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How Peter Mountford Became The Turnaround King

Here’s how a failing behemoth found its feet, got back on track, and turned a profit.

Nadine Todd

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VITAL STATS

Player: Peter Mountford

Company: CEO, Super Group Holdings

Awards: EY Southern Africa World Entrepreneur Award 2016

Group Turnover: R30 billion for the 2017 financial year

Market Cap: R12 billion.

Visit: www.supergroup.co.za

When Peter Mountford was asked to return to Super Group as CEO in 2009, it was to help the holding company regroup and find its way back to profitability. The business had lost its way. Super Group itself had annualised pre-tax losses of approximately R1,5 billion. Its borrowings had escalated to R4,3 billion and there was virtually no shareholder equity left in the business as a result of aggregated losses.

Something had to be done if the group was to survive. Sharks were circling the waters, looking for opportunities for a hostile takeover. Attrition and even death were imminent. The whole situation was a lesson that even large, profitable businesses can lose their way. It was time to make some changes.

Q: How did Super Group find itself in such a precarious position in 2009?

In a sense, the group had lost direction from 2006 to 2009. Our core businesses are supply chain, fleet lease and dealership businesses. We had lost sight of that and expanded into a series of industrial products businesses, which were importing and assembling a range of Chinese trucks, material handling equipment and so on. These businesses had underperformed and were losing R1 billion per annum.

Related: Siya Mapoko Measures Success By 4 Simple (But Essential) Yardsticks

We’d also gone into a number of retail and panel beating-type investments, which were also underperforming. Revenues were down, borrowings were up, and many of the group’s businesses were experiencing a cash squeeze. The group found itself under enormous pressure as a result. 

Q: Why were these businesses performing so poorly?

Each of the businesses needs to be looked at in its own right. The material handling and trucking-type businesses were entering a highly competitive South Africa landscape.

Super Group entered the market through businesses that largely imported and assembled products, but were competing against strong manufactured products and brands in South Africa. They just weren’t getting critical mass. This resulted in overstocking issues, which meant the businesses in that space were in a cash squeeze.

In the retail environment, Mica hardware had seen a failure of systems, and in response to that the business had moved to a royalty-based model. The value proposition for a franchisee is central procurement, administration, stock control, creditors and payments and collections.

A royalty model didn’t add value for us or them. Mica had a loss level of R500 million. We focused on turning that around, and managed to do so, but we knew a change in direction was necessary as well.

Related: Tough Lessons Flume Learnt To Survive Super-Charged Growth

We realised reasonable value on the sale of Mica, and the business could have worked within the group, but we also recognised that our core interests weren’t in franchised brands that had building material retail interests.

In coming back to the group we did an environmental scan that pinpointed Super Group’s core competencies, and these were supply chain, fleet leasing and dealerships.

Q: What were the key elements of the turnaround strategy?

In a nutshell, you need to reduce costs, bring down — or even eradicate — debt, increase cash flow and improve your focus.

We placed significant emphasis on cash generation and the need to get our balance sheet back to where it should be. At that stage, Super Group’s asset value was largely held across 16 lending banks. We needed to re-establish ownership of the underlying net assets of the business, which meant we needed to start making a profit.

We spent three years focused on regenerating our three core business pillars, highlighting the importance of cash generation. We managed to turn the group around to modest profitability — R150 million pre-tax profit by 2010. By 2012 the core group businesses were starting to perform well, and we had paid back all of our borrowings, were in a net cash position, and had managed to re-establish ownership of the underlying net assets of the business.

Q: What did rebuilding your core competencies entail?

First, and most importantly, it meant exiting areas that were not part of our core competencies. We immediately exited the industrial products division. This was a massive burning platform for us, losing over R1 billion per annum.

We were then able to realise some fairly reasonable cash injections via the disposal of AutoZone, which yielded over R400 million, and Mica Hardware, which over time realised over R230 million.

After we jettisoned some of our underperforming areas, we could now focus on rebuilding our core competencies.

We recognised that while the dealership model isn’t the most profitable area of our business, it does have an important role to play. In a mobility sense it’s complementary to both supply chain and fleet lease operations.

Focusing on driving operating margins

We had a strong management team in place and so we focused on driving our operating margins as a percentage of sales from lagging areas of 1,5% up to where we are today at 3,2%. We chose one area to focus our attention on, and that was it. We paid attention to the numbers, and how we could achieve the numbers we were looking for.

Within this context the dealership model becomes good. It’s relatively modest in a capital intensity sense, and we could leverage our other businesses off the dealerships. As a result, we’ve grown our dealership interests quite nicely.

By 2009 our supply chain businesses had lost a significant portion of their customer base. They had a failing fleet scenario, with large elements of their fleets parked off.

We needed to re-establish some of the management levels and layers that no longer existed — starting with marketing and new business development departments. At the time we hardly had the ability to respond to tenders. Because of cost-cutting a lot of those elements had fallen by the wayside.

peter-mountford_super-group-holdings_business-lessons

Q: Once you had regained a measure of control over the business and were back in a cash positive position, what was the next step?

By 2012 we were in a position to enter a more expansionary phase, which gave us the ability, with a very strong balance sheet, to start looking at what new business areas we wanted to enter in South Africa and abroad.

We did not repeat Super Group’s mistake of the past, which was to enter into completely new territories. Instead, we focused on opportunities that played into our core strengths.

In South Africa we identified four key growth areas.

  1. Fast foods distribution. This is a high-growth area. Our first acquisition was Digistics, a company that provides end-to-end supply chain solutions to many of the major fast food distributors in South Africa, from procurement to freight forwarding and clearing, warehousing, distribution and even collecting debtors’ book on behalf of the franchisor. This was absolutely within our core.
  1. Fuels, hazardous chemicals and bulk powders. Up until that point we had largely left this environment unchallenged and in the hands of our competitors, who had a very strong position in this sector. We invested in Haulcon, which at the time was a failing group, rebranded the business as SG Bulk, and have built that up into a successful bulk cement powder, hazardous chemicals and fuels distribution-type business. 
  1. The bottom end of the retail market. Most of the supply chain players in our environment are focused on top-end and mid-trade distribution. Top-end encompasses the big five retail groups, and mid-tier retailers like 7-Eleven and Spar. We felt there was an opportunity to focus on effective distribution into the garage forecourts, cafés and spaza-type environments. The initiative has worked well, and really got legs from 2009 onwards. Today it’s a business that does R2,3 billion annual turnover.
  1. Pharmaceutical and medical distribution. This seemed like a major opportunity for us, given Super Group’s market-leading technology capabilities. One of our businesses has promoted and implemented a range of warehouse management, transport planning and optimisation, and visibility systems that enable our clients to have complete supply chain visibility of their products, right down to any performance against a standard activity-time specification.

This capability is important in the pharmaceutical environment. We apply it in the automotive parts sector, but it offers huge value in pharmaceutical and medical environments, where lot, batch control and visibility of a product is essential.

This is an area where we see huge potential, but of our four growth areas, has been the least successful to date. We haven’t achieved the traction we expected, as we’ve only been able to grow organically, and have not made acquisitions in the sector.

Related: Why Café del Sol Are Intentionally Expanding Slowly

A few acquisitions have come to market, but they’ve been priced at very high and, we believe, unsustainable multiples by some of our competitors. We continue to grow those businesses organically and that remains a strategic agenda item for us but we’re also vigilant in recognising when PE multiples aren’t working for us. Experience has taught us that you can end up over-investing in a business that doesn’t perform.

Q: How do you determine whether a business is a good investment or not?

One of the realities of the new accounting standards is that purchasing businesses at investment value above net asset value sets off an intangible, and those intangibles have to be amortised to the income statement over the useful life of the technologies in those businesses, or over the average life of contracts in those businesses.

There are no free lunches in the acquisition space now, and we will not look at deals that are diluted in terms of our earnings per share, or that look unsustainable relative to the underlying core contracts and outstanding periods on those contracts.

The same is true of dealerships. We will not buy dealerships through a multiple of economic cycles; there are sensible price-earning multiples for these types of businesses and we will stick to those parameters. 

Q: What has been Super Group’s international growth path?

We’ve grown Super Group’s fleet in Australia, New Zealand and the UK, and invested into supply chain and dealership environments in Germany and the UK, respectively.

We’ve focused on areas we understand, and that require core time-critical distribution solutions, such as the automotive and medical industries in Germany.

Having an international footprint also mitigates our risk, from a currency perspective as well as market cycles.

Q: You’ve said that you believe in a small business culture with decisive business capabilities.

To be successful, I believe you need to retain a small business mindset. You need to be quick, decisive and entrepreneurial in your decision-making processes. We’ve resisted bogging the organisation down with administrative processes and documents, such as daily sales forecasts, daily order covers and daily cash flow forecasts.

We run a small executive team at group level, and keep our decision-making process highly efficient. We do read our financial dashboards carefully, but don’t get bogged down by bureaucracy for the sake of it. We’ve had a long and strong relationship with our non-executive directors, and have developed a mutual trust and understanding of our strategy and modus operandi, which has worked well because it allows us to make decisions quickly.

We’ve also carefully ensured that absolute management control is retained over all of the businesses within the group. Each business has a CEO who is directly accountable for all aspects of the businesses, removing the danger of a centralised decision-making process that undermines the entrepreneurial capabilities of businesses in various territories.

Bureaucratic matrix structures tend to be removed from the coal face; when that happens, the wrong decisions are made, which ultimately hurts the business.

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

Lessons Learnt

SA Entrepreneur Takes First-Of-Its Kind Business To An International Level

Jo Farah shares some insights on his entrepreneurial journey as Global Entrepreneurship Week (GEW) gets underway.

Entrepreneur

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South African-born entrepreneur and creator of the world’s first environmentally friendly sneaker care product – Jo Farah says entrepreneurship has always been part of his DNA, and making a valuable contribution to society his ultimate goal.

The founder of Sneaker LAB – an innovative business that’s managed to create a first-of-its-kind, biodegradable sneaker care product, delivered his sentiments on entrepreneurship and his entrepreneurial journey as Global Entrepreneurship Week (GEW) kicked-off in 170 countries around the world this week.

Farah, who’s been mentored and groomed by his entrepreneur father, says developing a successful business has always been part of his life’s plan. And while he managed to establish a few start-ups during his entrepreneurial journey, which includes founding a guerrilla marketing agency in South Africa, and producing ads for the likes of Adidas, New Balance and Puma it still wasn’t enough.

After returning from the United States in 2008 with just one thing on his mind – to help cure South Africa’s conundrum by creating jobs for the unemployed, and in-turn fostering economic growth, Jo invented a one-of-a-kind sneaker care product, and put shoulder to the wheel to establish his business in 2013.

Related: How Lorenzo Escobal Bootstrapped His Way To Competing With Titans And Attracting Top-Tier Clients

sneaker-lab-founder-jo-farahStarting a sneaker care product range was a natural choice, especially considering Jo’s passion for sneakers, street wear and urban culture. He also wanted to create a complimentary product to accompany the list of sneaker brands that has inspired him over time. Jo’s work behind the scenes commenced in earnest and in no time he conducted enough research to support his theory – there was a gap in the market for branded sneaker care products. He knew that he was on a good wicket.

“There already was a range of non-branded products on the market, but my research revealed there was a healthy appetite for branded, environmentally friendly sneaker care products. That spoke directly to my business model,” he says.

Today, Sneaker LAB has placed Cape Town on the map with its premium global status – it’s the only sneaker care product range in the world to be Green TAG certified, environmentally friendly and biotech driven. Its products are water-based, readily biodegradable, and the packaging is suitable for recycling. The business also operates internationally, in 50 countries across Africa, with an experiential brand store in Braamfontein Johannesburg; as well as downtown Los Angeles in the USA; Asia and Europe.  The business is growing by the day, with a store in Tokyo set to open soon.

As an entrepreneur he’s grown in leaps and bounds, and despite many changes along the way, his sentiments on entrepreneurship remain.

“Inspiring potential entrepreneurs to develop an entrepreneurial mindset and embark on an entrepreneurial journey is one way of solving some of the world’s most critical problems, and freeing the economically marginalised,” Jo says.

Related: Two 20 Year Olds Reshape Entrepreneur Landscape With New Social Investment Platform

He urges young aspiring entrepreneurs with an entrepreneurial mindset to take the plunge and to channel time and energy into developing their business ideas into something tangible and workable that could generate good long-term financial returns.

“People will tell you that it can’t be done, but believe me, it can. All you have to do is to believe in your idea and to work hard and smart and you’ll reap the benefits,” Jo says.

 

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9 Ways Successful Entrepreneurs Spend Their Weekends

All work and no play makes for a very dull entrepreneur.

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Successful entrepreneurs have a passion for what they do, so working hard is part of their DNA. But anyone who is successful also recognises that life and work are a marathon, not a sprint. Even they need downtime on the weekend to ensure they’re up to the task of being creative problem solvers and innovators Monday through Friday.

Sure, they may spend some time catching up on administrative work. They may spend time on a big project that needs special attention. And they should definitely spend time thinking about the future and considering the big picture.

But what successful entrepreneurs don’t do is spend the entire weekend buried under work. We all need a break, and entrepreneurs are no less immune to burnout than anyone else. Their weekends are spent restoring their bodies and minds, and getting prepared to function optimally come Monday.

Here are nine things successful entrepreneurs do over the weekend to unwind and re-energise for the week ahead.

wake-up-routine

1. Wake up at about the same time

Successful entrepreneurs understand that staying on track for the week ahead means keeping the same sleeping patterns, even on weekends. That means going to bed and getting up at about the same time all week. This is because your circadian rhythm will stay consistent, so your body will naturally know when it’s time to sleep and wake up.

As tempting as it might be to sleep in, doing so can throw off your sleep/wake cycle, disrupting sleep patterns and giving you a poor night’s rest. Make sure you aim to get seven to eight hours of sleep every night to avoid a sleep deficit. Also, getting up early means you’ll be ready for whatever the day brings and you’ll have time to accomplish all the things you hope to do.

Related: 20 South African Side-Hustles You Can Start This Weekend

2. Spend quality time with loved ones

It’s no surprise that weekdays can be hectic and filled with obligations. There’s a good chance you spent more time in front of your computer (and with co-workers and colleagues) than with the most important people in your life. Make sure you’re tending to the quality relationships in your life by making them a priority on the weekends.

Have a date night with a partner. Go for a long walk or enjoy a leisurely lunch with a friend. Make sure you’re building and maintaining those relationships by really listening to them. And then share what’s on your mind and how you’re feeling. The support and connection you feel with others will give you resiliency and can support you in stressful times.

3. Pursue a passion

Is there some hobby or activity you’ve been wanting to try but have never made time for? Dedicate some weekend time to pursuing a passion that’s outside of work and beyond your normal day-to-day obligations. Maybe you’ve always wanted to learn to paint, take up photography or write a novel.

Whether it’s a long-lost hobby or a labor of love you’ve dreamed of embarking on, stop telling yourself that you’ll get around to it “someday.” Set aside a quiet weekend morning or afternoon to work on it. Pursuing your interests beyond work improves your mental health and reduce stress levels. Plus, focusing on activities outside of work will improve your creativity and give you a chance to look at life from a new perspective.

Related: How To Work Less And Still Get More Done

camping trip

4. Find time for a mini-adventure

Weekends give you a chance to unplug from life, put aside your daily responsibilities and go have some fun! Let loose and break out of your rut by taking yourself on a mini-adventure. Get out of the house and find a change of scenery.

A mini-adventure means sticking close to home, so hiking the Grand Canyon may be a bit much, but an overnight camping trip or a day hike is totally doable. Spend an afternoon at the beach or take your bike out for a long ride. The point is to get out and make a memory that will give you a smile for the rest of the week.

5. Fuel their creative mind

Successful entrepreneurs make sure they take time to feed their creative minds by finding ways to connect with the arts. You don’t need a degree in art appreciation or music theory to enjoy the benefits of engaging with the arts. Simply visiting a local museum or spending time listening to music will suffice.

Viewing art can be like a mini-vacation for your brain. It activates areas of the brain that are involved in processing emotion and engaging your pleasure and reward systems. Listening to music can have an even more dramatic effect. In fact, music has been found to stimulate more parts of the brain than any other human function.

6. Relax, reflect and renew

Savvy entrepreneurs have learned that they must give themselves the space and time to decompress and mull over the events, issues or dilemmas they face. Giving yourself time for self-reflection allows you to link and construct meaning from your experiences. Reflection is one of the main ways we gain insight and foster complex learning and personal growth.

In our busy world, we are often dealing with packed schedules and juggling multiple issues. Make sure you find time on the weekend to disengage from your hectic schedule and just chill. Try journaling, going for a walk, taking in the beauty of a sunset or even just focusing on the present moment and being aware of all the sensations you’re experiencing.

Related: Get Your Weekend Started

hiking

7. Get outside and exercise

Whether it’s getting out for a walk through the neighbourhood, shooting some hoops or taking a run through the park, high-achieving entrepreneurs get outside on the weekend to stretch their legs and soak up some vitamin D. There are some great benefits to an outdoor rather than indoor workout (although the most important thing is getting exercise, however it works best for you).

Getting some natural sunlight may be a welcome reprieve from artificial lighting if you spend most of the week in an office. Studies have found that adults tend to exercise for longer when they’re outside. You also tend to burn more calories and work slightly different muscles because of the wind resistance and changes in terrain. Perhaps most important, you’ll have a chance to admire nature and the outside world, which is good for your mental health and well-being.

8. Socialise and network

Successful entrepreneurs realise that any event or gathering is a chance to get to know other people and learn something new from someone you haven’t met. Set aside time to socialise with friends and family or get to know colleagues and workmates. If everyone else is busy this weekend, look for other opportunities to socialise and do something fun and interesting.

Check out a local community event. It could be a great chance to learn more about where you live and network and make connections with others. You could also look for a volunteer opportunity with a charity or nonprofit you’d like to support, such as a local animal shelter, senior centre or food bank. If you enjoy active sports, join a local team or club. If you’re into less strenuous activities, consider a joining a bowling or bocce ball team.

9. Catch up on rest

It’s been a busy week, and you’re feeling sleep deprived and run down. While sleeping in isn’t a good idea, successful entrepreneurs know when they need to catch up on some much-needed rest. A 10- to 20-minute power nap may be just the thing to help you feel refreshed and alert – a short snooze is actually much more effective than a cup of coffee in providing an energy boost.

It’s best to keep naps short: 30 Minutes or less. Longer naps are more likely to leave you feeling groggy and can interfere with your nighttime sleep quality. So when that wave of post-lunch sleepiness hits, go ahead: Indulge in an mid-afternoon nap and enjoy the rest of your weekend!

This article was originally posted here on Entrepreneur.com.

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How Lorenzo Escobal Bootstrapped His Way To Competing With Titans And Attracting Top-Tier Clients

Inception Automotive Detailing was founded in 2011 by Lorenzo Escobal. He was only 18 at the time, and the business started small, but Lorenzo has grown it significantly over the last few years and aligned it with top brands. His secret to success? Being proactive and not being afraid to ask for what he wants.

GG van Rooyen

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Vital Stats

  • Player: Lorenzo Escobal
  • Company: Inception Automotive Detailing
  • Location: Toronto, Canada
  • Established: 2011
  • Visit: inceptionautodetailing.com

As is often the case in the world of entrepreneurship, Lorenzo Escobal launched his own business purely out of necessity. Attending university in 2010, he realised that finding a job shortly after North America had experienced a financial meltdown wouldn’t be easy. If he wanted to be sure of an income, he would need to create it for himself. So, having detailed cars for friends and family since he was 15, he decided to launch his own operation called Inception Automotive Detailing.

He bootstrapped the business — launching with just $1 200 — and grew it slowly. Today, the company boasts clients like Google and Tesla. Here are Lorenzo’s tips for bootstrapping a small business capable of competing against much bigger players and attracting top-tier clients.

1. Build a great website and market online

The fact of the matter is, your company is judged largely by the quality of its website and online presence these days, especially if you’re taking your product/service to the client. Even if you don’t have fancy premises, you can create a professional appearance by investing in a great website.

Most people are going to find you through your website, so make sure it instantly impresses. Also, invest time and money in creating effective online marketing campaigns on Google and Facebook. Funnily enough, Google approached us about detailing work by finding us on Google.

A good website and good online reviews got us a foot in the door. From there, we could prove ourselves through our work.

Related: Lessons From The Rich And Famous: Manage Your Money Like Oprah To Avoid Going Into Debt Like Nicholas Cage

2. Learn to network

Attracting clients online is important, but real-world networking shouldn’t be neglected either. There is immense value in joining professional organisations and attending conferences. It’s a great (and affordable) way to market, and you never know how the connections you make may pay off down the line. Networking and being in the public eye also builds credibility for your business. I’ve put a lot of time into getting my name and brand out there, but it’s been worth it.

3. Remember that no one is truly ‘self-made’

Every entrepreneur benefits from the wisdom and hard work of others. I’ve had great mentors who have helped me immeasurably in growing my business. I’ve also had the privilege of working with a great team who has helped me make the business what it is today. I do my best never to forget this, and I view myself not as a boss, but as a part of a team. Sure, I attend a lot of conferences and events, but I also jump in and help when there’s a lot of work to do.

As an entrepreneur, you need to be willing to get your hands dirty and do whatever’s needed — even if that means grabbing a mop and cleaning a dirty floor.

4. Make things happen

As an entrepreneur, you need to create opportunities, not wait for them to fall into your lap. I managed to get work from Tesla, for example, simply by asking for it. I filled out the contact form on the Tesla website and got a reply three days later.

Many entrepreneurs think that it’s pointless to approach large organisations because they’ll never want to do business with a small operation. Never simply assume that. Just ask, and see what happens. Sure, you’ll have to deal with a lot of rejection along the way, but that comes with the territory. Great entrepreneurs are never afraid to put themselves out there.

Related: How Matthew Piper And Karidas Tshintsholo Launched Their First Business From Their UCT Dorm Rooms

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