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Rico Wessels and Christopher de Bod Broke all the Rules

No business plan, no strategy, no market research and no cash in the bank = a R100 million business. Here’s how they did it.

Nadine Todd

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Wessels-and-Christopher-de-Bod-Successful Entrepreneurs

Rico Wessels and Christopher de Bod are not your typical entrepreneurs. For one thing, they didn’t dream of starting their own business.

When they finally did launch their company, PHAT Brand Activation in 2008, they went from an idle discussion about starting something of their own instead of building other people’s businesses, to resigning, to start-up in two weeks flat. They also broke all the rules doing it.

Every business book, coach and expert will give you the same start-up advice: Have a business plan, develop a clear strategy, have a structure in place, do market research, and have some cash in the bank. Wessels and de Bod had none of the above.

What they did have were complementary skills sets, contacts, and the fact that they were going into the business together.

Key entrepreneurial partnerships automatically raise the chances of success, and in Wessels and de Bod’s case, this was a vital ingredient in their business’s eventual growth – de Bod brought in the business (and in the early days they would take any business that came their way) and Wessels made sure they delivered.

Their early days were haphazard and organic. They entered the events industry because they knew it took the same amount of work to put on a R100 000 event as it did a R1 million event.

They also knew you could ask for upfront deposits, which meant they could do business without cash in the bank, and since they only had R3 000 start-up capital and enough saved up to pay two months’ worth of bills, this was a deciding factor.

So, putting out the word to everyone they knew, the partners made it known they were open for business, and they would do any event, no matter how big or small. Bar mitzvahs, weddings and corporate functions were the order of the day.

Phat-Brand-Activation-on-building-a-business_Entrepreneur-Profiles

 

They soon realised an important fact: They hated weddings, largely because mothers of the bride are evil, but they loved corporate events. As they managed to get cash in the bank, they were able to become more and more selective about the work they chose, until eventually their sole focus was corporate clients.

Today, they run a R100 million business with a laser focus. But the ride hasn’t been without its bumps in the road – and lessons to be learnt.

“I promise clients the world, Rico makes sure I’m not a liar.”

As partnerships go, de Bod and Wessels have very different skills sets and personality traits. Wessels’ background is in advertising agencies. His forté is project management and execution.

Give him a brief and he’ll get the job done, to spec, within budget. He’s all about the deliverables. De Bod is more people-orientated. His background is in call centres and client services.

He’s finely tuned to client needs, and is able to determine what a company needs, not what a client thinks they actually want. Together it’s proved to be a winning combination, with de Bod able to discern the best course of action for each client (and then promising them the world) and Wessels making those promises happen.

But it’s not just about the partners complementing each other’s skills set.

“We both started at the bottom of a corporate structure and worked our way up,” says Wessels. It’s an important point.

Neither is afraid of hard work and learning new things, but more importantly, they also learnt business from the inside out.

“We didn’t realise it at the time, because neither of us was specifically trying to learn as much as possible about business to prepare ourselves to become entrepreneurs, but if you’re naturally ambitious, inquisitive and want to do the best you can in every role you’re in, you learn a lot about business along the way,” he adds.

“My corporate career prepared me to understand business strategy, finance, profitable accounts and how to streamline processes. Christopher’s career taught him about people and the importance of customer service and he also developed a talent for translating those needs into actionable deliverables for the project management teams.

“It’s one thing to get client feedback. It’s another matter entirely translating that feedback into useable data for the company. These would be invaluable skills once we launched PHAT.”

Related: Meet the Disrupter 

“Cash is your lifeblood. Without it, you’ll never grow.”

These skills attracted early clients and ensured the duo could deliver on their promises. Jobs well done led to word-of-mouth referrals and bigger projects, but it wasn’t until cash flow stabilised that the business could really start growing and taking shape.

“Even though we’d started with nothing, we quickly learnt that our most valuable asset was cash in the bank. Healthy cash flow allowed us to start choosing our clients and which jobs we wanted to do, but more importantly, it meant we could start branching out from events,”says de Bod.

With a keen eye for identifying gaps in the needs of their clients, he soon realised that brand promotions was a marketing area that they would be good at – they had the necessary skills and backgrounds to pull promotional activations off, and more importantly, they now had the upfront cash.

“At first, we wanted to outsource this function,” admits Wessels. “Promotions require a lot of contract workers, most of whom tend to be university students and highly unreliable. It’s an area we didn’t want to be in. But we could see a client need, and we soon realised two things.

“First, if we were simply the middle men we’d be adding management fees onto management fees, pricing ourselves out of the market. More importantly though, if we outsourced our activations department, we wouldn’t be able to control our service delivery, and it might actually end up hurting us. What’s the point of growth to the detriment of your brand?”

And so their focus on getting cash in the bank began to really pay off. “Activations are tricky because you need to pay your contractors long before the client pays you,” explains Wessels.

“Many clients take up to 60 and even 90 days to pay you, and your single biggest expense is your promoters (or activators). Without a healthy cash flow you won’t be able to honour your agreement with them.

“Reliable, trustworthy activators are hard to find, and we’ve developed our brand around the fact that they’re ‘living’ media, which means they can intelligently interact with consumers, answering their brand questions and discussing the products they’re promoting.

“This takes training, which is an additional investment. You want to keep your activators happy, and to do that you can’t take weeks or even months to pay them.”

As the business has grown, so too has PHAT’s client base and the size of the activations they’re responsible for. None of this would have been possible without keeping a keen eye on cash flow. “So many businesses are unable to scale because they don’t have a healthy bank balance,” says Wessels. “It doesn’t matter what your balance sheet says. If you don’t have cash in the bank, you’ll never grow.”

“We lost a lot of good people before we realised they were the backbone of business.”

Phat-Brand-Activation_Key-strategies

Growth brings with it new challenges though. Sure, you can now take on bigger jobs and hire more people, but it’s also easy to get so caught up in doing the work that you forget how important systems, structures and above all people are to the business’s success.

“Our first round of hiring activators had gone well,” says Wessels. “Chris and I personally chose 500 CVs, shortlisted those to first 300, and then 120, and then with client input we settled on 80. Most of that first group was with us for four years, and many went on to be hired by our clients, and some have even joined our core staff.

“But we also got things wrong. We were running like a sweatshop. We worked 18-hour days and we expected our team to do the same. We had a job to do, and both of us are hardwired to work hard and get the job done to the best of our abilities.

“The problem was that we didn’t have the systems in place to support the workload we had undertaken, and we expected a lot from our employees without giving them any autonomy or seniority.”

The result? It took Wessels three days to pay 400 activators (a task he did himself), which is just one indication of how poor the business’s overall systems and back-end were.

“We lost a lot of good people in our early years. And then one day we realised the secret. If we wanted to be a big business, we needed to act like a big business, and that started with a proper back-end, putting systems in place, and appointing account directors who had full control over their accounts.”

In a large corporate or agency environment this is obvious, but as a small business trying to save costs, it’s often forgotten. It requires an investment in what is seen as a non-revenue generating area, and it can’t work unless the business owners take a step back from the day-to-day functioning of the company.

“Two things happened simultaneously for us,” says Wessels. “We realised who we actually were as a company, and we put systems in place to support that.” This sounds so simple and obvious, but it’s easy for companies to get waylaid by the who, what and how of business.

In PHAT’s case, they are a brand activation agency that focuses on living media and variable media (or activations and events).

But the reality is that this is what they sell to clients. What they actually are is a massive employer of contract staff who activate or promote a brand and its products. The ‘how’ is then how well they manage people – they need to be trained, booked and managed. They’re the face of a brand, and they’re also an excellent collection point of data for the client.

Understanding all these things makes PHAT very good at what it does, but it also requires systems to operate smoothly. These systems encompass everything from ensuring activators are paid on time, and keeping their training and knowledge up-to-date, to supporting the company’s core full-time staff who look after client accounts and the activators.

“We can track our sudden massive growth curve to two things: We put systems in place, and we established a PHAT exco that gave our account directors and executives autonomy but held them responsible for their accounts. It was a complete game changer in our business,” says Wessels.

“We reward teams that excel, but let non-performers go.”

The systems took a three-day job down to 15 minutes. They also promoted a strong back-end, which is the backbone of any business. Sales and account executives bring in revenue, but they’re hobbled if they have no admin and HR support. The change in company morale and productivity was almost immediately discernable. But that was just the first step. PHAT’s real secret growth weapon is its exco structure.

“Our PHAT exco serves two key purposes,” explains Wessels. “It frees up myself and Chris to focus on high-level client service and strategy sessions, and it allows us to work on our own internal strategies. That’s obvious. What’s important to understand is that none of this works without real autonomy on behalf of your account directors, and with responsibility comes accountability.

“Our system is highly transparent and straight forward,” explains Wessels.

“Each account director has full financial and managerial control over their department. They’re given a budget to work with and targets to meet. We then have an exco meeting every second week to track those targets and change direction if needed. It keeps us in the loop, it ensures our account executives are keeping their eye on their targets and client delivery because they have to report back to us, and it means we can trouble shoot early.

“If targets aren’t being met, we evaluate why, and develop strategies to keep the account healthy. It’s vital that everybody understands what the deliverables and their duties are. If an account runs at a deficit, the strategy will be revisited and we will then develop the appropriate structural solution.

“Obviously this is done within reason – if a major client suddenly has to pull its budget for example, this isn’t necessarily the team’s fault, and we might move everyone into different positions and teams. We make sure they all know exactly what that pressure is and what they need to achieve.”

According to Wessels, transparency plays a big role in this strategy. “We share financial information with clients which allows us to show the client exactly what the agency makes versus what the client thinks the agency makes. In this way we can come to a mutually beneficial solution.”

However, a strategy that is so dependent on employees who are responsible, driven and accountable relies on getting the right people in. “This is obviously a challenge,” agrees Wessels.

“We like to employ leaders with entrepreneurial spirit, but these skills and responsibilities come at a price. But, we’ve learnt that in the long run it’s a price worth paying. Upfront investment ensures healthier client accounts, it’s that simple.”

However, Wessels does admit that people have left PHAT to start agencies of their own in the past. “If that’s their dream, it’s obviously a loss to us, but we always encourage their ambitions, support them, and give them any advice we might have. That’s the flip side of employing entrepreneurially-minded people, and we understand that. We’re realistic that people – like accounts – move on, and that we just need to make the most of them while they’re with us.”

Related: Getting Stupidly Enormously Wildly Excited About Ideas

“If you’re looking for a master/slave relationship, you’ve come to the wrong agency.”

Phat-brand-company_Entrepreneur Profile

“Many big corporates will treat their service providers like slaves if they let them. That wasn’t us. We wanted partnerships. It’s the best way to ensure your clients get the most from their campaigns because you’re able to offer them real advice, and even tell them when they’re dropping the ball,” says Wessels.

All good partnerships are based on relationships built on trust, and transparency is the foundation of trust.

“If you’re able to have in-depth, honest and up-front conversations about the business, you’ll be in a much better position to advise clients on what they need to do to achieve  the results they’re looking for,” says de Bod.

These principles extend to everyone understanding exactly what they’re getting from the partnership as well.

“We are very clear about our fees and what our clients are getting for their money,” says Wessels.

“I’ll present a document that shows our management fee, what it covers, our mark-up and percentage profit. Clients know exactly what our gross profit is, or what figure we’re trying to get to. Based on that, we can then offer them our services according to what they’re willing to spend.

“Ultimately, the profitability of an account defines the size of the structure that will support the account. More profit equals more ‘wow’, including exclusive versus non-exclusive structures and dedicated versus shared teams. We also all agree on the profit margin upfront.

“We understand that unless you value your own services and what you have to offer, you can’t expect your clients to value you. We’re in the business of helping our clients see real return on investment in their marketing strategy, but we’re also here to make a profit. We’re always very clear about it, and our question is always simple and polite: Would you run at a loss?”

PHAT also has client rules. “We won’t mess with the system. Don’t ask for a R1 million event in three days. This ruins our pipeline and affects our other clients. We value the service we give them, and that means we need to stick to our schedules. The only way you’re above that schedule is if you’ve got your own dedicated team.

“First, should we accept the brief it will push back all current work by two to three days. Second, the brief will more than likely not be done to the standard and quality that we normally deliver.

“If you take the two points into consideration, someone will lose out – either the current client or the new client. We follow a simple rule: Never let the money make the decisions.”

“You quickly learn when starting an agency that the more you give in to a client’s whims the less they value your input as a subject matter expert,” agrees de Bod.

“We’ve learnt over the past six years that open cards and total transparency allow clients to understand our reasoning. We’re subject matter experts in our industry, just like our clients are in theirs. They’re paying a fee for a professional service. We never negotiate on our quality and standards, just like a doctor would never negotiate on quality and standard when performing an operation.”

Vital Stats

  • Players: Rico Wessels and Christopher de Bod
  • Company: PHAT Brand Activation
  • Est: 2008
  • Growth stats:

2010: 32%     2011: 77%

2012: 81%      2013: 176%

  • Current turnover: R102 million
  • Projected 2014 growth: 80%
  • Contact: +27 (0)12 348 5070
  • Email: talk-to-us@phat.co.za
  • Visit: www.phat.co.za

 

Nadine Todd is the Managing Editor of Entrepreneur Magazine, the How-To guide for growing businesses. Find her on Google+.

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Entrepreneur Profiles

Rich List: 2019 Richest People In The World

They’re worth billions, and their wealth continues to grow each year. Here’s the top 10 richest people globally in 2019.

Catherine Bristow

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jeff-bizos 10. Jeff Bezos

Net Worth: USD 139,5 billion

Jeff Bezos founded e-commerce giant Amazon in a garage in Seattle, USA in 1994. He also purchased The Washington Post for $250 million in 2013.

Bezos believes in always taking a long-term view and living in the present moment.

“I think this is something about which there’s a lot of controversy. A lot of people — and I’m just not one of them — believe that you should live for the now.

I think what you do is think about the great expanse of time ahead of you and try to make sure that you’re planning for that in a way that’s going to leave you ultimately satisfied. This is the way it works for me. There are a lot of paths to satisfaction and you need to find one that works for you.”

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Entrepreneur Profiles

7 Self-Made Teenager Millionaire Entrepreneurs

These teenager entrepreneurs have already made their first million and more. How did they do it and what’s their secret to success?

Catherine Bristow

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1. Evan of YouTube

evan-of-youtube

Evan and his father Jarod started a youtube channel ‘Evantube’ to review kids’ toys. The channel was a resounding success with other kids – so much so that today it boasts just over 6 million subscribers.

Evantube brings in more than USD1.4 million a year from ad revenue generated on the channel.

How did it start? With a father-son fun project making Angry Birds Stop Animation videos, and morphed into doing reviews on toys and video games. But Jarod’s dad is aware of the responsibility of Evan’s sudden fame and hopes to teach Evan about the importance of being a good role model for others.

“Most recently, we had the opportunity to work with the Make-a-Wish Foundation, and were able to fulfill the wish of a young boy whose dream was to meet Evan and make a video with him at Legoland,” explains Jared. “It was a really incredible experience. YouTube has definitely opened many doors, and the kids have gotten to do some pretty amazing things.”

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Entrepreneur Profiles

Expert Advice From Property Point On Taking Your Start-Up To The Next Level

Through Property Point, Shawn Theunissen and Desigan Chetty have worked with more than 170 businesses to help them scale. Here’s what your start-up should be focusing on, based on what they’ve learnt.

Nadine Todd

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shawn-theunissen-and-desigan-chetty

Vital Stats

  • Players: Shawn Theunissen and Desigan Chetty
  • Company: Property Point
  • What they do: Property Point is an enterprise development initiative created by Growthpoint Properties, and is dedicated to unlocking opportunities for SMEs operating in South Africa’s property sector.
  • Launched: 2008
  • Visit: propertypoint.org.za

Through Property Point, Shawn Theunissen and his team have spent ten years learning what makes entrepreneurs tick and what small business owners need to implement to become medium and large business owners. In that time, over 170 businesses have moved through the programme.

While Property Point is an enterprise development (ED) initiative, the lessons are universal. If you want to take your start-up to the next level, this is a good place to start.

Risk, reputation and relationships

“We believe that everything in business comes down to the 3Rs: Risk, Reputation and Relationships. If you understand these three factors and how they influence your business and its growth, your chances of success will increase exponentially,” says Shawn Theunissen, Executive Corporate Social Responsibility at Growthpoint Properties and founder of Property Point.

So, how do the 3Rs work, and what should business owners be doing based on them?

Risk: We can all agree that there will always be risks in business. It’s how you approach and mitigate those risks that counts, which means you first need to recognise and accept them.

“We always straddle the line between hardcore business fundamentals and the relational elements and people components of doing business,” says Shawn. “For example, one of the risks that everyone faces in South Africa is that we all make decisions based on unconscious biases. As a business owner, we need to recognise how this affects potential customers, employees, stakeholders and even ourselves as entrepreneurs.”

Reputation: Because Property Point is an ED initiative, its 170 alumni are black business owners, and so this is an area of bias that they focus on, but the rule holds true for all biases. “In the context of South Africa, small black businesses are seen as higher risk. To overcome this, black-owned businesses should focus on the reputational component of their companies. What’s the track record of the business?”

A business owner who approaches deals in this way can focus on building the value proposition of the business, outlining the capacity and capabilities of the business and its core team to deliver how the business is run, and specific service offerings.

“From a business development perspective, if you can provide a good track record, it diminishes the customer’s unconscious bias,” says Shawn. “Now the entrepreneur isn’t just being judged through one lens, but rather based on what they have done and delivered.”

Related: Property Point Creates R1bn In Procurement Opportunities For Small Businesses

Relationship: “We believe that fundamentally people do business with people,” says Shawn. “There needs to be culture match and fluency in terms of relations to make the job easier. As a general rule, the ease of doing business increases if there is a culture match.”

This relates to understanding what your client needs, how they want to do business, their user experience and customer experience. “We like to call it sharpening the pencil,” says Desigan Chetty, Property Point’s Head of Operations.

“In terms of value proposition, does your service offering focus on solving the client’s needs? Is there a culture match between you and your client? And if you realise there isn’t, can you walk away, or do you continue to focus time and energy on the wrong type of service offering to the wrong client? This isn’t learnt over- night. It takes time and small but constant adjustments to the direction you’re taking.”

In fact, Desigan advises walking away from the wrong business so that you can focus on your core competencies. “If you reach a space where you work well with a client and you’ve stuck to your core competencies, business is just going to be easier. It becomes easier for you to deliver. Sometimes entrepreneurs stretch themselves to try to provide a service to a client that’s not serving either of their needs. This strategy will never lead to growth — at least not sustainable growth.”

Instead, Desigan recommends choosing an entry point through a specific offering based on an explicit need. “Too often we see entrepreneurs whose offerings are so broad that they don’t focus,” he says. “Instead, understand what your client’s need is and address that need, even if it means that it’s only one out of your five offerings. Your likelihood of success if you go where the need is, is much higher.

“Once you get in, prove yourself through service delivery. It’s a lot easier to on-sell and cross sell once you have a foot in the door. You’re now building a relationship, learning the internal culture, how things work, what processes are followed and so on — the client’s landscape is easier to navigate. The challenge is to get in. Once you’re in, you can entrench yourself.”

Desigan and Shawn agree that this is one of the reasons why suppliers to large corporates become so entrenched. “Once you’re in, you can capitalise from other needs that may have emanated from your entry point and unlock opportunities,” says Shawn.

Building a sustainable start-up

While all start-ups are different, there are challenges most entrepreneurs share and key areas they should focus on.

Shawn and Desigan share the top five areas you should focus on.

1. Align and partner with the right people

This includes your staff, stakeholders, partners, suppliers and clients. Partnerships are the best thing to take you forward. The key is to collaborate and partner with the right people based on an alignment of objectives and culture. It’s when you don’t tick all the boxes that things don’t work out.

2. Make sure you get the basics right

Never neglect business fundamentals. Do you have the processes and systems in place to scale the business?

3. Understand your value proposition

Are you on a journey with your clients? Is your value proposition aligned to the need you’re trying to solve for your clients? Are you looking ahead of the curve — what’s the problem, what are your clients saying and are you being proactive in leveraging that relationship?

Related: Want To Start A Property Business That Buys Property And Rents It Out?

4. Unpack your value chain

If you want to diversify, understand your value chain. What is it, where are the opportunities both horizontally and vertically within your client base, and what other solutions can you offer based on your areas of expertise?

8. Don’t ignore technology

Be aware of what’s happening in the tech space and where you can use it to enable your business. Tech impacts everything, even more traditional industries. Businesses that embrace technology work smarter, faster and often at a lower cost base.

Ultimately, Desigan and Shawn believe that success often just comes down to attitude. “We have one entrepreneur in our programme who applied twice,” says Shawn. “When he was rejected, he listened to the feedback we gave him and instead of thinking we were wrong, went away, made changes and came back. He was willing to learn and open himself up to different ways of approaching things. That business has grown from R300 000 per annum to R20 million since joining us.

“Too many business owners aren’t willing to evaluate and adjust how they do things. It’s those who want to learn and embrace change and growth that excel.”

Networking, collaborating and mentoring

Property Point holds regular networking sessions called Entrepreneurship To The Point. They are open to the public and have two core aims. First, to provide entrepreneurs access to top speakers and entrepreneurs, and second, to give like-minded business owners an opportunity to network and possibly even collaborate.

“We believe in the power of collaboration and networking,” says Desigan.

“Most of our alumni become mentors themselves to new entrants to the programme. They want to share what they have learnt with other entrepreneurs, but they also know that they can learn from newer and younger entrepreneurs. The business landscape is always changing. Insights can come from anywhere and everywhere.”

The To The Point sessions are designed to help business owners widen their network, whether they are Property Point entrepreneurs or not.

To find out more, visit www.ettp.co.za

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