- Players: James Pearce and Charles Stretch
- Company: SMSPortal
- Established: 2002
- Turnover: R700 million
- Visit: www.smsportal.co.za
The rise of SMSPortal has been nothing short of astonishing. It had its origins in a garage in the Eastern Cape, where it was launched as a rudimentary SMS gateway aimed at letting students know what was happening in the club scene but quickly evolved from there.
“We realised pretty quickly that the system held potential,” says co-founder James Pearce. “Especially for businesses that were looking for an instant and reliable way of communicating with customers.”
Once co-founders James Pearce and Charles Stretch started focusing on this potential, the business took off. And it took off in rather spectacular fashion.
“When the company started out, it was sending 30 000 messages a month. I remember us saying that if we could get to 500 000 a month, we’d really have it made. Now we send out 150 million a month,” Stretch told Entrepreneur back in 2013. Today, the company sends 400 million messages a month, and it has upped its turnover from R300 million in 2013 to R700 million in 2016.
But while the growth SMSPortal has enjoyed has certainly been rapid and significant, it has also been carefully measured and managed. Cognisant of the dangers associated with growing too quickly, Pearce and Stretch made sure that the company didn’t grow so big so fast that they no longer had a handle on things.
Even when they recognised the massive potential in their idea during the early days of the business, they made the decision to start small.
“In the beginning, we just targeted SMEs in Port Elizabeth,” says Pearce. “Keeping things small early on meant we didn’t need to build a large-scale gateway early on. Also, we could find our feet and test our systems thoroughly before we scaled to a point where any glitch or hiccup would mean disaster.”
A great example of a company that scaled way too quickly was Pets.com — one of the most infamous casualties of the dot-com bubble.
Pets.com — which, as its name suggests, sold pet supplies online — was founded in August 1998. It was quickly identified as one of the hottest tech companies around and attracted very significant venture funding (about $300 million).
For a while, Pets.com was everywhere. It spent a lot of money on marketing, including a spot in the 1999 Macy’s Thanksgiving Day Parade in New York, and an advertisement during the 2000 NFL Super Bowl. (The $1,2 million Super Bowl ad, by the way, was a huge hit. USA Today ranked it as the best ad of the Super Bowl, and the tagline: ‘Because pets can’t drive’ was seen as a brilliant bit of marketing).
In February 2000, Pets.com listed on the Nasdaq. A mere 268 days later, it was liquidated. So what went wrong?
The company had grown too quickly. It had spent millions to capture the market and build brand recognition before it had really established whether its business model actually made sense. When those in charge did stop to take stock, it quickly became apparent that Pets.com was a house of cards built on a shaky foundation of assumptions.
Its marketing budget alone far outstripped the revenue it was generating, and people were not spending the sort of money online that the company had been betting on. Pets.com, for example, was offering free shipping, but customers weren’t spending enough to justify this.
On 6 November 2000, Pets.com announced that it was closing its doors. When it listed in February of the same year, a share in the company had been worth $11. By the time Pets.com decided to liquidate, a share went for $0,19.
As mentioned earlier, SMSPortal’s turnover has gone from R300 million in 2013 to R700 million in 2016, and it handles about 400 million text messages a month (an increase of 300% in three years).
Now, considering the above, it’s perhaps surprising to discover that SMSPortal only employs around 50 people. Sure, the staff complement has increased quite a bit since 2013 — when the company had a mere 20 employees — but 50 is still a very small number for an organisation that is turning over R700 million a year.
One of the chief characteristics of an eminently scalable business is the ability to reduce its marginal cost to virtually zero. Just consider Facebook, Dropbox or Uber. These tech companies could scale quickly because adding a single extra user cost them virtually nothing in terms of money, time and effort.
SMSPortal is another good example of a company that has managed to scale without allowing size and complexity to overwhelm the organisation. Some of this has to do with the nature of the business, sure, but Pearce and Stretch are quick to point out that the right employees are just as crucial when it comes to scaling.
“We spend a lot of time on recruitment,” says Pearce. “We never hire quickly. We spend time looking for the right people and put everyone through rigorous testing.
“We also make sure that there’s culture fit. It’s important that any new individual fits in with the rest of the team.”
“The IT space is a particularly challenging one,” adds Stretch. “There is huge demand for great engineers and software developers, so you’re competing with lots of large companies. Because of this, we put a lot of time and resources into recruiting the best people.”
SMSPortal also takes on interns twice a year. While interns obviously need a lot of supervision, an internship programme is also a great way to identify young people with excellent potential.
“It’s really worked for us in terms of identifying promising talent,” says Stretch. “We’ve hired quite a few people permanently who started out as interns.”
As SMSPortal has grown from 20 to 50 people, the founders have also put senior managers in place who manage the various teams.
“You can’t try to manage 50 people personally,” says Pearce. “You need to put competent managers in place who can take over the day-to-day management of certain key areas so that you can spend your time doing other things. As a company grows, you have to let go of certain responsibilities and trust that the people you’ve employed will be able to do the job. Your aim should be to empower them and not complicate their lives with red tape. Their focus should be on doing business — not dealing with bureaucracy.”
According to Stretch, it comes down to hiring people who can do the job better than you can.
“A business can’t grow very much if you’re only a handful of people. If you want to scale significantly, you need a larger team. The important thing, though, is to hire people who are very competent and highly skilled. We’ve certainly hired people who are better at their specific tasks than we would be. So we know that they can be trusted with making the right decisions. We know that the business wouldn’t be where it is today without them.”
Since SMSPortal was last featured in Entrepreneur, the company’s international operations have increased massively. At the moment, the company delivers messages to roughly 700 networks in 150 countries.
How have Stretch and Pearce managed to establish SMSPortal overseas?
“One of the strategies that has worked best for us has been to grow alongside our clients,” says Pearce. “Many of our clients have ventured into foreign markets, and we have joined them in these endeavours — providing our services to them in these new territories.
“Once we’re operating in a new territory, we can then start building relationships and gain an understanding of how things are done in the region. Eventually, we can start working with foreign clients.
“To an extent, this has been a bit of a ’do or die’ strategy. We realised that if we didn’t grow with our clients and offer them our services in other regions, someone else would jump in and do it. It’s been difficult at times, but we’ve learnt a lot through the process.”
“It all comes down to having great relationships,” says Stretch. “We have very good relationships with Vodacom and MTN, for example, and since these companies are very active in other countries and regions, we have been able to expand because of these relationships. So when going into other regions, it’s worth considering how you can leverage existing relationships to do it. Just going into a new region on your own can be very hard.”
The founders also warn against entering markets that are far away from South Africa and in a different time zone.
“We are especially active in southern Africa, the UK and Australia,” says Pearce. “And there is no doubt that it’s easier to manage operations that are in a similar time zone. So trying to enter a territory on the other side of the world as your first form of international expansion is perhaps not the best idea. You’ll be surprised how much easier it is when the time zone is similar.”
- Don’t let growth overwhelm you. Many successful companies have failed because they grew too quickly.
- Avoid unnecessary complexity. The aim should be to grow as much as possible, without adding too much complexity. The right employees can help you accomplish this.
- Grow with your clients, especially when it comes to venturing beyond South Africa’s borders.
Understand that your ability to scale is linked to the quality of talent that you hire and invest in.
Can Being Deceptive Help You Build Your Business? It Worked For These 5 Entrepreneurs
We’ve all told little white lies. But what about the big ones? What if telling them would bring your business success?
We all commit little acts of deception, like saying we got stuck in traffic when we were really late to the meeting because we wanted to watch the last five minutes of a favourite TV show. Little white lies? I’ve told them. You’ve told them.
But what about big lies, the kind truly lacking in integrity – like misrepresenting your sales to a prospective investor?
Obviously, there are often severe consequences to lying. Depending on the context, you could lose the trust of a peer, break a professional relationship or even face legal action. Yet, despite these consequences, lying is more common in the entrepreneurial world than you might think.
Just take as an example these five entrepreneurs, who might not be as well known or successful as they are if it weren’t for some clever acts of deception:
Three Habits That Underpin Entrepreneurial Success
Here are three powerful habits that will help you stay focused, define your entrepreneurial attitude and take your business from zero to hero.
Successful people and businesses don’t all share the same traits and commitments. Yes they all have managed to break barriers and achieve impressive goals. They’re the leaders, the movers, the shakers and the industry creators. However, not all entrepreneurs are created equal and their recipes for success can differ wildly.
Some swear by a three-hour run every morning followed by a nice salad and the bustle of busy work life. Others need an incredibly early start so they can spend time with their emails and focus on their business. Every entrepreneur has their own secret tricks that keep them on the straight and successful narrow, but most share a few simple habits that are guaranteed to make a difference.
Here are three habits that will help you become better at business and at leading others towards long-term success:
1. Always be ready to change your assumptions
Many people are unable to change the assumptions they have about their business and its future as it evolves. No business model should be locked in cement and rigidly upheld, it will need to adapt and adjust as it grows and customer needs change. As an entrepreneur you need to understand this concept and be prepared to evolve and change in new directions and markets.
Related: Business Plan Format Guide
This also ties into failure. Do you understand why you failed at something? Are you aware that perhaps your business model is changing? Can you learn from these experiences? Can you adjust your business model, get better research, refine your ideas? If you are ready to take positive value out of these moments and experiences, then you are an agile and inspired entrepreneur.
2. There’s no off switch
Passion and commitment are absolutely key to the success of your business and your own personal growth. You can’t switch off or walk away or just take a sick day because you feel like it, not if you want to stand as an example to your employees or if you want to build a brilliant business.
It may sound trite and tired, but a work ethic is the single most important habit to have as an entrepreneur. You need to always hold yourself to the highest standards, commit to ethical practice and work harder than anyone else.
3. Take it personally
This doesn’t mean gentle sobs in your office when Susan from accounts ridicules your maths skills. If you take your business personally, then you are wrapping the skills learned in points 1 and 2 above into one cohesive whole – you are embedding your passion into every crevice of your company. Care about what you do, be passionate about what it stands for, and be prepared to fight for its life. The route from zero to billion-dollar business isn’t easy. If it was, everyone would be doing it.
Remember, the idea is only 1%. Sweat, work, commitment and focus are the other 99% of the success equation.
Head Of Audi South Africa Shares His Top Lessons On Weathering The Storm In Turbulent Times
When the economy isn’t playing ball, it’s time to roll up your sleeves, face your challenges head-on, and get to work, says Head of Audi SA, Trevor Hill.
- Player: Trevor Hill
- Position: Head of Audi South Africa
- Visit: www.audi.co.za
“In everything we do, across the organisation, we ask this question: Is it the best? That’s our value proposition. Without it, we don’t have a clear direction for everyone to follow.”
Some of the biggest brands in the world are well-known for keeping things lean. Amazon is a prime example, where even Amazon-branded employee backpacks are reused. Many bloated organisations learnt the hard way in 2008 that if you aren’t efficient and focused on the bottom-line, you’ll struggle to survive in competitive and volatile environments. On the other hand, businesses that were already lean and flexible not only survived the recession — many of them actually thrived, mainly because they were far better equipped to handle new economic realities than their competitors.
According to research conducted by Bain & Co’s authors of The Founder’s Mentality, Chris Zook and James Lane Allen, 85% of the biggest growth challenges large-scale organisations face are internal. This doesn’t mean the economy and competitors don’t matter. But the way leaders and managers of those organisations react to economic and external stimuli does.
Trevor Hill, Head of Audi South Africa, is well-versed on the impact external stimuli can have on a brand — even an established premium brand like Audi South Africa. Economic and political conditions in South Africa have impacted consumer confidence, and the premium vehicle market has experienced year-on-year double digit declines over the past three years. “The premium market is almost half the size it was three years ago in South Africa,” he explains. “Consumer confidence, the high pricing of premium cars, and a general buying down trend have really impacted our market. Three years ago, we were selling close to 20 000 vehicles per year. Today we sell around 10 000 vehicles. You can’t ignore market conditions. You need to face them head on, and do what’s best for your employees, the brand and your consumers.”
Here are Trevor’s five lessons for weathering the storm so that your business and brand are well positioned when market recovery begins.
1. Have a clear value proposition that everyone understands and embraces
“We will never be the biggest in the South African market,” says Trevor. “Mercedes-Benz and BMW produce in South Africa and have an advantage over us in terms of export credits. If we can’t be the biggest though, we can focus on being the best. That is entirely within our control.
“Our ‘Best’ strategy says that we want to be the best organisation, have the best product, the best brand and the best customer service. Everything we do must be looked at through this lens – is it the best? If we host an event, have we chosen the best venue, event organisers and caterers? Does the look and feel match our standards? If we can’t be the best — we don’t do it.
“In everything we do, across the organisation, we ask this question: Is it the best? That’s our value proposition. Without it, we don’t have a clear direction for everyone to follow.”
2. Understand what’s in your control and then roll up your sleeves and get it done
The rate cut at the end of 2017 really helped the premium market towards the end of the year. The problem is that there are things you can control — such as running a lean organisation — and things you can’t control, such as whether or not there will be another rate cut. So how do you ensure a proactive culture rather than a defeatist mentality when times are tough?
“The spirit of Audi has always been to challenge boundaries, roll up our sleeves and forge our own future,” says Trevor. “It’s in our ‘Vorsprung’ DNA. This has never been more applicable than when we’re weathering a storm, but it has to be fostered when the waters are calm.”
The theory is straightforward. If an organisation isn’t used to challenging boundaries and being in control of its own destiny, it’s difficult to find those characteristics when they’re really needed. When something is woven into a brand’s DNA, it’s because it’s always there, and the organisation’s entire culture supports it.
Trevor can point to examples everywhere. For example, in the 1980s, Audi was the first car manufacturer to put a five-cylinder engine and four-wheel drive on a rally car, and cleaned up two years in a row as a result.
“The Audi spirit is that you can improve anything. You just need to be willing to put in the work.”
Faced with extremely tough local conditions, the South African team is now doing just that: Rolling up its sleeves and finding solutions.
“This is how we handle the business as a whole. We’ve been completely upfront with head office and our investors about current market conditions, but we aren’t complaining — we’re putting the facts on the table, showing them what we can control, and unpacking how we’re going to see the business rolling forward. Because of that attitude and transparency, we have everyone’s full support.”
3. Never throw money at a problem; smart solutions aren’t necessarily the most expensive
“Spending a fortune on brand campaigns isn’t going to change the reality of the current market conditions,” says Trevor. “It’s easy to throw money at a problem, but then what? We’ve taken a different approach. We’ve selected a number of brand ambassadors whose values really align with our own. These include TBO Touch, Cameron van der Burgh, Wayde van Niekerk and Nomzamo Mbatha. Their followers know what they stand for, and associate Audi with those same values. It’s a much more targeted and niche way to gain awareness for our brand.”
For Trevor, not throwing money at a problem is a value that should be ingrained in an organisation. “We approached 2018 with this value top of mind. At the end of 2017 our management team went away for a strategy session. We collectively took a look at the entire business and asked what we needed to do to drive this business through the stormy waters of 2018.
“Each manager then got a target for their division that was aligned with the other divisions and organisation as a whole. They then conducted individual strategy sessions with their teams. The whole thing was a problem-solving mission: This is the budget we have, this is where our focus needs to be, now how do we go out and deliver the best? What’s our plan?
“These plans were then aligned with each other to ensure everyone was going in the same direction, and we measure everything. My KPIs filter down to the management team, and theirs filter down to their teams. It’s a very inclusive system; everyone can workshop the problem, and in that way we don’t only gather some out-the-box ideas, but we get everyone’s buy-in as well.”
4. Encourage your team to try new things and communicate collaboratively
Very often, individual divisions communicate well together, but the message and camaraderie is lost across divisions, particularly between sales and marketing. “We’ve found two ways to encourage participation and camaraderie across the business,” says Trevor. “The first is that we always encourage new ideas. If something is tried and tested and doing well, especially in marketing, try to own that property. But if something isn’t giving you what you want, change it. We’re often too scared to change things that aren’t working or to try something new. We encourage participation and thinking differently. The bigger your pool of ideas, the more you have to work with.”
The company also has a number of monthly meetings that bring different divisions into the same room for workshop sessions. “We have a lot of field staff who aren’t often in the office. We need to keep communicating with them to pull them into the fold,” explains Trevor. “For example, once a month we have marketing and product meetings. The marketing, product and sales teams all attend. It gives everyone an opportunity to know what’s happening and hash out any questions or issues then and there. The communication between divisions — particularly marketing and sales — is much better as a result.”
5. Keep your core motivated
Like many industries, there’s a lot of employee movement in the consumer and premium brands segment. “People move. That’s the reality of job markets around the world,” says Trevor. But stability is important, and at Audi SA, that means identifying your core employees and keeping them happy.
“We have a very strong core. Within the organisation we’ve identified a core group of employees whom we absolutely need if we’re going to continue to run this business efficiently and successfully. Once you’ve identified your core, you need to keep them happy, and that’s about a lot more than their paycheque.
“Different people want different things — advancement, developing their careers, an opportunity to work abroad or perhaps spend more time with their families at home.”
The lesson? Figure out what’s important to each member of your core and try your best to give it to them. Success is a team sport — you need to keep that core team in your corner.
MAKING A SUCCESS OF NEW TERRITORIES
Trevor Hill began his career with Audi as an area manager in 1989. In 1997 he left South Africa to join Audi’s head office in Germany. Since then he has headed up divisions in Germany, Japan, China, Dubai and South Korea. One of the biggest lessons he’s learnt through his travels is that while there are certain business fundamentals that hold true everywhere, each culture has its own way of doing business, and you need to understand what that is on the ground if you’re going to make an impact and be successful.
“One of the biggest things I’ve had to communicate back to head office is that each territory operates slightly differently,” explains Trevor. “For example, in Germany, you have 100 days in any new job to prove yourself. If you don’t make something happen in those 100 days, you’re not seen to be successful. This is impossible in Asia, where business is all about relationships. You have to develop a relationship based on trust and honesty, and that doesn’t happen overnight. Until you have that trust though, your employees and customers won’t work with you. When you enter a new territory, take your time. The first year is all about understanding the lay of the land. In the second year you can implement your strategy, and in the third year you can start reaping rewards.”
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