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This Enterprises UP Expert Explains Why Start-Ups Really Fail

Too many young businesses fail because the entrepreneurs involved don’t focus on the basics early on. If you want your company to beat the start-up odds, you need to sweat the details.

GG van Rooyen

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Vital stats

  • Player: Dr Alex Antonites
  • Organisation: Enterprises University of Pretoria
  • Position: Professor in Entrepreneurship in the Department of Business Management at the University of Pretoria. Consults for Enterprises UP.
  • Established: 2000
  • Visit: enterprises.up.ac.za

As a lecturer at the University of Pretoria and a consultant to Enterprises UP, Dr Alex Antonites has dealt with a lot of new entrepreneurs. And one of the main reasons their young businesses go under is a failure to focus on the fundamentals.

Too many new entrepreneurs are so eager to get out there and sell, that they neglect important support functions until it is too late.

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

Here are Dr Antonites’ tips for getting the fundamentals right.

1. Do your research

“Many new businesses fail because the entrepreneurs involved simply don’t understand the market or the industry,” says Antonites.

“Before investing too much time and money into a business, you need to do research. There’s a lot of information out there these days, you just need to access it. Examine the nitty gritty of an industry. What are the rules and regulations involved? How saturated is the market? Who are the main players? What kind of capital do you need to set up this particular kind of business?

“You also need to do what is called customer discovery. Before launching a business, get out there and speak to people. Find out if there really is a market for what you’re selling before you invest too much time and money.”

2. Understand turnover

“When it comes to ascertaining the health of a business, we don’t actually pay much attention to turnover. It all depends on the industry you’re operating in and the margins you’re dealing with,” says Antonites.

“In an industry like mining, for example, you could have a massive turnover without really making much money. So, in order to be successful, you need to understand — and pay attention to — things like gross profit, net profit, debtors, creditors, etc.

“You need to know exactly what the financial situation of your business is at all times. You need to know what’s coming in and what’s going out every single day. You also need to be able to read a financial statement and know what’s going on. Some financial literacy is important. You don’t need to have a degree in accounting, but you need to understand the basics.”

Related: RocoMamas Founder Brian Altriche’s On Fabulous Failures And Visualising Success

3. Ask the experts

“When your business is new and you’re not really making a lot of money yet, employing a financial or legal consultant can seem like an unjustified expense. But getting an accountant to look at your books or a lawyer to examine your contracts is worth it. A lot of businesses bring in experts only when there’s a problem. That’s often too late. What you should do is bring in knowledgeable people early on. Many businesses make mistakes during the first year or two that they end up paying for long afterwards. This is especially true when it comes to contracts with clients, suppliers and employees. So a lawyer can end up saving you money in the long run,” says Antonites.

4. Spend as little as possible

“While some things, like getting an accountant or lawyer, might be justified, it’s still important to manage your expenses carefully,” says Antonites.

“Moving into expensive offices or hiring a lot of people can cripple a young business, so you want to keep your expenses as low as possible.

“Where a lot of small businesses end up losing money is in procurement. I had a student a while ago who was in the construction industry. His turnover was very decent, but he wasn’t making a profit. When I started questioning him about it, it became clear that he was purchasing his building supplies from a retail store, so he was paying R2,10 for a brick. Once we found a place where he could buy supplies at wholesale prices, he was suddenly only paying 90 cents a brick, which meant he was now making a solid profit.

“Even as a small business, you need to find ways of getting good deals from suppliers. Paying retail prices is not an option. One strategy that often works is setting up a buying cooperative. Teaming up with two or three other businesses can give you a much better bargaining position.”

Related: How Neil Robinson Is Saving The World 1 Bracelet At A Time

Take note

It’s tempting during the early days to neglect admin and financial controls in favour of getting out there and selling, but it’ll be detrimental to your business in the long run. A sustainable business establishes the right controls early on.

Lessons Learnt

(Podcast) ‘Bizarre Foods’ Andrew Zimmern: ‘I’m Addicted To The Hustle’

How this week’s ‘How Success Happens’ guest overcame personal struggles and built an empire.

Dan Bova

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I didn’t know what to expect when we scheduled an interview over breakfast with today’s guest Andrew Zimmern. As you may know, the chef, writer, restaurateur and TV personality made a name for himself traveling the world and eating some, well, bizarre foods on his hit travel/food show, Bizarre Foods.

Turns out our breakfast was pretty normal – we didn’t dig into a fresh plate of scrambled brains or anything – but the conversation was anything but typical.

Over the past couple of years, Zimmern has built a true empire around his name with books, TV shows, restaurants (including his new Twin Cities joint Lucky Cricket), and a production company, but as he very candidly told me, the road to success has not been easy. He has gone through a lot of personal pain on his journey, and he says it is a daily endeavour to keep himself moving on the right track.

As Zimmern explained, over the course of his life, he’s had problems with substance abuse, depression – even homelessness – and he was very open about sharing the lessons he’s learned along the way about coping and finding redemption. We also spoke about his dear friend, Anthony Bourdain, and about the struggles of feeling overwhelmed that most of us face.

Related: Gareth Cliff Shares His Tips For Starting Your Very Own Podcast

But don’t get me wrong, he’s really funny, too! There’s nothing “normal” about Andrew Zimmern. Hope you’ll enjoy our conversation, thanks for listening.

This article was originally posted here on Entrepreneur.com.

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Lessons Learnt

How BrightRock Is Disrupting The Insurance Industry With These 2 Pivotal Strategies

Developments in technology, and clear communication are positioning BrightRock to disrupt their industry and transform the consumer experience.

Monique Verduyn

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Vital Stats

  • Players: Sean Hanlon, Leopold Malan, Schalk Malan, Suzanne Stevens
  • Company: BrightRock
  • Est: 2011
  • Visit: www.brightrock.co.za

BrightRock was started around a dining room table in 2011 by four people with years of industry experience and — importantly — a diverse set of complementary skills.  They wanted to make changes to an industry with an age-old methodology by allowing customers to co-create a solution that precisely meets their individual needs, and adjusts as those needs change. Today, BrightRock is the fastest-growing insurer in the intermediated individual life risk market. It also provides underwriting management services to funeral parlour businesses and, more recently, has entered the group risk insurance market, offering its needs-matched approach to employees.

The founders of BrightRock, established in 2011, knew the life insurance industry all too well, and they found its methodology wanting. “Traditional life insurance lumps all the individual’s needs into one policy,” says CEO Schalk Malan.

“It’s a methodology that has been around for centuries. We started afresh and looked at how we could design life insurance based on individual requirements. Our cover is designed to exactly match each specific financial need. Because there is no waste, it’s more cost efficient and sustainable. And if circumstances change and our customer needs more cover, it’s easy to get it because needs-matched design enables the policy to change in line with changing needs.”

1. Embracing digital technology to provide needs-matched insurance

Suzanne Stevens, marketing executive director at BrightRock, points out that this type of innovation achieves efficiency (cost savings) and effectiveness (higher returns). “By harnessing digital technology, we have made our operations more efficient, and aggressively lowered costs by up to 30% for our customers. Every rand they spend with us works harder for them. That’s the benefit of a solution designed around the customer.”

BrightRock’s founders took a similar approach. ‘We ditched legacy thinking in favour of creating a product that is intuitive and easy to navigate. An enormous amount of time and effort went into writing and designing that system, and creating the optimal customer journey.”

Related: How BrightRock Is Rocking The (Industry) Boat In Only 5 Years Since Launch

Unlike clunky legacy systems, BrightRock’s platform is modularised, and was built according to the agile principle of rapid delivery cycles. The result is a technology stack with longevity, that is also flexible enough to be tweaked when needed.

“The advantage of the technology available today is that you can plug things in and pull them out as required,” says Suzanne. “That’s one of the enablers of a truly disruptive mindset. To step away from accepted norms and find new solutions requires curiosity and creativity, as well as a lot of courage to go up against large incumbents in the market. There is always resistance to new technology, although we are fortunate in this country to have one of the most innovative insurance sectors in the world.”

2. Effective communication is critical

These disruptors have set themselves above the rest through one surprisingly simple tactic —  effective communication. They agree that it simply doesn’t matter how world-changing your product or service is if you don’t communicate it to the right audience at the right time. New companies that fail to communicate their remarkable new development will quickly be pushed aside by other disruptors. Without a clear communication strategy that reaches the audience in the industry you’re trying to disrupt, you’ll set yourself up for failure. A key question to ask when you are developing your communication strategy is simply whether people understand what you do.

“Because the premise for our product was fundamentally different from anything on the market, communication and clear messaging were critical to convincing our clients to put their trust in us,” says Schalk.

“It was especially important to educate insurance advisors so they would understand what we were doing, why we were doing it, and how it was better than the other options available. That was key to disrupting the individual life market.”

Currently, BrightRock employs 380 staff, has experienced 40% year-on-year growth, and has an annualised premium income of more than R1,3 billion. The company has recently entered the group risk environment with a similar offering that addresses many of the same shortcomings of traditional group risk products. “The inefficiencies of the structuring of group products has meant that, to remain competitive, insurers have cut the benefits offered to employees, undermining their sense of financial security. Change is needed, and we believe our needs-matched philosophy positions us to change the group risk market too.”

‘We ditched legacy thinking in favour of creating a product that is intuitive and easy to navigate. An enormous amount of time and effort went into writing and designing that system, and creating the optimal customer journey.”

Unlike clunky legacy systems, the BrightRock’s platform is modularised, and was built according to the agile principle of rapid delivery cycles. The result is a technology stack with longevity, that is also flexible enough to be tweaked when needed.

Related: BrightRock’s 5 Entrepreneurial Tips For Start-ups

This iterative, modular approach typically begins with defining the strategy and programme plan upfront, delivering a core capability fast so it can provide benefits immediately, and then continuously improving with regular, incremental capability improvements to achieve the objectives of the strategy. It’s an approach that fosters closer collaboration between stakeholders, improved transparency, earlier delivery, greater allowance for change and more focus on the business outcomes.

“The advantage of the technology available today is that you can plug things in and pull them out as required,” says Suzanne. “That’s one of the enablers of a truly disruptive mindset. To step away from accepted norms and find new solutions requires curiosity and creativity, as well as a lot of courage to go up against large incumbents in the market. There is always resistance to new technology, although we are fortunate in this country to have one of the most innovative insurance sectors in the world.”

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Lessons Learnt

The 9 Obsessions You Need To Have To Become A Self-Made Millionaire

Here’s how to stay focused on your millionaire goals.

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The ones who succeed weren’t handed a golden ticket; it wasn’t chance that helped them cultivate their fortune. To reach millionaire status, you must be driven to reach your dreams. You must be obsessed in order to be successful.

These are the nine obsessions that give every self-made millionaire an edge in creating success and wealth.

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