Eat with a local: Make a meal, make a friend
- The entrepreneur: Vicky Edmunds
- Investment: £50 000 for 15% of the business.
- The idea: A website that connects tourists with locals who will host them, cook traditional, home-cooked meals for them and introduce them to the local culture. The idea is to unite food lovers across continents.
- What the Dragons had to say: Consensus was that the numbers don’t work. Vicky asked for too little investment to achieve her goals. There was no clear indication of how the investor would get a return and the Dragons felt it was too big an investment for too little equity. It’s extremely difficult to monetise a concept like this and while the website works – and is a wonderful idea – it’s not clear whether it can be a viable business that generates revenue and makes a profit. The Dragons also felt that Vicky needed more commercial acumen.
- What she did right: Vicky had a very infectious enthusiasm for her idea. She came across as extremely personable and engaging – the judges enjoyed her energy. She is in touch with her target market and remembers each of her customers by name. Vicky clearly had a real passion for what she does. While she has come up with a very nice reciprocal model, the question is, does it have a business angle? As she points out, she has accumulated 1 000 members without even trying.
- What she did wrong: The idea was initially presented with enthusiasm but very little business information was provided, such as the target market, the revenue model or what the £50 000 investment would pay for. Vicky also cooked a meal for the Dragons, which was lovely, but she wasn’t selling her cooking skills. It was a neat trick, with no real purpose. She also didn’t have a firm grasp of relevant facts, such as how many of her members charged tourists for meals. When Georgia (her daughter) joined the panel to discuss figures, all amounts were presented as ‘we think’. Vicky and her daughter were unclear of what the tourism industry in the UK was worth, ranging from millions to billions. When asked how the investment would be spent it became clear that they hadn’t done sufficient research as the response was £20 000 on the website and £30 000 on advertising, but with no clear plan of how the money would be allocated if the website cost more other than to take money from the advertising budget. Vicky didn’t place sufficient focus on the financial side of her business and how her idea could be monetised to generate a return for the investor.
- Verdict: No
- The lesson: An engaging personality and a great idea aren’t enough, you need to have a clear plan for how your business idea is going to generate money. In addition, know how much working capital you will need and ask for enough to get your venture off the ground.
Third Door: Office come nursery
- The entrepreneur: Yusuf Shatz and Shadi Mustafa
- The investment: £120 000 for 20% equity.
- The idea: Providing office space that comes with childcare for working parents. Childcare services can be inflexible and expensive, while working at home with a small child in the vicinity can prove distracting. This new way of working enables the parent to rent office space in a building with an on-site nursery. The business is already up and running, the couple is asking for an investment to grow the business and turn a profit.
- What the Dragons had to say: A lot of questions were posed around set-up costs and the return to date over the 2 years that the business has been operational. The couple was unable to answer all of the financial questions to the Dragons’ satisfaction. What was very clear was that unlike the previous pitch, as this was an existing business, the Dragons posed some very tough questions pertaining to numbers, especially regarding profit and loss within the business. They pointed out that businesses make money and the couple would be well advised to close the nursery, which was not making a profit, and just concentrate on the office space, which is where the revenue lies. However, the couple insisted that the nursery was their USP (unique selling proposition) and as such gave people a reason to rent their office space.
- What they did right. The concept is excellent, as shown by the fact that their child – who was in the room – was kept occupied by a carer throughout the entire pitch. This gave a good indication of how well the concept works and the quality of care available. Initially, Yusuf knew his figures off the cuff, both in terms of the investment and losses made by the business. He was very upfront and honest about the fact that his start-up had lost money. Being open about this showed that he understood the business and its figures. In addition, the fact that he had thus far £400 000 of own skin in the game, demonstrated his faith in his own business idea. The business showed very good growth from year one to year two, with a projected profit for year three.
- What they did wrong: When the Dragons started asking for more detail about the year-on-year results, Yusuf went blank and couldn’t remember his accounts. When pitching to investors you need to be able to provide numbers asked for off the cuff. The Dragons pointed out that even though the couple’s research had told them that office space was profitable, much more so than nurseries, they had still chosen to pitch the unprofitable business idea. This begs the question: does having a USP justify the costs? The couple ended up ignoring the most commercial profitable part of their business. It’s also why they’ve had such high losses. Not enough information was provided, an issue that might have been addressed had they prepared a proper business plan. The Dragons advised that the couple prove the workability of the concept by operating at a profit for a number of years before seeking investment.
- Verdict: No
- The lesson: Sometimes your business idea needs to pivot once you’re operating. You also need to be completely prepared when pitching to investors. It’s extremely important to be able to provide detail when asked for it.
Dirty Beach: Sandcastles in the sky
- The entrepreneur: (S) Andy Robertson
- The investment: £100 000 for 10% of his business.
- The idea: After spending six years building sand castles at events and festivals, Sandy is convinced that there’s money to be made from selling food and drink to the crowds attracted by his sand castles.
- What the Dragons had to say: More information was required about how he would ship sand to inland venues, seating arrangements for customers and profit margins on food and drink. The Dragons were incredulous at Sandy’s lack of firm detail as to how the business would actually work and make money that would provide a return for investors. It’s important to have a proper business plan that includes financial projections of how the business is going to make a return. Speaking to a guy who runs a bar and finding out how much he makes isn’t real research and figures. These need to be stress tested and proven. Far too little firm detail was provided. Consensus was that the beach bar won’t make money and Sandy should drop that idea and focus on what he’s good at, ie building sand sculptures.
- What he did right. Sandy was passionate about his business idea and he’s clearly a talented sand sculptor. His idea to make furniture out of sand was innovative and novel. His idea to ship sand to locations inland was a good one.
- What he did wrong: Sandy didn’t cover the cost of shipping sand inland and focused more on making money from selling beer, although he had no idea what his margins on that would be. He needed to show how he’d make money by providing concrete figures. There was no clear business plan indicating how he would make a return. Sandy valued his business at a million pounds but couldn’t show where that figure came from. He was unclear on what he would need for set-up or what his turnover will be. Or his margins. His grasp of the numbers was lacking. While he knew something about running a bar he didn’t know anything about the financial side of the business, which is vital.
- Verdict: No
- The lesson: To get investment, you need to have something that others can’t do. That’s your USP but you still need to understand the mechanics of making money. Passion and talent can’t replace business acumen.
Shampooheads: Bubbles and babies
- The entrepreneurs: Geoff and Collette Bell
- The investment: £75 000 for a 15% investment.
- The idea: The couple has developed a kids’ shampoo brand that features fun characters on the bottles, encouraging kids to look forward to bath time, which is an important parent/child bonding time. The bottles are pump action – designed for kids aged 2 to 6 years – and by eventually allowing them to wash their own hair, will create independence as kids get older.
- What the Dragons had to say: The Dragons unanimously loved the idea. They were very impressed with the product and extremely impressed by the deal in hand with a high street retailer. The couple’s negotiations with Boots have resulted in them getting free promotional space in-store for four weeks.
- What they did right. When pitching, the couple quickly jumped into their thorough market research. Their brand was registered, as were domain names for the characters and the products have the necessary approvals. They have all been dermatologically tested, tear-free and clinically approved and the couple paid for this out of their own pockets. A lot of thought has gone into what kids (and parents) need at bath time. The business already has a deal in place with UK’s leading chemist chain and Geoff knew the relevant figures off hand. He readily provided his cost price and profit margins as well as sales forecasts. The negotiation of the free in-store promotional site indicates buy-in from the retail chain to assist in launching the brand. The business needs the investment because the couple has built the business from scratch, boot-strapping it as they went. Now they have exhausted their resources and have a cash flow issue. They need the investment to grow. Geoff mentioned his background in shampoo and hair care products, another plus as he demonstrated his strengths to the Dragons. They ended up in a position where the Dragons were pitching to the entrepreneurs – that’s a real place of strength.
- Where they did wrong: Not much.
- Verdict: Yes
- The lesson: If you’ve done your research, approached the right clients, signed good deals, know your numbers, demonstrated there’s a market and have the details at hand – you’ll get investment.
If you have a great business, choose who you approach for investment carefully – you need to be able to work with your investor – closely. In the end they chose two of the Dragons as investors after evaluating who would bring what to their business.
Are you an entrepreneur with a viable new idea and an investor-ready business? Could you handle the heat in the Dragons’ Den? Enter BBC Entertainment and Entrepreneur Magazine’s exclusive Dragons’ Den Series 10 competition and you could win a business makeover worth R140 000 with business guru Pavlo Phitidis and Aurik Business Accelerator.
Win 1 Of 50 Free Tickets To This Exclusive Event With Entrepreneur And Matt Brown Media
Calling start-up business owners or aspiring entrepreneurs 25 years old and under. Win a free ticket to this life-changing event with Entrepreneur Magazine, Matt Brown Media and South African entrepreneur Max Lichaba.
Are you a young, start-up or aspiring entrepreneur looking for inspiration from someone who started with nothing and built a R120 million business?
You could be one of 50 lucky, young start-ups and aspiring entrepreneurs to join Lichaba Creations, Kwa Lichaba, Lichaba Custom Rides and Lichaba Refinery owner Max Lichaba on Tuesday 20 March 2018 for an exclusive two-hour lunch and in-person interview brimming with entrepreneurial insights.
Enter to win this once in a lifetime opportunity
If you’re 25 years old and under, and looking for business advice to help you build a successful start-up, then don’t miss this opportunity to receive access to the event, which will be held at Kwa Lichaba in Soweto.
50 exclusive seats up for grabs!
Your prize will include:
1. First-hand insights from successful South African entrepreneur Max Lichaba.
2. A free Brand ID workshop with Vega on ‘How to Develop and Launch Your Brand’.
The workshop focuses on the importance of reflection and self-belief when offering your own personal brand and products to the world. You will be encouraged to explore your own values, meaning and purpose, and guided as to how to create an identity that will capture the unique individual that is “brand YOU”. The workshop will be hosted in Soweto or at Vega’s campus in Randburg, and the date is still to be determined
AS WELL AS
- FREE access to the premier Kwa Lichaba venue.
- FREE lunch included in the event.
How to enter the competition
You must be under 25 years old to enter the competition:
- Send an email to Entrepreneur Magazine at firstname.lastname@example.org
- Give us your full name and ID number.
- Tell us in your email why you should win a free ticket to this premier event.
What you will learn from Max Lichaba
Max finished school with a Grade 10 education, and was expected to become a miner like most of the men in his community. Instead, he focused on becoming a business owner. It’s been a long, hard road, full of challenges, but today he heads up a R120 million business. Share in his journey as Matt Brown interviews him in person, and unpacks his journey, the hardships he’s faced, and the lessons his learnt in overcoming those obstacles, including:
- Wanting more out of life than being a miner in his hometown, like his peers and seeking alternative opportunities to make money and uplift his community.
- The power of persevering even in the face of closed doors – they eventually opened up because he pushed through for long enough.
- The importance of starting, even if you start small, by initially focusing on breaking even before buying into the fancy additions to presumably make business faster and easier.
- Banking on a new business and losing it all, with the added responsibility of paying employees’ salaries and pension packages with money he didn’t have
Max will join a list of some of South Africa’s most successful billionaires, entrepreneurs and the CEOs hosted on The Matt Brown Show, on Tuesday morning. Matt’s 20 years’ experience in business strategy, technology and marketing communications and over a dozen local and international awards make this a discussion worth participating in.
Don’t miss out – enter the competition to win your ticket
- Send an email to Entrepreneur Magazine at email@example.com
- Give us your full name and ID number.
- Tell us why you should win a free ticket to this premier event.
Franchising Sector Ready To Lend A Hand
How business can use franchising to improve jobs and support entrepreneurship throughout South Africa.
“We are at a moment in the history of our nation when the people, through their determination, have started to turn the country around.
Now is the time to lend a hand…
Now is the time for each of us to say ‘send me’…
Now is the time for all of us to work together, in honour of Nelson Mandela, to build a new, better South Africa for all.”
Cyril Ramaphosa, SONA 2018
The Presidents commitment to small business
The SONA speech by President Cyril Ramaphosa and his commitment to supporting small business and entrepreneurship has been welcomed by Tony Da Fonseca, the Franchise Association of South Africa’s Chairman, who in 2017 had already met with the chairperson of the Parliamentary Portfolio Committee for Trade & Industry to pave the way for greater co-operation between government and the franchise sector.
“We are encouraged by the President’s promise to increase co-operation with business and look at ways to encourage entrepreneurship, youth training and job creation” says Tony Da Fonseca.
“We are confident that the franchise sector can play a pivotal role through innovations like the development of social and micro franchising which hold enormous and largely untapped potential for the development of the economy and improve service delivery.”
Confirming that the growth of the economy will be sustained by small businesses, “as is the case in many countries”, President Ramaphosa confirmed that government would honour its undertaking to set aside at least 30 percent of public procurement to SMMEs, co-operatives and township and rural enterprises and would continue to invest in small business incubation. “It is our shared responsibility to grow this vital sector of the economy.”
Franchising is ready to play a larger role
As a sector that already contributes 13, 3% to the country’s GDP generating an estimated R587 billion through its 845 franchise systems, 40 528 franchisees and employing 343 319 people, franchising is perfectly poised to play an even bigger role in furthering small business development, skills transfer and job creation.
“As a successful businessman and former franchise owner himself, Cyril Ramaphosa is familiar with the far-reaching potential that franchising has in small business development, skills development and job creation, says FASA Chairman Tony Da Fonseca.
“We are hopeful that he will look to us in the franchise sector to assist in building that ‘small business support ecosystem that assists, nourishes and promotes entrepreneurs’ that he referred to in his SONA speech.”
That, together with the welcome measures by government to reduce the regulatory barriers for small business and the introduction of an innovation fund targeted at start-ups and small suppliers that could become supply chains to the franchise sector, will go a long way to opening the doors to small business expansion and the benefits to the economy that will flow from that.
The Franchise Association of South Africa (FASA) has always been a proponent of small business incubation and has, over the years, embarked on various public/private initiatives to grow the franchise sector. Their efforts have included youth cadet schemes through the Jobs Fund, developing micro businesses to become franchise-ready through the Department of Small Business Development’s Micro Franchisor Development Project and through various private initiatives with funders and franchise members.
The franchise sector to stimulate entrepreneurship and jobs
According to Tony Da Fonseca, much more can be done in the public/private development space. “The opportunities to transform government services, such as health care, water delivery, education and in many other areas, through the social franchise format, are enormous. Both locally and internationally, pilot projects in social franchising that operate on commercial principles, making enough profit to sustain operations and re-investing surplus profits into the community they serve, have proved to be viable.”
According to Tony Da Fonseca, the franchise sector is well-positioned to come together in a concerted effort to stimulate entrepreneurship and create much-needed jobs.
Franchising in South Africa currently services around 17 business sectors – way behind countries such as Australia, Europe, Canada and the USA who boast between 25 and over 70 business categories.
“The opportunities to expand into many more sectors and particularly in the social and services sectors of the economy are endless. We welcome the opportunity to work with government in creating an entrepreneurial environment that will grow investment confidence, introduce new small business concepts via the franchise system, accelerate BEE and enterprise opportunities, giving training to the youth and above all create those much needed jobs.”
Mr President, the franchising sector is ready and able to take on the opportunities for ‘renewal and revitalisation, and for progress to build the fair, just and decent society to which Nelson Mandela dedicated his life.’
How To Pick The Business Model That Works For You
So, you’ve picked your lane. You’ve decided what you want to do and why you want to do it. You’ve picked something you’re good at. You’re convinced the world needs and values it. You now need to decide how to make money. That’s where business model design comes in.
There are plenty of business model options for the same idea. For example, let’s say your idea is to offer historic tours of Cape Town. You could either do it yourself or hire professional guides to do it. Or you could use mobile technology to provide DIY walking tours. You could charge per tour or you could charge a membership fee. There are so many options. How do you pick the model that works for you?
The Lean Canvas is a great tool for entrepreneurs who are faced with this question. Adapted from The Business Model Canvas, it provides a simple, one page framework for brainstorming possible business models, prioritising where to start, and tracking ongoing learning. It walks the entrepreneur through the business model process logically and ensures the key elements of a successful business are considered.
My co-founders and I have used the Canvas extensively at Simply – for designing our business model, and for communicating it to partners and investors. The only thing you know with certainty when you start a business is that it’s not going to turn out as you expect it to. The Canvas evolves as you go – it was, and continues to be, a very useful guide in our journey.
Recognising an opportunity for disruption
We figured there was an opportunity to do something disruptive in the SA life insurance space. It was clear to us that lots of people were either not covered or getting a rough deal. Guided by the Canvas, we defined our first Customer Segment as adult South Africans, aged between 25 and 45 and earning between R5k and R30k monthly.
We then identified the 3 big Problems – specific to that segment – that needed solving:
- Most of the people in our segment have some form of funeral cover, but very few have life or disability cover.
- The cover they do have is often expensive relative to the benefits provided (i.e. a very small % of the premium goes towards the risk costs).
- There is no simple, intuitive way to buy good value life, disability and funeral cover online.
Developing a value proposition
Next came the Value Proposition. We believed we could use technology, digital marketing and human-centred product design to deliver simple, online life, disability and funeral insurance at a great price. We felt we could be for life insurance in South Africa what Takealot has been for retail.
We thought the world was moving far faster than incumbents realised; that millennials were ready to buy life insurance online; that we could build for the digital world and be in the right place at the right time.
And the rest flowed from there. I don’t have the time or the space to walk you through the other elements of the Canvas here, but you can probably fill in the blanks. Suffice to say, the process was invaluable and enabled us to build our business around a clearly considered business model. It’s early days, but the signs are good – we’re making a positive impact, having fun and keeping our investors happy.
Creating a Lean Canvas
So, how should you go about sketching your own Lean Canvas? The team at www.leanstack.com suggest the following approach:
- Sketch a canvas in one sitting. While a business plan can take weeks or months to write, your initial canvas should be sketched quickly.
- It’s okay to leave sections blank. Rather than trying to research or debate the “right” answers, put something down quickly or leave it blank and come back to it later.
- Think in the present. Business plans try too hard to predict the future which is impossible. Instead, write your canvas with a ‘getting things done’ attitude.
- Use a customer-centric approach. You may need to sketch one Canvas per customer segment. Start with the Customer Segment and go in sequence.
The Canvas has brought clarity and a common language to our business model design process. It’s enabled us to agree upon and communicate our business model effectively – both internally and externally. It’s also allowed us to tune and adjust our model as our story has unfolded – an inevitability for entrepreneurs. I highly recommend the Lean Canvas as a tool for designing your business model. Give it a try – I think you’ll like it.
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