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Why Seitebatso Rakgokong Reined It All In And Made More Money

Sounds counter-intuitive to do less to earn more, but that’s exactly what Seitebatso Rakgokong of Masedi Electric-Serve had to do to save his business from hyper-growth.

Tracy Lee Nicol

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Vital stats

  • Company: Masedi Electric-Serve
  • Player: Seitebatso Rakgokong
  • Established: Officially 2004
  • Contact: info@masedielectric.co.za

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What’s wrong with this picture: In 2010 a Rustenburg-based electrical installation and maintenance business turns over R3 million, in 2011 R4 million, and in 2012 R14 million. In the space of a year revenue has quadrupled. But then in 2013, revenue drops to R9 million. It must be a disaster, right? Well, no actually.

Related: What the Power of 10% Rule Can Do For Your Profits

Here’s the twist in the story you’re probably not expecting. Dig below the surface and what you discover is that the business was actually three times more profitable at R9 million turnover than it was at R14 million.

Seitebatso Rakgokong is the entrepreneur behind the recalibration of Masedi Electric-Serve, and he tells us the lessons he’s learnt about hyper-growth.

Learning curve #1: Reining in the pitches

“In 2004 the bulk of our clients were government departments but we needed private clients to balance out the often late payments from public sector that impacted cash flow.

By focusing on high quality work, we started getting contracts from mines in Rustenburg, landed Royal Bafokeng Administration as an anchor tenant, and grew from there.

Foreseeing the impact of the 2008 recession and concerned for future business, Rakgokong started pitching to anyone and everyone.

“We aggressively submitted tenders. Typically a 30% or 40% conversion is doing well, so we used that conversion ratio for further bids.” It backfired.

“By the time 2012 started, we had 34 projects running at the same time with some being over 300km away. As a small business we were thrilled, but by the second quarter we felt the effects of such growth – cash flow and profitability were the biggest casualties. Ironically, the government’s continued spending during the recession helped the business a lot, but a late payment would put us into crisis mode.”

The lesson: “We had to make a tactical decision about how many contracts we could handle at a time and the size of those contracts. We had to put a cap on distance and refine who we pitched to – it wasn’t revenue at all costs anymore, but aligning clients to our strengths, whether they were good payers, and the potential to get long-term maintenance contracts with them. This means we turn away some business, but it’s for the good of the company.”

Learning curve #2: Bringing in systems to improve profits

Masedi-Electric-Serve

“In the busyness of so many projects, we were losing track of profitability as we didn’t have specific financial monitoring to track individual project profitability, just gross and operating profit. Before hyper-growth, we enjoyed a healthy profit margin, but come 2012 that had dropped to 4% and some projects even incurred a loss.”

The lesson: “Keeping track of cost of sales is essential. We went from using spreadsheets to needing a more sophisticated financial management package to provide detail on project-specific costing. In construction, one project tends to subsidise another, but it seriously ate into our profitability. Individual monitoring helped stop that, but it also saw us implementing a project pricing review before starting each project. This was important because in the 90 day interim between a bid being accepted and a project starting, prices might have increased.”

Related: Paying Attention To This Will Generate You More Profit

There was another important find in project-specific financial monitoring: “We found supplier pricing wasn’t consistent simply through dealing with different people at the same supplier, so we implemented systems to streamline procurement. On the fleet management side, through fuel and maintenance expenses tracking, we started identifying instances of abuse. By the end of 2012 and into 2013 we really started seeing the results of optimising expenditure.”

The value of mentorship

Seitebatso Rakgokong entered into the 2012 class of Property Point, a Growthpoint enterprise development initiative. Through mentorship, workshops and being supplied with tools for success, he was able to guide his business back to profitability.

He even took his book-keeper along to some of the workshops for immediate system implementation.

“Entrepreneurship is a lonely road. The team at Property Point were very supportive and the overall experience was highly beneficial.” In fact, Masedi-Electric-Serve won first prize for the class of 2012.

Related: Find Smart Ways to Lift Profit Margins Effortlessly

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Top tips

  • Don’t take on clients simply because it’s work. Manage your capacity to avoid compromising your other projects.
  • Refine your bidding process. Look at the quality of the client in terms of longevity, project size, and project requirements aligning with your strengths.
  • Monitor project-specific costing. This will prevent too much subsidising that eats into profitability.
  • Review your pricing when there’s a long interim period. Have prices between being awarded and commencing a project increased?
  • Chase profit, not revenue. Rather go for a R10m project with R2m profit, than a R20m project for R1m profit.

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Tracy-Lee Nicol is an experienced business writer and magazine editor. She was awarded a Masters degree with distinction from Rhodes university in 2010, and in the time since has honed her business acumen and writing skills profiling some of South Africa's most successful entrepreneurs, CEOs, franchisees and franchisors.Find her on Google+.

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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elon-musk

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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