Connect with us

Entrepreneur Profiles

Vox Telecom: Douglas Reed

The inside story of how telecommunications entrepreneur, Douglas Reed, believes in generating wealth, not competing for it.

Monique Verduyn

Published

on

Douglas Reed

Economic pressures are set to accelerate convergence of telecoms and the Internet, affecting telecom services in unexpected ways in 2009, according to North American consultancy inCode. That’s good news for Vox Telecom CEO Douglas Reed, who has built a conglomerate that crossed the divide a while ago and is already maximising convergence. An entrepreneur at heart, Reed completed the first year of his BCom and followed this with a job on a North Sea oil rig. At the age of 22 he took over Sandton City Hardware, a career move that culminated with his appointment as MD of Mica Distributors. “I’ve always focused strongly on growth,” he says, referring to his early ability to grow retail stores by between 45% and 50% per year.

One of the first management lessons Reed learnt was that entrepreneurs have to be managed loosely but stringently. “That sounds like a contradiction, but the first MD I worked for was very clear on this. I had the freedom to run my store as I wished, but I was measured on four things – debtors’ days, creditors’ days, stock turnover and profit. Reed realised during these early days that leaders must have good benchmarks in place across all areas of management. “I was great at sales and merchandising, but not so good at accounts. Luckily, I learn very quickly, and my time with Mica Hardware also gave me a solid understanding of cash flow.” In his late 30s, Reed realised that he was wasting his time working for other people. He wanted to go into his own business, but could not afford to start at the bottom. He had also had enough of an industry that was confined to four walls. It was at that point that he got an offer from Control Instruments to head up its IT business DataPro, a company that had provided IT support for Reed’s stores. The incumbent MD knew Reed well and was moving into another area of the group. “I made the decision based on gut feel,” Reed says. “DataPro was a small company at the time, turning over R150 000 a month. I took a salary cut and bought 30% of the business.”
The move from hardware retail to IT was not too much of a leap. Reed had always had a keen interest in technology and had rolled out systems that were ahead of their time in the somewhat conservative hardware sector.

“My goal was to transform DataPro into a national Internet service provider. I took over a company that had no business plan in place. The first three years demanded 12-hour days, six days a week.” In 1998, DataPro launched Internet services aimed at small and medium businesses, and was the first company to offer cheap dial-up-based email. By the end of that year, monthly recurring revenue exceeded R183 000. DataPro had 257 business clients and 51 contract customers. In 2000, it was one of the first ISPs in the country to become cash positive. “This was a big thing for us,” says Reed. “Even when you have budgeted to lose money, it’s horrid.”

Control Instruments, an electronics company that dealt with aviation and vehicle tracking, decided it was time to sell DataPro. “We were not core to Control Instruments’ business, and it would have been pointless for us to remain within the group. This was Internet boom time and I wanted to grow the company.”

Reed approached three financiers. BoE Private Equity Investments took the bait and agreed to fund a management buy-out from Control Instruments. DataPro was sold at a premium: the company was worth R15 million at the time, but Reed and his team paid twice that, recognising the value of a customer base that no other ISP could match. The relationship between DataPro and BoE got off to a good start, with a five-year plan in place that would have seen the shareholders make R50 million, but then Nedbank took over BoE and, as Reed says, their objectives were no longer aligned. “The bank wanted to sell us to the highest bidder and we had no desire to be owned by anyone.” Fortunately, a R65 million offer from MWeb was turned down. But while the bankers focused on the numbers, Reed and his team were looking to the future and the relationship grew ever more tenuous. The company ended off 2001 with monthly revenue exceeding R890 000 and with first-tier ISP status. It seemed there was no stopping DataPro. A year later it was achieving organic sales growth of 218% and launched South Africa’s first SOHO leased line solution. It also switched its international links from satellite to fibre, boosting the speed of its services. Monthly revenue soon exceeded R3,8 million.
In 2003, the company launched a least cost routing (LCR) division, as well as a high speed Internet access solution for the hospitality industry, enabling in-room and wireless connectivity. This was also a year of rapid consolidation and rationalisation in the Internet industry, and DataPro emerged as a strong player with significant market share. In 2004, BoE and DataPro parted ways when the company reverse listed on the JSE’s AltX. Ask Reed what he learnt from the transaction and his answer is blunt. “If you ask for money from a bank, you’re screwed. But if there is no alternative, the best thing to do is hold onto as many shares as possible, and then double the size of the company so that your money doubles, work hard for five years and buy back your business.”

Shopping spree

In 2005, DataPro branded its voice division as Vox Telecom. A number of significant acquisitions followed: WickIT, a regional Durban-based ISP; @lantic, a consumer-focused ISP; Pretoria-based corporate ISP Netralink; Definity Telecom, South Africa’s fourth largest LCR provider; Orion Telecom, the biggest LCR provider in the country and consumer ISPs MJVNET, XsiNet and Shisas. “Every acquisition has been a learning experience,” says Reed. “These transactions have a major impact on both the company being bought and the buyer. Each time we conclude a deal, both sides stop in their tracks for a few months, which costs us a lot of money. It’s vital to plan everything in great detail beforehand so that you minimise downtime. Rather take longer to conclude the deal and have the ability to hit the ground running. When we bought Storm Telecom, we did not have enough time to plan properly and it took four months to get the business going.”

Reed believes in being ruthless. “If the company you take over is your core business, then people are not an issue and we take virtually none of them into the fold; however, if it’s not our core business, it’s vital to buy a company that is well run, which means we bring the people on board.” Having consolidated its position in the market, DataPro became the largest listed company on the AltX in 2007, with a market capitalisation of R2,3 billion. The DataPro Group changed its name to Vox Telecom that same year to re-position it as a full-service telecommunications provider.What kind of personality does it take to build a R2 billion business? Reed refuses to work with people who are not self-motivated and driven. “Experience and education come second for me, because managing someone has to be the biggest waste of time. I believe in strong controls, but few of them.”
This philosophy runs deep throughout the group, with all companies having their own teams and cultures. Some are conservative and process-driven, while others are far more relaxed in their approach. “I make snowballs, roll them down the hill with my team, and then others take over and run with them. Most companies in the group manage themselves, so I spend my time focusing on innovation and getting new ideas off the ground. We introduce a major innovation every eight months; it’s critical in our industry, but I believe it’s a strategy that should be applied everywhere.” Reed says he treats everyone in the business as a partner, and leaves the hiring and firing of people up to line managers so that each employee knows that they will be rewarded or punished by the person who employed them. He believes in continuous learning and reads a business book at least every two weeks. Among his favourite writers is John Kehoe, who appeals to Reed’s naturally optimistic and positive personality. He also enjoys stories about real entrepreneurs, rather than books written by “professional managers”.

Re-Writing the rules: The Vox Telepreneur Story

Reed is sanguine about the fact that all Vox Telecom’s products lose money for the first 12 to 18 months. “Six months before we listed, we went big on uncapped ADSL; we ran it at a loss, but today it accounts for 30% of our earnings. The reality of this business is that you launch innovative products that gain traction over time and then become hugely cash generative.”

That’s how Vox Telecom’s latest offering, Vox Telepreneur, came about. “I always had it at the back of my mind that telcos are particularly well suited to multi-level marketing – telecommunication is an annuity product and it’s basically a necessity,” says Reed.

Then he read Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant. “I realised we were on a hiding to nothing by selling what everybody else is selling. The book got me thinking about how we could differentiate and grow our market share by selling something different to different people.

Because Vox Telecom cannot compete with the service provided by tiny IT companies, or with the products supplied by Telkom, Reed decided to create a market segment that no-one else is in: “I saw that the best way to grow the business is to bring in customers as part of the team and to harness small entrepreneurs. If we could bring them in, we would have an 18-month lead on other companies by the time they caught on. By the end of January 2009 it will be a year since we launched Vox Telepreneur, and it has been our most successful start-up ever, with the customer base growing by 20% a month.” The business model aims to empower entrepreneurs to endorse telecommunication products and services through their own social networks and, in return, have the opportunity to both save on their telephony costs and earn residual income. It’s new in the local market, but has proved to be successful in the US and Europe, with companies like Sprint and MCI (now part of Verizon) having used similar methodologies to achieve great success.
Leverage and community are the two key elements.
Leverage, says Reed, is a particularly powerful method of harnessing entrepreneurial energy to achieve rapid market penetration. By adopting a referral-marketing strategy, Vox Telepreneur is able to achieve lower overheads and do something that no telco has done before – reinvest in its customers. Up to 57% of gross profit is redistributed to the communities that generate it, and up to 43% is redistributed to product-focused resellers such as small IT outlets and PBX vendors. Vox Telepreneur aims to grow its community to more than 300 000 customers by 2010, which will make it the largest reseller of telco services in South Africa.
Vox Telepreneur’s community of customers and dealers are at the heart of the business model. “Telecommunications has entrenched itself in the daily lives of people,” says Reed. But telco costs, particularly in South Africa, are still high. Add to this the fact that debt is rising, disposable income is shrinking and convergence is gaining popularity, and it is clear that there is a consumer need for choice – a lower-cost, cutting-edge, converged, easy-to-use choice.” The growth of this new venture proves one of Reed’s business tenets: “To grow, any business has to improve a little every day. Many become stale after a few years, not noticing that the window display is dusty and faded. To avoid this, you have to constantly keep up to speed with what is happening in your market, understand the latest trends, and know what the theoretical driving forces of the business you are in. Remember that you don’t have to be original; use ideas that have worked in other countries and make them work here.”

Why the listing

Fearing that the company was going to be sold to the highest bidder, Reed and his team wanted to make sure that DataPro remained independent. The reverse listing sped up the move to autonomy.

Reverse listing defined

A reverse listing is a complex transaction that occurs when an unlisted company uses an already listed entity as a vehicle to bring its assets to market. Rather than starting from scratch, the unlisted company sells its assets into the existing listed company. You have to comply with all the same requirements as a totally new listing. The big benefits lie in timing and discussing and transacting with current owners. By using an existing listed entity you have the certainty that you are already listed and you start out with an existing shareholder base. Even with the need to meet the JSE’s requirements, the process does not take as long. The costs of the reverse listing route are similar to those involved in a new listing.

How DataPro did it

The company listed at a premium with Reed and his team buying back the business from BoE and listing it for double the amount the next day. “We were lucky because deregulation had been announced just three weeks before,” says Reed. “We only had to raise R36 million, but because it was a reverse listing, it was expensive and no cash went into the business. Had we not reverse listed, we could have pumped R30 million into the company.”

What was involved in the listing?

Aside from raising the cash, DataPro also had to prove that its expensive shares were priced correctly. The share price ran on sentiment and it ran high. “We had to rapidly grow the business into the rating it had received,” says Reed. “As a result, we had to do exceptionally well just to remain in the same position. That took an enormous amount of time and money. We made a few mistakes which cost us in the short-term, but we also did a lot of things right.”

The pros and cons of listing

“The biggest con is that listing makes the company very visible,” says Reed. “It also means that you are reliant on others, which is not great considering that the stock market is based on fear and greed.” Reed also points out that South Africans view a long-term investment as six months. “That means you have to grow the value of the shares like mad and build a telco at the same time,” he adds. “All the while you are told what your gross profit should be and what is wrong with your business model. Brokers use your price to earnings ration (stock price divided by per share earnings over the previous year), but you cannot be measured by PE only when you are building a business for the future.” On the positive side, Reed and his team would never have acquired the business back without the listing. “Being public property is unpleasant, but we had to do it.”

Monique Verduyn is a freelance writer. She has more than 12 years’ experience in writing for the corporate, SME, IT and entertainment sectors, and has interviewed many of South Africa’s most prominent business leaders and thinkers. Find her on Google+.

Company Posts

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.

FedEx

Published

on

By

relate-bracelets-neil-robinson

Vital stats

  • 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.”

Related: Zenzele Fitness’s Clever Tactics To Grow In Next To No Time

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.”

Supporting growth

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.”

Related: Entrepreneur BB Moloi’s Inspiring Story of Rise To Success Through Grit And Hard Work

The business

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.

Continue Reading

Entrepreneur Profiles

Lichaba Creations Founder Max Lichaba’s Inspiring Journey To Entrepreneurial Success

Max Lichaba finished school with a Grade 10 and no prospects, except for a burning desire to do more with his life than become a miner like all the other men in his community. This is the story of how he started a jewellery business, lost everything, and painstakingly built it up from scratch again.

Nadine Todd

Published

on

max-lichaba

Vital Stats

I grew up living in the garage of a friend’s house in the small town of Virginia outside Welkom. My dad lived on the mines, my mom had five kids and nowhere to live, and he gave us a roof over our heads. It was a mining town, and I was expected to become a miner. But, my mom wanted us to have an education. She never blamed anyone for our situation — she just tried to make a plan. School was one of those plans. But, it needed to be a school close to home, and free — or as close to free as possible. That left only one option: A remedial school in Virginia.

Looking back, it had its pros and cons. I got to work a lot with my hands, and discovered I was really good at it. But the school ended at Grade 10, which meant I would never matriculate, and my maths and language literacy skills weren’t great by the time I left. I was never challenged, and an unchallenged mind doesn’t grow.

I’ve only recently completed some financial literacy courses so that I can run my books and understand my numbers. I’d left that to my accountants, and learnt it’s unwise — you have to be on top of your numbers. I didn’t have these skills from my youth, so I needed to go out and get them, ten years after starting my own business. But, if you’re serious about growth, it’s never too late.

By the late 1990s I was 16, helping my mom sell fruit and vegetables on the side of the road, and my school career was over — but then another opportunity presented itself. Harmony Gold owned the mines in our area and had developed the Harmony Gold Jewellery School to upskill the local community.

I wasn’t satisfied with my Grade 10 qualification. I didn’t want to be a miner, and I wanted more than selling fruit and veg on the side of the road. I knew I was good with my hands, and I saw the jewellery school as an opportunity.

Related: How To Build A Disruptive Attitude

I applied late, but that didn’t stop me. Every day I went to the school, and sat in the waiting room, determined to secure a spot if one opened up. There was one student who hadn’t pitched at the start. I pestered the registrations office to let me take her spot. I was relentless. One day I received the call: “Fine, the place is yours. When can you start?” I replied that I was on my way.

Everyone at the school had completed matric. I was the youngest person in the room with the lowest qualification — but I was good with my hands and hungry for success. Six months later I was one of the best in the class. I spent all my time there, practising and getting better and better at my new craft. I realised that I wanted to make beautiful things I could sell — I was already thinking about a small business.

As we were finishing our course, a local jewellery manufacturer, Regal Manufacturing came to the school and asked for two of their best students. I was chosen, which secured my first job in the sector. The company manufactured jewellery and exported it to South America. With 3 000 employees, it was a major employer in our community, predominantly of women. After nine months, I had the down-payment for my first car, and had just moved into my first flat, when we arrived at work to closed gates. Overnight, and with no warning, the company had closed down. We were all given a letter, stating that we would receive our salaries at the end of the week, and that the business had been liquidated.

Finding a light

max-lichaba-entrepreneurThe women around me — many of whom were the sole breadwinners in their households — were kneeling and wailing in shock. I was also in shock, coupled with a good healthy dose of anger. And then I started thinking. I had no dependants. No children relying on me to be fed. I was 19 and I’d find a job. But what about these women? I couldn’t help everyone, but there were four gogos I knew. In my community, gogos are the backbone of everything. I didn’t hesitate, I just said to them, let’s start something together. Let’s meet at my house tomorrow. We can make this work.

Here’s the problem. A machine costs between R50 000 and R100 000. We didn’t even have R5 000. We needed to start small. Putting our heads together, we realised that the simplest thing — and one we could afford — was beads. We needed to start bringing in cash, and this was the fastest, simplest way.

Between us we collected R1 000 to buy beads and start working from my flat. The local Nigerian market loved them, and then we had a stroke of inspiration — we approached church choirs, offering to make each member a unique set of beads that they could wear at competitions. This became a steady source of income.

We spent 18 months focusing on beads, and then I started looking at our growth opportunities. The business was very hand to mouth — we used our cash to buy more materials. There wasn’t room for expansion, and after a year and a half I wasn’t any closer to buying machines. So, what could we do?

Related: 20 Quotes On Coping With Change From Successful Entrepreneurs And Leaders

After researching SME support programmes, I found SAB’s Kickstarter competition and we entered. We won in our region, and with the R20 000 prize money were able to buy small machines. We didn’t have an innovative business, but we were operational. I believe that gave SAB faith in our business.

Start small, but start — that’s the key. I could have gone out and tried to figure out how to raise R100 000 for fancy machines. I didn’t do that. Instead, I focused on trading — bringing in cash to feed and support us.

The equipment took us to the next level, and I was able to look for our next opportunity, which was a programme run between the Free State Department of Tourism and the Dti that helped local manufacturers market their products overseas. There were many forms to fill in and our capacity to deliver if orders came in was checked, but eventually we were approved for the programme.

We were still in my flat, and we needed more space — but we couldn’t afford rent. We found a tiny shop and convinced the landlord to let us move in, if we agreed to start paying R500 per month as soon as we could. Always ask — you never know what the answer will be. If you’re polite and friendly, people often want to help you — or at least give you the benefit of the doubt.

When everything goes wrong

kwa-lichaba-founderWhile we were gearing up for our first foray into global markets, I concentrated on local growth — and that meant Joburg. I didn’t have a car, and couldn’t afford transport, so I hitched rides, wearing a suit and tie. I had a jewellery business and needed to look the part. I made sure I was always the smartest looking guy in the room. If you take yourself seriously and project where you want to be, others will take you seriously too.

I really struggled to get our jewellery into local stores, but we finished the dti’s six-month programme and were considered export-ready.

Step one was making the products. The African element was popular, so we focused on that. Our choir market had grown, and we were able to use the cash to manufacture more products for export from those sales. Our first trip was to Nairobi and we received immediate orders. Our second was to London, and we realised we were onto something.

The Dti gave us an incredible opportunity. They work on turnovers, and move you into different regions based on your level. We worked with them until 2015, and gained a foundation for growth. They also helped us build up our cash reserves.

At the time, we were exporting our jewellery successfully, we’d won Kickstarter and had deployed those funds into the business. But, I was looking for more. Success makes you feel invincible, and my experiences with the Dti had been positive. Then I found another opportunity: We could open a school, similar to the one Harmony had run, and give youth the opportunity I’d received. The Dti funds initiatives like this, which meant we could give back to our youth, with government support.

I achieved the NQF accreditations I needed, and set up the school at a cost of R900 000. We were told we’d be paid within 60 to 90 days of each student enrolling, and we took the plunge.

But harsh reality stepped in. I took my eye off Lichaba Creations to concentrate on the school at a time when we’d moved into new, bigger premises to handle our increased international orders. The first payments came through 12 months later than expected. Lichaba Creations was effectively carrying the school, and the result was that we couldn’t pay rent for the jewellery business.

Related: Successful People Always Chase the Impossible – Here’s Why

After two months our landlord told us he was locking our doors. I begged him for more time, promising I’d pay him soon. I kept hoping the Dti payments would come through, but they didn’t. I was in Joburg trying to get paid when I received a call from someone I thought was my friend — he was laughing. Our doors had been locked and all my equipment was being auctioned off. I raced back to Welkom but couldn’t stop it. I owed R30 000 and couldn’t pay it. I watched my machines get sold for R300, and I couldn’t even afford to buy them myself.

At the same time, I realised that as I’d built the business, I’d paid less attention to family, and more to friends — and I was learning that they weren’t very good friends. They’d laughed at my fate and told me that they hadn’t expected my good fortune to last. I realised I was surrounded by people who didn’t truly care about me, or believe in me, and some were even satisfied at my loss. It was time for change.

One of the toughest things you’ll ever do

Starting over is one of the hardest things in life. I had nothing, and worse, I’d failed the people I had wanted to protect. They were all jobless, my old ladies and my new staff. The younger staff who hadn’t been with me at the beginning were particularly angry and wanted their salaries. I was devastated.

The one light at the end of my tunnel was the support of my brothers, who came back to Welkom from Joburg to help me. It was a stark and humbling reminder of the value of family. I’d been open and shared my story, asking my friends for assistance. They all said no. I realised these were just ordinary people, and I’d put too much faith in them. My brothers were the opposite. They each took out a R3 000 loan that they couldn’t afford to help me pay my staff and settle some debt. And they did it in faith, believing I would make a plan to pay them back. I would never neglect my family again.

I needed to get back on my feet, and I no longer had a business, or the school. I started by reaching out to my old school — could I teach there? For six months, that’s what I did. I taught and saved every cent I could. I sold most of my furniture, and slept on a mattress on the floor. When I had enough cash in the bank, I started visiting all the pawn shops in Welkom. I knew my equipment was specialised, and I had a feeling that the people who had bought it wouldn’t be able to use it. I was right — I started to find my machines at different pawn shops. Piece by piece, I bought them back.

It took eight months, but I was able to get back up and running — at a very small scale. I worked from my flat, exporting to India and the UK. I was totally focused. I vowed I would never lose sight of my core business again, even if I pursued other ventures.

I finally got the cash I was owed for the school, and paid my gogos’ retirement packages. I then made my second biggest mistake. No matter what we did, we couldn’t get into retail stores in South Africa. There isn’t enough of a funnel for gold jewellery in the local market. But, we didn’t want to admit defeat, and so we opened our own stores in a Pick n Pay centre in Welkom, in Randburg, and in Orange Grove. The money we made overseas went into these black holes — and we did it for three years. Having a personality that won’t admit defeat has its pros and cons. It’s kept me going in the face of enormous adversity, but it’s also sustained me when I should have admitted defeat and moved on. We spent too much on stores for limited returns. Maybe it was because I didn’t want to admit a second defeat so soon after the failure of the school. Whatever it was, I held on too long.

But, you live and you learn. Sometimes you just have to cut your losses and move on.

Starting over and pursuing passions

I wasn’t done trying new things though. I’ve always loved cars. When I was at school, we learnt to fix cars. I’d had this idea for a while: A luxury car wash where you could sit comfortably and eat chesa nyama and drink a beer while you waited. I thought the combination would attract more people. At that stage, we’d closed down two of our Lichaba Creations stores and only had one still operational. I bought a plot on Vilakazi Street in Soweto and started building my dream, brick by brick. It’s a big building, and it took my whole family a year to finish. It was funded through the jewellery business, so we built on and off, depending on cash flow.

I wanted to launch in December, so towards the end of 2013 we all put our backs into getting it finished. My brothers travelled from their homes in Vereeniging every day, and together we got it ready. We opened on 16 December and haven’t looked back.

Related: 4 Success Lessons From The Entrepreneur Who Quietly Grew Pinterest Into A $12 Billion Company

Kwa Lichaba gives us incredible returns. We chose to charge an entrance fee to attract a specific clientele. It was trial and error at the beginning, but slowly we’ve shaped one of the go-to venues in Soweto, with a vibrant, loyal clientele.

We realised we had something worth more than gold: Access to a captive, middle to upper-middle class black market. It took us a year to get traction with the concept, but we now host corporate-sponsored functions throughout the year, giving brands access to our clientele. It’s an incredible model, and one we replicated in Lesotho — my grandmother’s place of birth — in 2016, and this time we didn’t lay a brick ourselves.

Lichaba Custom Rides, a car customisation and sound business, followed, reflecting my passion for cars. We also opened a refinery to recycle precious metals ourselves, so that we can supply the gold we need for Lichaba Creations, which continues to do very well overseas.

I’m in a good place. I know that life — and business — have their ups and downs, and I have no doubt there are more lessons to learn on this journey. As long as I apply those lessons and keep picking myself up, I will always have something to show for my hard work, and a legacy to leave for my children and the people I love.

Lessons Learnt

kwa-lichaba-event

Know your numbers

This sounds so obvious, but I trusted people with my books for years — mainly because I wasn’t financially literate. I reached a point where I would no longer accept that I couldn’t run my own books, and so I upskilled myself. I took business management, bookkeeping and finance courses. It’s never too late to learn something new.

Education is everything

This is one area where I’m lacking. I’m filling the gaps as much as I can in my later life, and determined to give my children a better education than I had. I also want to help other children. Through the Lichaba Foundation, we close Kwa Lichaba on Wednesdays so that we can feed Soweto’s children and gogos in need once a week. We also have social workers and educators on site, to try and do as much as we can. Once a week isn’t enough, but it’s a start — and you always need to start somewhere.

Pay it forward

There are so many people who have helped me over the years. Never forget that you don’t achieve success alone. It always takes a village. I believe it’s our duty to give back if we succeed. We started out making boerewors rolls from the boot of our car and handing them out in townships. Today we have the Lichaba Foundation. We support the children of Soweto, have a magazine that supports local businesses and gives them free marketing, and the Miss Lichaba competition, an annual pageant for Soweto-based teens. The winner receives free university tuition, and is the face of all our businesses for a year. She is also expected to give back to her community, paying the idea of social awareness forward.

Work as a community

All of our businesses operate within a community — which is true of all businesses. You can’t operate as an island, and ignore those around you. And why would you want to? It creates goodwill, a vibrancy that operating alone could never achieve, and encourages everyone to work together towards shared goals.

Look for your own opportunities

When I look back at my life, it was tough as a kid. There was so much pain and embarrassment. Kids laughed at me because I sold fruit and vegetables at the side of the road and went to a remedial school. I was driven to prove myself. I’m a human being and a man. It’s my life, and only I can prove myself. I wouldn’t let my circumstances hold me back. I saw these things as challenges and obstacles I had to face, but also as opportunities. You need to look for opportunity. No one else will do that for you.


Listen to the podcast

matt-brown-podcast

Matt Brown interviews Max Lichaba and unpacks his incredible journey from small-town kid to successful entrepreneur.

To listen to the podcast, go to www.mattbrownmedia.co.za or find the Matt Brown Show on iTunes or Stitcher.

The Matt Brown Show is a podcast with a listenership in over 100 countries and is designed to empower entrepreneurs around the world through information sharing.

Continue Reading

Entrepreneur Profiles

Co-Founder Of DataProphet Daniel Schwartzkopff Talks AI And How To Prepare For The Coming Change

Artificial Intelligence is set to change the way all companies do business, says Daniel Schwartzkopff of DataProphet. Those who don’t prepare for this inevitability right now run the risk of getting left behind.

GG van Rooyen

Published

on

daniel-schwartzkopff

Vital Stats

  • Player: Daniel Schwartzkopff
  • Company: DataProphet
  • Position: Commercial director and co-founder
  • Established: 2013
  • Visit: dataprophet.com
  • About: DataProphet is comprised of a diverse team of skilled computer scientists, statisticians, actuaries, engineers and mathematicians who deliver actionable Artificial Intelligence solutions to organisations.

Can you give us some background on yourself? What sparked your interest in the fields of AI and machine learning?

I first developed an interest in AI and machine learning when trying to build a system to play poker against humans and win in 2011. Subsequently, it has been proven that heads-up limit hold’em poker is a solved game, meaning there are now unbeatable AI bots in this variant of the game.

How did DataProphet come about, and what does the company do?

DataProphet started as a machine learning consultancy in 2013 after noting the lack of such businesses in South Africa. This was at the beginning of the machine learning renaissance — the advent of graphic processing unit (GPU) processing had enabled techniques developed in the 1950s (neural networks and deep learning) to finally become viable. The use of a GPU as opposed to the CPU to perform the calculations necessary for deep learning brought about a 100x increase in calculation speed. This allowed companies and individuals access to the technology that only a nation-state with a supercomputer would have previously had.

DataProphet developed expertise across many industries with a major focus on insurance, financial services and manufacturing and began to develop products. It is now primarily focused on the global expansion and distribution of its Omni manufacturing product that is able to massively reduce defect rates by optimising with machine learning. This software is in production at several global sites.

One of our clients, Atlantis Foundries, the largest foundry in the southern hemisphere has been using our software since the beginning of the year and has achieved a 0% defect rate on shipped parts for several months — a very exciting milestone for us.

Is there a difference between AI and machine learning?

This is a fairly contentious question and largely depends on who you ask. In my opinion, Artificial Intelligence refers to the broader concept of enabling machines to perform tasks that previously only humans would have been able to do. In some narrow applications machines can now perform these tasks much better than humans.

Machine learning is one way to enable Artificial Intelligence and refers to the idea that machines can perform as more than just calculators, essentially discovering the underlying patterns/equations that govern a system just by providing them with enough data.

These can seem like such high-level concepts, so can you give us concrete examples of how they can affect of a business?

All industries will use machine learning as a fundamental part of their operation in the future. For example, machine learning can provide more accurate pricing models for insurance. It can reduce defect rates in manufacturing by predicting whether a part will be faulty, and then adjust the operating parameters to produce less faulty parts in future. Netflix and Amazon use machine learning in their recommendation systems to provide you with content and products that you want and thereby increase sales.

Self-driving cars are entirely powered by machine learning. For retail, machine learning can predict what a customer will buy and generate personalised specials based on anchor items that will draw the customer back to the store. It can perform more accurate demand forecasting than any linear model.

The opportunities for implementing machine learning in business are vast and most of the S&P 500 either have in-house data science teams or are using machine-learning powered products already. The only requirement is data. Data is extremely valuable and generally enterprise-size businesses have the quantity of data necessary to build an effective model.

How will these two concepts disrupt the working environment?

Rules-based professions can and will be displaced entirely by AI systems. Lawyers, doctors, accountants and so on. Jobs requiring empathy and human interaction will be the last to go, along with engineers, programmers and other professions that have a design or management element.

How should companies prepare for the coming change?

Businesses should begin to aggressively store and utilise their data. Machine learning can significantly improve efficiencies in almost all businesses.

In 1965, corporations remained in the S&P 500 Index for an average of 33 years; by 2012 this had shrunk to 18 years. In a single year, Kodak’s net earnings dropped from $1,29 billion to $5 million. All they did was fail to act on a market shift with the introduction of the digital camera. Machine learning is having the same effect on other  industries. Uber’s core business model is based around machine learning and they are effectively shutting down the metered cab businesses in every city they operate in.

Taxi businesses faced no competition for decades and grew complacent and failed to innovate. Now some of the largest cab companies in the world have split up and filed for bankruptcy protection. Lemonade Insurance Company is disrupting the insurance industry with crazy growth figures and much lower pricing because of their use of machine learning and an app to radically change the status quo. This is not the distant future. The time to engage with machine learning is now.

Continue Reading
Advertisement

SPOTLIGHT

Advertisement

Recent Posts

Follow Us

Entrepreneur-Newsletters
*
We respect your privacy. 
* indicates required.
Advertisement

Trending

FREE E-BOOK: How to Build an Entrepreneurial Mindset

Sign up now for Entrepreneur's Daily Newsletters to Download​​