of it is that either you throw all the money you’ve already put into the business away, give up and go get a job, or you try a new angle. I wasn’t certain the pivot would work — this business has evolved so many times over the past ten years that you can never be certain until you try something — but I knew it was worth a shot.”
In fact, not only did Bevan believe in the idea enough to keep pushing forward, but he’d learnt a lot of lessons about what didn’t work, and these were as valuable — if not more so — than learning what did work.
“We’d spent two years learning our market from the inside out and the idea wasn’t the problem. The uptake was there, but not at scale — cash flow was beating us.”
Even though uptake was slow, Bevan was spending a lot of time in front of corporates and large retailers, and it was clear that they all wanted to get into mobile apps, transaction software and mobile loyalty rewards, payments and vouchers.
“In every conversation we had, I came up with ideas and gauged their interest and what they would pay for the solutions we could build for them — and the ideas excited them.”
Cut to Bevan’s meeting with his team. “I still needed to meet with my investors and explain that not only was the business not going to work and we needed to pivot, but that I needed more money to make it happen. I couldn’t walk into that meeting without first getting buy-in from my team. We needed to put our heads together to come up with a solution that I could present to the board.
“It’s important to be as proactive as possible. I owed it to my investors to not just give up. They had taken a risk and backed me, and I didn’t take that lightly. I needed to apply my mind, look at it from every angle and come up with a plan.”
This led to the second most difficult conversation of Bevan’s life — convincing his investors to believe in his new vision. “I presented my business case to them; it was a hard sell, but the choice was simple — double down, or write the previous investment off. They decided to double down.”
Today wiGroup’s turnover is just north of R100 million, the company has enjoyed 50% year-on-year growth for the past five years, other key investors have come on board, including Investec UK and Richard Branson, who is a shareholder in the business through Virgin Global.
Oh, and Bevan isn’t just planning on becoming a billion-rand business — he wants to be a billion-dollar business, and is already opening offices in Mauritius, Amsterdam, and the UK to achieve that goal.
Bootstrapping a business
Even though he had funding, Bevan kept the start-up lean. “I still consider this business bootstrapped,” he says. “Our burn rate wasn’t high, and so by the time we pivoted we’d burnt through R3 million, but we still had R1 million left, and I raised an additional R1 million. With R2 million in hand, we broke even in 18 months.”
Before launching in 2008, Bevan had spent four months raising capital. He’d quit his job in 2007 with enough saved up to pay four month’s rent. If he couldn’t make his idea work in that time, or find an investor, he’d need to give up and find a job.
Just as he was about to run out of cash, Bevan’s network came through and a previous manager facilitated a meeting with UCS (now Crossfin Technology Holdings), Bevan’s first investor and a key shareholder of wiGroup to this day.
“Even though I believe we bootstrapped this business as much as possible, we needed capital to build out our solution. Our first idea was wiWallet, a mobile wallet that linked your credit card to your phone. My idea centred around the fact that the thing we do the most is make payments. I also believed the mobile phone would change the way we did everything, so I thought we should combine the two. SnapScan and Zapper are similar solutions today, but in 2008 there was no iPhone, and we were trying to convince South Africans of a new way of paying that had never been done before. We were just too early.”
Joining Bevan was a friend, Basie Kok, who was building the prototypes. “We needed to develop an application that was secure and could integrate to point of sale software, which would take months and would require other developers as well as marketing capital to let people know who we were and what we were doing.”
Although the business consisted of only four people working out of Bevan’s flat, funding was necessary, and the R4 million he raised was enough if they had an incredibly lean operation.
As it turned out, wiWallet wasn’t the solution everyone was looking for in 2009 (or 2010), but it did give Bevan and his team the foundations they needed to build a B2B business that the retail and corporate sector did need.
“At our core, we provide a transactional layer that people can plug into across the retail, banking, telco and insurance sectors. Anyone launching digital rewards can use our software. They also have access to the 85 000 retail lanes integrated into us, which gives them a network to tap into where their customers can redeem their rewards. Consider Discovery’s loyalty programme, or FNB’s eBucks. Customers earn loyalty points through our software, and can then redeem those points through electronic vouchers drawn from other retailers on our network.”
In other words, wiGroup has the software and the network — but it took time and patience to build, and ultimately needed to start with a single retailer.
There is no magic bullet to signing a deal with a major retailer. It takes hard work, perseverance and knocking on a lot of doors. “I cold called,” says Bevan. “I hustled. I had no contact into any of the big retailers, so I started at the bottom and worked my way up. I called a junior person, secured a meeting, got them excited and slowly moved up the chain. On each step of the journey I was selling our dream and the value we could give them. If you sell your vision hard enough and long enough, eventually customers will start to buy in. It took us two years to get Shoprite and Pick n Pay integrated and live, but that was a tipping point for us.”
Bevan knows that there’s no such thing as an overnight success. “We closed deals with forward-thinking brands like Vida more quickly, and that gave us the case study we needed to show people. From there we built on each success, no matter how small.”
Like many start-ups, wiGroup’s early days were all about hustling. “We didn’t have a clear strategy, even after we pivoted. A lot of what I’ve learnt over the last few years is about focus and productisation, but back then we were just trying to keep our head above water and make money.”
And the business was making money. Within a few short years wiGroup’s EBITA (earnings before interest, taxes and amortisation) was 30%, which is a sizeable margin. The problem was that it was extremely difficult to maintain while scaling.
Bevan found himself in a position many entrepreneurs trying to scale get into: The business was growing and making good profits, but the management team was making bad short-term decisions for the sake of maintaining those good profits.
“This meant we weren’t productising properly, we weren’t servicing properly, and we weren’t beefing up our staff for growth. We were trying to do too many things and it wasn’t sustainable.”
It was at this point that Bevan approached the board and made his case. “As much as I appreciated that we were a growing business that needed to make profits, I felt we were building the business on sand. It needed to be rock. I pitched that we needed to raise additional capital to productise properly. We needed to hire the right people to grow as well. If we wanted to become a billion dollar business, we needed to start building strong foundations.”
The board agreed, and an equity deal was struck with Investec Global UK. “We’d had previous investment offers, but the timing hadn’t been right; now it was,” says Bevan. “We’d grown as far as we could organically, and now needed to formalise the business.”
Some changes needed to be made though. After the mobile payment app, wiGroup was operating like a services company instead of the annuity-income business Bevan had always envisioned. “We focused on mobile, but we would change the product based on what our clients needed,” he explains. So, for example, for Shoprite wiGroup powered all their digital couponing, and for Vida it was all about mobile payments.
“We thought we were productising,” admits Bevan. “For every coupon used we’d receive a small fee, which we viewed as annuity-based income. The problem was that we could only use Shoprite’s solution for Shoprite, because it had been built specifically for them — and that’s not productising.”
If you build it, they will come
Over the past four years this has changed in wiGroup. Since the company’s first big pivot in 2011, Bevan and his team have learnt from their time in the market and adjusted the business accordingly — multiple times.
“We needed to be clear on our niche, which is the rewards and digital vouchering and couponing space. That’s our bread and butter, and we’ve productised it as a Software as a Service. We’re no longer custom building — this is what’s available, and our clients plug in.”
Because they operate in the tech space, wiGroup needs to constantly stay ahead of the curve. “You need to embrace a mindset that understands that everything is constantly changing,” says Bevan. “If your board asks you for a ten-year plan, you need to know that it’s impossible to give one. If we try to look ten years down the line, by the time we get there, things will have changed so much we will be way behind.
“Instead, in the tech space, you have to be flexible and learn to hold things lightly. If something fails, you have to learn from that failure and move forward. If your mentality is that a failure means you’re done, you’ll never make it in this space. I’ve read many, many biographies, and every single one of them discusses failure. All the top entrepreneurs and business people have failed — but they’ve learnt from those failures.
“A lot of business is sticking it out and giving it the time it deserves, and always knowing that you haven’t made it — we’re always looking ahead. Our senior team has four strategy breakaways a year. Every three months the 12 of us meet, not to change our strategy, but to see where we are, and to sharpen the sword.
“We started out as a B2C business. Then we became a B2B business that services consumers; in other words, a B2B2C. We need to understand our client’s needs and what their customers want. We get a kick out of seeing solutions in the market that use our software.”
It’s an important distinction because the pivot in 2011 shifted wiGroup’s revenue model. “It’s easier to generate revenue from businesses and leverage their brand and reach than try to get customers yourself. We needed to figure out who would benefit from what we could do, and focus on solutions that added real value in that space.”
wiGroup’s Transformation didn’t end there, which is why regular strategy breakaways remain so important.
“We need to continue to build world-class software and to keep advancing and staying ahead of the game. That means we need to keep coming up with new innovative ideas. Our original idea was payments. Ten years later, we can leverage that, even though we don’t make money from it. It’s a commodity now — but the value lies in customer engagement, loyalty programmes and vouchering, and the payment functionality supports everything else we do.”
It’s an interesting lesson for other entrepreneurs. “No one wants to pay for payments — ten years ago our whole business model was built on paying for payments. It’s still a crucial element in our business, but not in the way we envisioned. Your business will always be different. You need to keep flexible and innovating while at the same time being focused on core product verticals, that’s my motto.”
In Touch Media’s Margie Carr Shares How She Made An Out-Of-Home Media Agency A Solid Competitor
Out-of-home media agencies are growing and In Touch Media’s Margie Carr is leading the way with an approach that embraces trust, simplicity and the power of networks.
- Player: Margie Carr
- Company: In Touch Media
- Est: 2008
- Visit: intouchmedia.co.za
With content playing an increasingly central role, out-of-home media agencies can no longer just be real estate companies. They must evolve to become publishers. That’s according to a recent article in US advertising trade publication Adweek.
It’s an approach that has worked for Margie Carr, owner and MD of In Touch Media, a business she has built over 20 years in a cutthroat industry. Having gone through several key growth phases, today the company has a level 2 B-BBEE rating, and is accredited with the Association for Communication and Advertising (ACA).
Margie is positive about the future of out-of-home, thanks to the increasing digitisation of the media, consumer demands for responsive experiences, and an explosion of location data.
“Advertisers are fundamentally changing their perception of out-of-home advertising,” says Margie. “Where we have differentiated our services is that we simplify the entire process, from idea to execution, so that our clients can focus on managing their brands.”
When Margie started the business, she had experience as an account manager and copywriter. Initially she was ‘selling out-of-home stock’, but her passion for strategic campaign management got in the way, and the business evolved into a full-service out-of-home media agency. That shift required a change in mindset.
“To book, plan and execute an out-of-home campaign is a much more complex process than selling space,” says Margie. “It was a major adjustment. A tangible product is easier to sell than an intangible service.”
That’s because a tangible product can more easily demonstrate value, whereas with a service, you create a vision and sell the vision to the customer.
“Our promise to the client is that once they brief us, we do the rest. We handle the communication across all the teams contracted into campaigns, keeping clients updated on progress every step of the way. Out-of-home is an extremely complex medium, and knowledge of both buyers and sellers is critical. We have differentiated the business on our depth of knowledge and extensive experience in the market.”
Believe in your employees
Margie admits that one of her biggest challenges was learning to trust employees. It’s a common one for entrepreneurs. One of the key requirements of ‘learning to let go’ is showing your people what it means to walk in your shoes, and to avoid the temptation of trying to protect them from reality.
“Giving employees the ability to see things from your perspective helps to make them feel more like partners, rather than staff who are in it for the salary at the end of the month. This makes it easier to establish trust, and a mutual commitment to the business and its long-term goals.”
Become part of a network
Margie also acknowledges that it’s important to have a professional network. For her, membership of the local chapter of Women Presidents’ Organisation (WPO), of which she is also a founder member, has been beneficial. It’s an organisation for female CEOs and managing directors, and the South African chapter, launched in 2008 by Anni Hoare, is the first to be established beyond North America. Margie credits the organisation with empowering her to grow her company.
“The WPO aims to accelerate business growth, enhance competitiveness, and promote economic security through confidential and collaborative peer-learning groups,” she says. “For me it has been a platform to learn from, and to be inspired by and work with incredible people who are determined to succeed.”
As an entrepreneur, she points out that you do not have a board that meets regularly. Instead you are expected to have all the answers. With a dedicated board, you have people who are focused on what you need to be successful, guide you on the risks you should take or avoid, and can help you to achieve your long-term goals and strategic objectives. Boards expand networks, promote accountability, and give a company a level of credibility that is reassuring for customers and employees.
“In the absence of that, membership of a powerful network can make all the difference. Having the ability to meet with fellow entrepreneurs once a month, to work through different sets of challenges together and come up with creative solutions, is a proactive learning experience that really helps you to grow as a business owner and leader. It’s an opportunity to come to grips with your own strengths and weaknesses, and to understand the value of high-level advice.”
Simplicity is the key to success
Ken Seagall, author and former Apple creative director, said ‘The most important thing we do is give people a simple solution, so they can do amazing things.’ The connection between simplicity and success has contributed to the success of In Touch Media. Keeping it simple has been a guiding principle for the business.
“We had to make changes to our systems to make them more client friendly as the out-of-home environment evolved. In some instances, clients are required to sign more than a dozen different contracts with diverse providers — we have streamlined our processes so that clients sign one agreement with us and we manage all the suppliers.”
The future is digital
Looking ahead, Margie expects ongoing change with the growth of digital out-of-home. PricewaterhouseCoopers (PwC) valued South Africa’s out-of-home market — the biggest in Africa — at R4,4 billion in 2016, with growth of 2,7% forecast over the next five years. More than a quarter of the country’s out-of-home revenue is now sourced via digital screens. UK research has shown that digital out-of-home reaches 92% of Londoners.
“There are exciting times ahead. On average, out-of-home super-users increase profits by 26%. Consumer trust is a key element, and familiarity nurtures trust. A consumer passing your ad every time they go shopping will develop confidence in the brand. They see you are here for the long haul, and that you have confidence in your brand.”
The House That Moladi Built – How Challenging Traditional Building Empowers Local Entrepreneurs
Hennie Botes is a true entrepreneur — through a combination of passion and resilience, he has pressed on despite challenges, developing an unrelenting ability to sell his vision, and execute it. His goal has always been to use the technology he created — which challenges traditional building techniques — to empower other entrepreneurs.
- Player: Hennie Botes
- Company: Moladi
- Est: 1986
- Visit: moladi.co.za
South Africa has a housing backlog of between 2,5 million to three million and it’s continuing to grow. The country also has a persistently high number of unemployed people at 5,98 million, according to the latest numbers from Stats SA.
One entrepreneur who is committed to helping address both crises is Hennie Botes. A toolmaker by trade, the Port Elizabeth-based founder and designer of construction system Moladi developed this innovative building technology as a means to address many of the cumbersome and costly aspects of conventional construction methods, without compromising on the quality or integrity of the structure. The system replaces the bricklaying process with an approach similar to plastic injection moulding.
Founded back in 1986, when Hennie first realised how difficult it was for the poor to get good quality housing, his solution was the development of a whole new building system, which he named Moladi. The company has been in existence for more than three decades, and exports to 22 countries around the world.
“I built the first house based on the Moladi system in Benoni, in 1987,” Hennie says. “Substandard craftsmanship has resulted in South Africa’s poor living in inferior housing structures. I wanted to fix this problem, and I wanted to show people that the concept I had developed actually worked in real life.”
Like many truly innovative entrepreneurs, however, he discovered that a brilliant business idea is no guarantee of success. Converting an idea into a reality (regardless of the required investment of time and money) is never an easy task. In fact, it can be extremely difficult.
“I was naïve to think that a phenomenal breakthrough in the way we build houses would have people beating a path to my door, but academics and politicians speak different languages from entrepreneurs. I discovered that the saying, ‘Eat the elephant one bite at a time’ really does apply to entrepreneurship.”
Related: Construction Business Plan
Hennie learnt that you have to believe in yourself enough to handle the consequences of your decisions. “When you take on the responsibility of developing something that had not existed before, you become accountable. To turn that opportunity into a reality, you have to believe in yourself 100%. Great ideas fail because the unexpected challenges become more than you think you can handle, and the risk is that you lose the belief in yourself to see things through all the way to the end. In many ways, it’s like competing in a triathlon — you achieve one goal, and you have to move on straight to the next one.”
Hennie says his goal is not to enrich himself, but to use his technology to help empower other entrepreneurs. His methodology has been used to build thousands of houses all around the world — from Mexico to Sri Lanka. Today, Moladi exports to multiple countries, including Mexico, Trinidad and Tobago, Panama, Nigeria, Ghana, Tanzania, and Kenya. Moladi recently built a showhouse for a low-cost housing development in Trinidad and Tobago — the structure went up in 12 days. Another big win has been the construction of the 1 600m2 Kibaha District Courthouse in Tanzania. It was built in six months, at a cost of 4 250 per m2, which is less than half the cost of a conventional building. In Mauritius. the technology is being used to build 2 000 low-cost homes on 250 acres of coastline.
“Despite the housing backlog in this country, what has sustained my business over 32 years is the work we have done beyond our borders,” he says. “But that is changing. Earlier this year we were contracted by the Western Cape Department of Education to build four classrooms in Philippi, as well as a double-storey building with eight classrooms in Robertson. We completed these projects in a record four months, at a third of the price. Usually, the construction of just one classroom can take between four to six months. This kind of government project is exactly the foot-in-the door that Moladi is after. The Western Cape has to build 20 schools a year to provide for its growing population.”
Moladi provides training in the construction of its houses and licences people who finish the course to build Moladi houses. Training is free, but trainees need to pay for the moulds and admixture. Licensees are supplied with viable business plans to help them secure loans for their start-ups. Hennie has a vested interest in the success of the licensees, since poor outcomes reflect badly on the business. He also prefers working with cooperatives rather than individuals, as it means that people will check up on each other. This is especially important when it comes to cash flow. Many new entrepreneurs fail, he says, because they splurge on cars and cell phones instead of the must-haves required to make a business grow.
Hennie has kept his team small. Low overhead costs have enabled Moladi to remain profitable in the low cost housing market. Companies with high overheads simply cannot compete in this small-margin, big-volume space.
“The real market requires a vast amount of homes below the R500 000 range, and that’s where our focus lies. Also, I did most of the work alone for many years after I started the company. These days my daughters, Shevaughn and Camalynne, are key to the successful running of Moladi and they fulfil vital roles. We outsource work to keep overheads down and have very good relationships with various suppliers, building experts, engineers, town planners, architects, and funding institutions. Our biggest differentiator is the pride we take in our ‘land to stand’ approach’ — we are a one-stop-shop for home building.”
His goal now is to find ways to work together with organisations like the National Development Plan (NDP) and the National Youth Development Agency (NYDA). Hennie refers to his customers as partners, which forms part of his holistic approach to construction. Typical clients include private construction firms and property developers. Governments can often play indirect roles, as they would usually contract state-funded housing programmes through the tender process.
“I believe we need entrepreneurship that looks beyond spaza shops, hairdressers and car washes,” he says. “There is an enormous and pressing need to provide dignified housing for South Africans, and to address our appalling unemployment levels. What better way to begin to do that than by using accredited, affordable technology that can achieve both goals at an accelerated rate? Moreover, to fulfil the supply chain, work would be provided for painters, plumbers, electricians and roofers.”
The Moladi building system uses a removable, reusable, recyclable and lightweight plastic formwork mould, which is filled with mortar to form the wall structure of a house in only one day.
Hennie describes it as the ‘Henry Ford’ of mass housing. “We produce components and products that reduce the cost of building, and we work on a production-line basis, from production to homeowner, bypassing the middleman in the supply chain.”
The process involves the assembly of a temporary plastic formwork mould, the size of the designed house, with all the electrical services plumbing and steel reinforcing located within the wall structure, which is then filled with a specially formulated mortar mix to form all the walls of the house simultaneously.
All the steel reinforcing, window and door block-outs, conduits, pipes and other fittings are positioned within the wall cavity to be cast in-place when filled with the Moladi mortar mix. The mix is a fast curing aerated mortar that flows easily, is waterproof and possesses good thermal and sound insulating properties.
Swipe Successful – How Sureswipe Scaled To A R250 Million Turnover
Here’s how Sureswipe cornered a niche market with limited funding and continues to enjoy double-digit year-on-year growth.
- Player: Paul Kent
- Company: Sureswipe
- What they do: Sureswipe is one of South Africa’s first card Payment Service Providers (PSPs), established to make card payment acceptance easy and accessible to all independent retailers and service providers.
- Est: 2008
- Turnover: R251 million
- Visit: sureswipe.co.za
Four years ago, Paul Kent received a Request for Proposal (RFP) from a tier one retailer. He ran around the office high-fiving everyone. Sureswipe had made it. They were officially on the map.
Two days later, Paul and his COO, Richard Flack, turned the RFP down, choosing not to pitch for the business, even though it would have been a huge deal if they’d secured it. It took two brutal days to make the decision, but ultimately, Paul and Richard understood that sometimes you have to say no to business, particularly if it doesn’t align with your vision.
“I was so excited, but Richard immediately said, ‘let’s think carefully about this before making any decisions,’ and so we did. We went back to our vision to make card acceptance easy and accessible for all independent retailers. The more we thought about the RFP, the more we realised that we’re not geared to service tier one retailers. Our team has a deep connection with independents. That’s who we want to support and where our expertise lies. Our business model is geared to support that market sector. Extending our focus to tier one retailers would require a change in our business and a new division to service them. It wasn’t the right move for us.”
Paul learnt what many successful entrepreneurs before him have discovered: In business, what you say no to is as important as what you take on. The more focused you are and the better you understand your core customers, the more successfully you will service them. That’s the foundation of a sustainable, high-growth company.
It took Paul and his team five years to get 3 000 Sureswipe card payment machines into the market. They were growing rapidly by the time they received the RFP. Today they have 10 000 devices in the market, and expect to hit 30 000 within three years. The business has grown 30% in the last year alone.
Here are the lessons Paul has learnt since launching Sureswipe in 2008, from the leanest way to start (and run) a business, to minimising customer churn and maximising market loyalty.
1. Launch a solution, not just a company
The idea for Sureswipe was born inside Healthbridge, a company that processed claims between doctors and medical insurers. It was the mid-2000s and medical aids were changing. Where previously doctors submitted directly to medical aids, co-payments and limited annual benefits compelled medical practices to start accepting cash and card payments.
Sureswipe was launched as a division that supplied card payment machines to support this shift. Paul, who was heading up the business development key account team at Healthbridge, realised that there was a much bigger market that needed a value-for-money, high service level card payment solution, and that was independent retailers.
“Growing up in the UK, I spent a lot of time in my grandfather’s fruit and florist store and in high school I worked weekends at a local clothing retailer. As a result I understood the challenges of retail, particularly the time-bound administrative burdens,” he says.
Paul researched the market and developed a value proposition based on two key factors. First, although paying for payments is a grudge purchase, particularly for small, independent retailers, cash-based businesses that adopt card payments typically experience a 50% increase in monthly turnover. Second, independent retailers with point of sale (POS) machines were paying a 5% transaction fee, while those that hadn’t adopted POS systems weren’t the core focus of banks. Paul found a frustrated customer base eager for an alternative service provider.
“Most retailers either thought that card payments were too expensive, or that they could only access POS machines through their banks. They’d often wait up to 30 days for a machine, and if it broke, it would be another week before a technician came to fix it. At that time, the large banks weren’t geared to service that market.”
With a clear value proposition in mind, Paul convinced Healthbridge to ring-fence Sureswipe and launch it as a separate business. In October 2008, Sureswipe opened its doors with Heathbridge as the majority shareholder. The business model had two core focuses: Converting cash-based businesses and switching independent retailers who already had POS systems but were dissatisfied with their current service providers.
“We were strategic in picking the right market, but luck also played a part,” says Paul. “When we entered this space, a similar company was launched to focus on tier one and two retailers. But, the banks were highly competitive in that market segment and new entrants found it difficult to compete. We targeted a market that was largely ignored and today, 70% of our business is from single-store owners.”
While they were fine-tuning their offering, Paul and his team found that their customers were so grateful for an alternative solution that they tended to forgive start-up wobbles as Sureswipe found its groove.
Stress-testing your business
In the early days, the Sureswipe team leveraged its relationship with Capitec Bank to secure meetings and make sales. “We’re not a bank, so we need a banking sponsor to help us meet regulations and operate within this market,” explains Paul. “When Capitec secured its licence to do merchant acquiring, they had no customers and were developing their product in-house. They were also looking for a distribution partner. We aligned Sureswipe with Capitec as our sponsor and provided them with a distribution partner and a solid footprint in the medical market — it was a perfect solution.”
When you’re dealing with people’s money, you need a strong level of trust, so the relationship with Capitec was essential while Sureswipe built its own brand. “It wasn’t always easy,” says Paul. “We had six people who went from retailer to retailer explaining who we were and what we did. At one restaurant, two off-duty cops heard one of our reps and decided it was a con. They arrested him and he called me from the back of the police van. I had to convince them that we were a legitimate business before they’d let him go.”
After five years, Sureswipe and Capitec found that they were competing with each other. When the contract came to an end, both parties decided not to renew it. But Sureswipe had 3 000 devices in the market, all of which were on Capitec’s technology platform. By not renewing the agreement with Capitec, Sureswipe needed to recontract all 3 000 of their customers. It was a massive project.
“It was also a huge lesson for us, and I’m glad it happened when we only had 3 000 machines in the market. We realised the risk in working with one bank, particularly because the technology that processed our customers’ payments wasn’t our own. We needed to licence our own technology and develop a dual sponsor system to mitigate this risk.”
The entire project took more than six months to complete. “People in the industry were sceptical — a project of this scope had never been done before,” says Paul. “We started with a small, ring-fenced team. By the end of the six months every employee was working on the migration of customers onto the new platform.”
The lesson: There will always be challenges, particularly during growth phases. Stress-test your business as much as possible. The earlier you spot a potential risk or problem, the sooner you can address it and implement a solution, even if it means adjusting your business model.
To stress-test your business, ask yourself these four questions regularly: What happens if everything goes right (ie, we grow too fast)? If I remove one piece that’s central to the functionality of my business (this is what Sureswipe faced), what happens? Is my business valued (ie, do you know if your buyers love you and why)? What’s the worst that could happen?
2.Variable cost models keep businesses lean
One of Sureswipe’s success factors is that its product isn’t cutting edge — what the business does is not unique, and the technology is available to be licensed. Nothing had to be built from scratch.
This allowed Paul and his team to launch the business with a variable cost model, outsourcing sales, the call centre and even their technology.
“The biggest outlay was the initial investment into the product, funded by Healthbridge, but within a year we were cashflow positive,” says Paul. “We’ve been funding ourselves organically ever since.”
At the time, launching the business wasn’t a big risk because it didn’t involve a huge upfront investment. Healthbridge was happy to see where it went. Paul and his team of eight kept costs down and slowly built up the business to the point where it became bigger than its initial shareholder.
“It was the ideal business model to start with. Don’t try to build the biggest — do the minimum required and don’t use a lot of capital. If you use a lot of capital upfront shareholders will put you under immense pressure. We were under no pressure. We weren’t drawing anything; we were just a little side thing that may or may not work.
“We were the first mover in this space in South Africa, but everything we do has been done somewhere else. The machines are sourced from a few companies in the world that manufacture them. The mPOS machine is licensed from a company in Iceland. Software is licensed. Everything Sureswipe needs exists — it’s just a case of sourcing it and building a solid service-delivery business around the tech.”
Without the burden of heavy research and development and other start-up costs, Sureswipe channels all internally-generated cash into finding ways to do things better and faster for their customers.
“Today fintech is a buzzword. Disruption within the financial services sector is expected. Ten years ago, fintech wasn’t even a word. Everyone thought you could only deal with banks.
“What we had going for us when we launched was our card machines. People understood them so we didn’t need to educate our market on what we did. We just needed to make them aware that there was an alternative to banks, and because we focused on an untapped market, there weren’t really competitors in the space. We weren’t trying to bring in new technology like mobile payments. The market wasn’t ready for that in 2008.”
Sureswipe launched with traditional stand-alone card machines, followed by Integrated payments for larger retail franchise stores, mobile MOVE card readers for businesses on the go, and Sureswipe POS LITE, an app-based point-of-sale software for start-ups and smaller retailers.
“When it came to mPOS, we were happy to be followers. We had a product ready to launch, but we made the decision to wait for the banks to launch their offerings and educate the market first. We were then in a perfect position to be fast followers — without needing to educate the market ourselves.
“It was a strategic play and it worked for us. We’ve also had good growth in our MOVE product and we’re doing the same with QR code payments. There have been trailblazers in the market who have done phenomenally well, but they operate on separate platforms. We can now offer a QR code that accepts almost any QR Wallet.
“On the other hand, a peer-to-peer mobile wallet was developed within Healthbridge that never gained the traction needed for success. It was too early for the market and deep pockets were needed to fund the business. The business had a great team that worked on the project and Sureswipe benefited from accessing them.”
Today, Sureswipe has integrated many functions that were previously outsourced. “Our variable cost-model allowed us to enter the market without huge financial backing, but where it’s made financial sense, or it offers us a strong competitive advantage, we have brought services or products in-house.”
3. Understand — and leverage — your competitive advantage
Since entering the market ten years ago, transaction fees have more than halved. This is good for retailers, but it makes the space more competitive for service providers who must maintain quality products and service as profit margins narrow.
Sureswipe’s value proposition is captured in one sentence: They come for price, they stay for service. “Everything we do needs to adhere to that,” says Paul. “We need to bring technology to market at a lower price point than incumbents are offering, and then secure customer loyalty with our superior service offering.”
Within an increasingly competitive space, Sureswipe is not always the most cost-effective solution in the market, but a focus on service and convenience means that retailers are willing to pay a premium if the offering is good for their business.
“Our focus is value for money, not price. Retailers want to be able to accept any legal currency from their customers. As a service provider, we needed to figure out a way to do that in the most cost-effective way possible, without increasing our administrative burden as the business grew. With its low margins, this business only works at scale. If our internal costs escalate with each new user, that’s not a scalable business.”
So, what is Sureswipe’s competitive edge? “We’ve always understood retailers,” says Paul. “Their biggest burden is time — they never have enough of it. If you have an unreliable product, or an administrative burden, you’re essentially losing time and revenue.”
This was the business’s entry into the market, but growth has been the result of continuously fine-tuning Sureswipe’s offering based on its knowledge of customer needs. “The more time we spend understanding our target market, the more we’re able to recognise their pain points. Everything we do is focused on simplifying the lives of retailers and helping them to grow their businesses.”
In a highly competitive space, you need to create an edge for yourself. Some businesses create a moat around the business with tech, but often there is a competitor who can do things faster and cheaper.
Successful companies find a different competitive edge, one that focuses on delivering value to the customer beyond the product.
Sureswipe has a two-pronged approach. First, convenience and simplicity are a must — if Sureswipe isn’t making the lives of its clients easier (and more convenient for their customers in turn), then the business isn’t living up to its core values. The second is keeping costs as low as possible. Sureswipe needs to be able to offer its products and services to the market at highly competitive prices. This is only possible if the business has lean operations and is scalable.
So, how have Paul and his team managed to offer exceptional service while keeping costs low? “You need to sweat the details,” he says. “This landscape has become increasingly competitive. Banks have caught up to us. An independent retailer can pick up the phone and the bank will send someone the following day to chat to them.”
To counter competition, Sureswipe focuses on service and cost to serve. It’s one thing acquiring a customer, it’s another keeping them, and this has been where Sureswipe’s team focuses their passion and energy.
“We’ve found that complex structures hinder service levels and so we’ve kept our structure flat. Our internal culture is extremely important for customer service. Hiring the right people who are passionate about retail and business means we are able to service our clients better. We care about their businesses. 86% of calls get resolved by our call centres. If they can’t solve the problem, a technician is sent to the store to fix or swap a faulty machine.”
From a cost perspective, Sureswipe needs to continuously get to market cheaper than before, while simultaneously offering products that are better, more seamless and more integrated into the business.
“There is always an initial cost when introducing a new product, whether it’s a device or an app. However, each new offering increases our clients’ revenue, which in turn increases our revenue. Scale is critical — we’re in the red until we achieve scale.
“We’ve had to be ruthless about achieving great service levels at low costs. We don’t believe in either low cost or good service — we need to deliver both. If something is too expensive for us or our clients, we either don’t do it, or we find a more cost-effective way to bring it to market.”
4. Ensure you have a ‘stickiness’ factor
One of the dangers of a highly competitive market is that it’s simple for customers to switch service providers if they are only looking at price. If a retailer only has a POS machine with Sureswipe for example, it can be swopped out for another device. With this in mind, Paul started looking at value-added services that increase brand loyalty and reduce churn.
“We call it preventable churn,” says Paul. “If business owners have a POS device and take just one more product from us, the stickiness factor is exponential. This can include a cash advance product, or creating a gift and loyalty programme through our platform, or both. As a business owner you can still switch to another service provider, but it’s more complicated and you’re receiving a bundle of services that all add value to your business.”
To achieve this, Sureswipe has partnered with Retail Capital to offer its customers cash advance products, while a loyalty programme allows consumers to swipe their loyalty cards and gift cards at all Sureswipe terminals, accumulating points.
“We’ve seen a small increase in revenue since we added these offerings, but more importantly, our customers’ revenues have increased. For example, if someone has a gift card, they will generally spend a bit extra in-store as well. Our merchant discount fee means we offer these products to our customers at a low cost, but our churn rate has lowered by 70%.”
Everything Sureswipe introduces to the market is based on a long-term view. “We offer a commoditised product and so our success relies on scale and volume. As long as you can do that at the right cost, with the right returns, you have a sustainable business. These extra products reduce churn, solve pain points for our customers and in the long term will increase our revenue.”
Paul’s long-term focus is consolidation. “We’ve been in this space for ten years, we have a great customer base, and we believe that we can consolidate our market. Our long-term view informs any decision we make about acquisitions or mergers.”
In 2016, Sureswipe acquired Concord, a company running software that integrated banks with retailers’ till systems.
The acquisition enabled Sureswipe to reduce costs by offering customers one point of contact for their POS system, tills and the processing between the two. “It removes complexities from the value chain, reduces costs and reduces retailer admin.”
With new generation mPOS offerings encroaching on Sureswipe’s standalone devices on the one side, and Integrated payments on the other, Sureswipe is effectively cannibalising its own market, but as Paul is quick to point out — that’s the idea.
5. Always look to the future
Sureswipe’s potential is huge. With 10 000 devices in the market, the business will facilitate R10 billion in transactions this year alone, which accounts for only 6% of its target sector, 2% overall, and 1% if you consider that the biggest competitor to electronic payments isn’t other service providers or banks, but cash.
“Markets change and adapt, particularly in this space where there has been incredible innovation and growth over the past few years. We know that in the long run, if we want to sustain growth, we will need to cannibalise the stand-alone devices, which we’re already doing. Ultimately though, what we really want to bring to market are products that can compete with cash.”
According to Paul, everything comes down to two things: Convenience and cost. mPOS is a lower cost option; contactless payments are all about convenience. Sureswipe needs both — and to keep looking ahead to see what’s next for their market.
“In the UK this year, for the first time, there were more electronic payments than cash, thanks to the convenience of contactless purchases for small ticket items. This is a big driver for us.”
To stay ahead of the game, Paul focuses on the business’s capabilities, and his own. “I need to pay attention to what’s happening internationally and how we can adapt our product offerings based on international innovations, but I also need to continuously focus on personal growth.
“One of my biggest fears is that the business will outgrow me. It’s a common founder’s fear, and for good reason. Many founders are great at launching businesses, but they don’t possess the skills the business needs to grow.”
To avoid this pitfall, Paul has consciously developed his business acumen over the past 15 years, beginning with Wits Business School’s Management Advancement Programme in 2003, and completing his MBA in 2015 through IE Business School in Madrid.
“I think it’s essential for all entrepreneurs and business owners to keep the pencil sharp and learn as much as possible. If I reached a stage where I didn’t think I was the right person for this position, I’d step back. We’ve built a team to complement each other; I’m not a details guy, but someone who is can fill that role. Part of my journey has been working my way out of a job by bringing in someone who can do what I’m doing, and often they do it better than me.
Become an expert in a niche
Our focus on the independent retailer space has given us a deep understanding of our customers and their needs. We’ve had international companies that are interested in acquiring us state that companies in other markets don’t have our level of understanding for each element of the business.
Look at problems with fresh eyes
We were naive about banking and financial businesses; we’re more retailers than bankers. This meant we didn’t have legacy systems when we launched, which allowed us to look at the independent retail sector without preconceived ideas and ask: What does this market need and how can we service it?
Always seek to remove pain points from your customers, no matter how small
In our sector, as businesses grow, their owners go back to the bank each year to renegotiate their fees. We removed this administrative burden by signing them up on a sliding scale, and as they grow, they automatically move into new segments and their fees drop — both new entrants and incumbent banks have copied this pricing model.
Understand where you’re innovating and why
We knew we didn’t need to innovate on the tech side. Everything we needed existed, and it was far more cost-effective to licence products than build from scratch. Instead, we innovated around our business model and service offering.
Everything starts with your people
Our employees are friendly and helpful, even though we now have a staff complement of 139 people. We foster a passion for learning, promote from within, where possible, and champion a can-do attitude. We’re a service-based organisation, which means everyone’s visions need to align with our service goal.
Pay attention locally and internationally
Read a lot, find out what’s trending, be well networked and have associations overseas. For example, Mastercard and Visa let us know what’s happening in other markets. We’re not at the forefront of technology, but we need to know what’s happening with technology to be able to follow it.
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