We love a good story and a quick cash infusion, but when it comes down to it, we’re far bigger fans of businesses built on a solid foundation – those that can weather the economy’s fits and starts; that can embrace what’s trendy but don’t crash when kids move on to the next big thing; that address the wants and needs of America’s increasingly diverse population.
Our list of the trends we’ve got our eyes on will help anchor your business, present or future, in reality. From cooking up goodies that satisfy America’s growing taste for all things spicy – a sign of our shifting demographics – to helping workers who are locking the door on traditional office setups, these trends are built to last (at least for a while).
Consider this a jumping-off point as you envision new products and services – and look at it as a heads-up on evolving ways to manage your current business. Now, to your future.
The Rise of Big Data
Cutting-edge entrepreneurs are stepping up to crunch the vast (and ever-growing) stockpile of information too large for companies to store and analyse in-house.
By John Patrick Pullen
A massive abstraction with a cute little name, Big Data is the vast (and ever-growing) stockpile of information too large for companies to store in-house – let alone analyse. All that info offers potential to cutting-edge entrepreneurs willing to step up and do the crunching.
According to IBM, 2.5 quintillion bytes of data are born every day (enough to fill more than 531 million DVDs), and 90% of the world’s digital information was produced over the last two years. “For so long, we’ve focused on human-powered businesses, and now we’re transforming into data-driven organisations that are bringing a level of customer centricity that we’ve never seen before,” says Graeme Noseworthy, marketing director for IBM’s Big Data Solutions Software Group.
And this is just the Cro-Magnon stage of the info boom. By 2020, the annual data-generation rate will balloon 4 300% to 35 zettabytes of intelligence, according to Virginia-based Computer Sciences Corporation. (That’s 7.35 trillion DVDs, in case you’re keeping track).
From yesterday’s Dow Jones industrial average to a GPS tag on today’s Instagram image to tomorrow’s pollen count, every bit of information will be collected, catalogued, distributed, stored and analysed by a rapidly evolving segment of companies. According to Reuters, venture capital firms invested $2.47 billion in fields around big data in 2011, nearly 10% of all money distributed. That’s up from $1.53 billion in 2010 and $1.1 billion in 2009.
“Big Data represents a transformation of the entire IT industry and a $300 billion to $500 billion wealth-creation opportunity for entrepreneurs,” says Matt Ocko, co-managing partner at San Francisco-based investment fund Data Collective. “It’s as sound a bet for us today as investing in PC-related technologies in 1981 or in internet-enabling technologies in 1994.”
Entire funds, like Data Collective, have popped up to support the category, using technology to inform investments in start-ups like California-based Continuuity, which helps developers make data-based cloud applications, and Oregon-based Cloudability, a cloud-computing dashboard that enables companies to monitor their online computing expenditures.
And these investments appear to be solid bets. According to a report by the McKinsey Global Institute, the potential value of big data, if used creatively and effectively by the U.S. healthcare industry, would be worth more than $300 billion in that sector every year. Currently healthcare providers throw 90% of that information away.
And that’s just one of many market segments Big Data will revolutionise. In June Ford Motor Company opened a Silicon Valley lab to process data from more than 4 million cars currently spitting out information. Twitter recently hooked 12 partners up to its massive fire hose of 340 million tweets per day, allowing fledgling firms like New York-based Dataminr to sell global event predictions and Colorado-based Gnip to parse and resell post-related data.
No matter how you look at it – as a consumer, marketer, investor, administrator or inventor -the numbers don’t lie. Big Data isn’t just changing business; it’s changing everything.
Domestic Production Makes a Comeback
Factors like more affordable labour, higher shipping costs, a better financial climate and a surge of homegrown innovation mean the U.S. manufacturing start-up universe is experiencing a renaissance.
By Jennifer Wang
Grandpa can stop complaining: “Made in the USA” is making a comeback. Early this year a New York Times poll revealed that 52% of the public thinks it’s “very important” that products they buy are made in America. This past summer Starbucks generated all sorts of feel-good headlines for its Create Jobs for USA Fund.
In one instance the corporation chose one of the last remaining U.S.-based pottery manufacturers, American Mug and Stein, to create merchandise for its new “Indivisible” brand, which donates a portion of sales back to the fund.
Same deal on the mass-production side. In September a PricewaterhouseCoopers report alluded to a “renaissance” in U.S. manufacturing stemming from factors like more affordable labour, higher shipping costs and a better financial climate – and the fact that “re-shoring” (returning production stateside) could mitigate $2.2 billion in losses from supply-chain disruptions in 2011.
Also helping the cause: a surge of homegrown innovation in the manufacturing start-up universe, including Tesla Motors’ release of the world’s first all-electric luxury sedan from its Silicon Valley headquarters earlier this year. (Robots help keep operational costs down.)
“One of the things we learned in the downturn is how to do things leaner and greener than we used to. We can get the same kind of revenue figure with less cost,” says Karen Burns, co-founder of California-based East Bay Manufacturing Group, an organisation that counts start-ups and multifactory operations among its members.
A recent group survey revealed that 69% of members were “very positive” about the current business outlook, with 38% expecting sales growth of more than 10% in 2013.
By keeping production close to home, companies reap benefits on the connectivity front, translating into better products and systems. Case in point: San Francisco-based Everlane, which makes luxury apparel and sells it directly to consumers online, manufactures half its product line in the U.S. Founder Michael Preysman believed staying stateside would give him speed and more control over his inventory.
He was right – over the summer, an endorsement on the popular lifestyle blog A Cup of Jo caused a flash sellout of 2 000 black V-neck T-shirts in a single day. If the tees had been sourced from overseas, rapid restocking would not have been possible.
“It can take a minimum of 12 weeks to get something shipped from overseas, but we can do it in a month,” Preysman says. “It’s maybe a buck more for a T-shirt, but here you can sit and go over the design details and touch the product.”
Sites like Etsy and Kickstarter also have made it easier to buy and promote local goods and services. For example, Susan Sarich, founder of SusieCakes, a self-professed “All-American Bakery” with eight locations in California, sourced hand-sewn holiday aprons from an Oregon-based Etsy artist.
The relatively high price point for the aprons – $49 for a set of two – reflects the use of organic cottons, incorporation of thoughtful design elements and the labour of custom embroidery, done in San Francisco. “I could have gotten it done for 3 cents an apron,” she says. “But customers appreciate the quality.”
Indeed, customers who appreciate “Made in the USA” tags are in good (and historic) company. In 1815 Thomas Jefferson announced, “I have come to a resolution myself as I hope every good citizen will, never again to purchase any article of foreign manufacture which can be had of American make, be the difference of price what it may.”
The Workspace of the Future
The office is getting a new look – or being phased out altogether.
By Matt Villano
Wondering about the office of the future? It might take more imagination than you think. “Who says there’ll be an office at all?” asks Tom Austin, vice president at Gartner, a Connecticut-based technology research firm. “Already we work from Starbucks, in the car and at our kids’ softball games.”
Sure, experts like Austin have predicted the obsolescence of the workplace for years, but as technology empowers people to work from any place with an internet connection, it’s starting to look like more small- and medium-size businesses could very well decide to go without on the physical office front.
Take, for instance, Floor64. The media and consulting company maintains a brick-and-mortar space, but also runs a bunch of Skype-powered chat rooms for remote workers -many of which are buzzing for most of the day.
“These [chat rooms], more than anything else, represent our ‘office,'” says CEO Mike Masnick, “and they don’t exist in physical space.”
Several developments have facilitated the rise of a virtual workplace. Nearly 6 million Americans work from home, according to the U.S. Census Bureau. Cloud computing enables data backups and remote collaboration in real time. And group video chat – videoconferencing 2.0, if you will – has become dirt cheap (or, in the case of Google Hangouts, free).
Even traditional back-office departments are moving toward virtualisation. Recently a number of third-party companies have popped up to provide services such as human resources, payroll and benefits. Some of these providers, including Algentis and Insperity, offer customisable online portals for each employee.
Of course many companies – big ones, especially – won’t give up on physical offices entirely. But experts say that in order to succeed, these firms should completely rethink their layouts, creating work environments that provide employees with a range of options.
Gartner’s Austin predicts that rather than the cube farms and conference rooms of yore, workspaces will come to evoke areas of the typical home – open floor plans with couches and soft rugs; cozy, kitchen-like spaces with waist-high countertops; and covered outdoor patios with chaise lounges.
Or, says Kevin Kuske – chief brand advocate and general manager for Turnstone, an office-furniture company in Michigan – office planners will start to think more like city planners, clumping purpose-built spaces into distinct portions of a building. “Urban centres have entertainment zones, dining zones, even residential zones,” Kuske notes. “For an office to work it needs to take this approach, too.”
Managers Who Understand the Importance of Goofing Off
CEOs get the message about the value of fun in the workplace and its contribution to the bottom line.
By Christopher Hann
These days more CEOs are getting the memo on the value of fun in the workplace and its contribution to the bottom line. The prevailing wisdom is that a spirit of playfulness builds teamwork by bringing employees together in a collaborative setting. Just look at one of Zappos’ core values: “Create fun and a little weirdness.”
Southwest Airlines has been the poster child for playfulness in the workplace since its founding in 1971 by fun-loving Herb Kelleher. More recently Cartoon Network CEO Stuart Snyder – named the “Most Playful CEO” of 2012 by Playworks, a California-based non-profit – can be seen gliding about company headquarters in Atlanta on an oversize tricycle.
“For me,” says Playworks founder and CEO Jill Vialet, “it’s a constant effort around getting the message out that work is not the antithesis of play – by no means at all. The opposite of play is depression.”
Stuart Brown, founder of the National Institute for Play, says a positive spirit should start from the top. “The key to leadership is being flexible and open and playful … in a way that is really natural to your own personality,” Brown says. “When work and play can be joined in a way that works and is sensible, that, to me, is an ideal.”
Each spring Brown teaches a course at Stanford University titled “From Play to Innovation” with Brendan Boyle, a partner at Ideo, the California design consultancy known for promoting play to inspire imagination. Boyle touched on this idea during a presentation at the 2011 Creative Innovation conference in Australia.
“If you can incorporate [play] into your innovation process,” Boyle told the gathering, “you’re going to make it more enjoyable, and you’re going to be better at it.”
These days playful leadership may be most famously reflected in the businesses of Silicon Valley – but not just in the grand, in-house gaming arcades and bowling alleys of the early internet days. Fun-based leadership has gone in a decidedly more grown-up and community-anchored direction.
At Thumbtack, a San Francisco firm that helps consumers find and hire local service professionals online, employees sit down to lunches prepared by a professional chef. “Eating all our meals together is a great way to build camaraderie,” says co-founder and CEO Marco Zappacosta.
The company culture grew organically from Thumbtack’s origins, Zappacosta notes, when most of the founders all lived – and worked – in his brother’s house. “We keep things casual,” he says. “We work hard and care about what we do. But at the end of the day we’re not so wrapped up in it that we can’t joke about it.”
Beauty Seekers Favour ‘Cosmeceuticals’
Consumers take a shine to advanced personal-care products.
By Jennifer Wang
Botox, schmotox. When it comes to anti-aging solutions, beauty seekers are starting to thumb their noses at injections in favour of “cosmeceuticals,” personal-care products with supposed skin-enhancing ingredients.
Market research group IBISWorld estimates that cosmeceuticals accounted for 13.4% of the $54.9 billion wholesale cosmetics and beauty-products market in 2012 – a whopping $7.4 billion. Another research firm, Freedonia Group, predicts that demand for cosmetic chemicals will jump 4.9% per year to reach $9.4 billion by 2016.
This growth will be driven by products advertising “active and natural” ingredients like rice-enzyme powders and rainforest plant extracts, such as those from Lily Herbceuticals – which uses exotic ingredients like the Tibetan Snow Lotus, a flower that survives in the Himalayas at 21 000 feet above sea level and 70 degrees below zero – and Personal Cell Sciences’ U Autologous, a skincare line that incorporates customers’ own stem cells in the service of anti-aging.
Lindsey Guest, founder and CEO of San Francisco-based BeautyArmy, a year-old tech company that uses algorithms to match individuals with personalised beauty samples, says the number of skincare lines on the market has quadrupled over the last five years.
It’s an especially lucrative category because of an urban and affluent customer base willing to pay a premium for the latest innovations. “They don’t want to use what their mothers and grandmothers used, and a new algae or deep-sea ingredient really resonates,” she says.
Dan Obegi, CEO of Los Angeles-based DermStore, the largest e-tailer of physician-strength skincare products, agrees. “There’s new demand as beauty influencers and tastemakers get older and become more interested in these types of products,” he says.
DermStore has seen annual growth of 50% for the last three years. Its parent company, Intelligent Beauty, which expects 2012 revenue of $450 million, has introduced a cosmeceutical slant into other verticals, such as shampoos that treat split ends.
Katia Beauchamp, co-founder and co-CEO of Birchbox, a New York City-based discovery shopping service for beauty, grooming and lifestyle products, says that no matter the age of the consumer, spending is trending toward higher-performance products.
A recent company survey revealed that BB creams – all-in-one products that work as a serum, moisturiser, primer, foundation and sunblock and were originally developed to protect skin after cosmetic surgery – are now finding mainstream use as a daily skincare option and are most popular among the under-21 set.
And let’s not forget the ever-growing opportunities in the ethnic and male-grooming markets, worth $3 billion and $2.6 billion, respectively, by some counts.
Beauty may only be skin deep, but consumers’ desire to chase it offers endless potential for companies’ bottom lines.
Hot Sauce Goes Mainstream
Move over ketchup, hot sauce is now one of the 10 fastest-growing industries in the U.S.
By Jason Daley
Hot sauce has caught fire. In April research firm IBISWorld declared manufacturing of the spicy condiment to be one of the 10 fastest-growing industries in the U.S., with average company revenue jumping 9.3% per year over the last decade.
Even though the segment is small – roughly 5 500 people employed by 218 sauce companies, an industry valued at $1 billion – it packs an entrepreneurial punch. Beyond established companies, thousands of kitchen and garage cooks have begun decocting their own spicy blends, with dozens of new sauces hitting local shelves and mail-order catalogues each year.
A quick survey of recent entrepreneurial sauciers included a 13-year-old boy from North Carolina, a formerly homeless veteran who used sauce to rebuild his life and a California firefighter who grows his peppers behind the station. Even the industry’s largest player – Avery Island, La.-based Tabasco, which has an estimated 34% of the market – has been privately held by the McIlhenny family since 1868.
Dave DeWitt, producer of the annual National Fiery Foods & Barbecue Show held in New Mexico, and the authority on all things spicy, likens the hot-sauce explosion to that of craft beer. “It’s similar because it’s an industry in which people have a vision of a product that they want to create,” he says. “So just like in microbrewing, people are using innovation as much as they can.”
So what has transformed Americans from ketchup slaves to salsa-swilling heat addicts? IBISWorld and DeWitt both point to the increasing popularity of and exposure to international foods. With that comes demand for zippy condiments like Vietnamese sriracha, Korean chili paste and more complex versions of Mexican salsas.
Research firm Mintel reports that sales of sauces and marinades – including hot sauces – jumped 20% between 2005 and 2010 and are expected to increase another 19% by 2015, mainly because people are increasingly cooking at home to save money and want to re-create those international flavours they have come to enjoy while eating out.
At the same time, DeWitt says, hot sauces are maturing. Instead of focusing on extreme heat or crude names like Slap Your Mama and Blow It Out Your Ass, companies are doubling down on flavour, experimenting with fruit-based sauces and toning down some of the heat to appeal to a wider consumer base.
“The micro-hot-sauce industry and all the new brands are slowly eroding Tabasco’s market position,” DeWitt says. “These new chili-heads are trying to come up with a line of products that will appeal to people who like all kinds of cuisines.”
Blair Lazar, who founded New Jersey-based Blair’s Sauces and Snacks 23 years ago (and holds the Guinness World Record for the hottest product on Earth), believes technology is a major driver of the sauce boomlet. “When I started it was hard to even find bottles.
Now people can order bottles and get labels off the internet,” Lazar says. But the most important reason for the trend, he contends, is that Americans, like much of the rest of the world, have simply fallen in love with heat: “We’re not a bland society, that’s for sure, so why not turn it up a bit?”
Energy Drink Market Gets a Boost From Young Consumers
Energy-enhancing products have grown into a multibillion-dollar industry fuelled by young consumers.
By Katherine Duncan
Whether it’s synthesised caffeine in a mass-produced beverage or a naturally occurring jolt in an organic snack, energy products are lifting off.
Since flying in on Red Bull’s wings in the 1990s, energy-enhancing products have grown into a multibillion-dollar industry fuelled by young consumers. Sales for the industry’s largest segment – drinks and shots – surpassed $8 billion last year, an increase of 124% since 2006, according to market research company Mintel.
Tom Vierhile, innovation insights director for Datamonitor, a business information and market analysis firm, estimates that the energy drink category will grow 8.9% from 2010 to 2015, while the food and beverage industry overall will increase by just 2.9%. He notes a recent survey in which nearly 30% of U.S. consumers said they are highly influenced by energy-boosting benefits when choosing a soft drink.
Supercharged food products are also on the rise. A PricewaterhouseCoopers market report on functional food divides the $20 billion-plus industry into categories according to health benefit, such as weight management, heart health and memory improvement, but the largest segment (29%) is made up of products claiming to boost energy.
“Looking toward the future, you’re starting to see companies getting outside the beverage area and [talking] about energy as a viable benefit for food products,” Vierhile says. But he isn’t referring to novelty items like caffeinated waffles. “One of the trends we’re seeing in food these days is [that] consumers are seeking out products on the basis of what they naturally contain,” he says.
YouBar, a Los Angeles-based manufacturer of customised energy bars, has been filling that need since its 2006 launch – and has grown every year since. At YouBars.com, users build bars from scratch by selecting from a variety of natural, healthful ingredients (including those with intrinsic energy enhancers); a nutritional label on the page automatically updates to reflect their choices.
Owner Anthony Flynn says sales increased 100% in 2011, and he expects them to double again this year.
Other companies are pursuing the all-natural energy path, too, even if it means diverging from their core business. Pyure Brands, a Florida-based supplier of organic stevia products, branched out from the natural sweetener industry after founder Ben Fleischer saw an opportunity in energy shots.
“We found a niche in the marketplace,” he says. “Our product is the first certified-organic, sugar-free [and calorie-free] energy shot.” Six months after introducing Pyure’s Organic Energy Optimization shot to distribution channels, Fleischer anticipates selling 250 000 to 500 000 units per month.
Whatever the reason, staying awake to complete a business plan, cramming the night before a presentation or just remaining alert throughout the workday, clearly, says Datamonitor’s Vierhile, “there is an interest in energy.”
Health Care Goes Digital
The digital health technology market will be worth $5.7 billion by 2015, with chronic care, wellness and medication management leading the charge.
By Jennifer Wang
Market research firm Parks Associates reports that the digital health technology market will be worth $5.7 billion by 2015 – up from $1.7 billion in 2010 – with chronic care, wellness and medication management leading the charge. Meanwhile, consultancy ABI Research estimates that sales of wearable wireless health-monitoring devices will grow from less than 3 million units in 2011 to 36 million by 2017, pushed by rapid growth in the senior in-home care market.
Early players in the mobile-health space include Happtique, an app-management company that helps healthcare professionals integrate digital technologies into their treatment programs, and Proteus Digital Health, inventors of a sand-grain-size ingestible sensor that monitors physiological and behavioural metrics from within a patient’s body.
Start-ups, of course, want in. “Regulatory challenges still pose a problem, but the ability to scale healthcare absolutely has to happen,” says Leslie Ziegler, chief evangelist at San Francisco-based health-dedicated accelerator Rock Health, which is nurturing promising ideas like Cardiio, a $4.99 touchless biofeedback app that uses mobile-device cameras to measure pulse via light reflected off the face (changes correspond to the flow of blood underneath the skin), and Podimetrics, maker of Wi-Fi-connected mats that can detect burgeoning foot ulcers in diabetics.
“Technology has finally caught up to the need, and the solution finally fits into people’s lifestyles,” Ziegler says.
The money has caught up, too. According to Rock Health, nearly $1.1 billion has been invested in digital health start-ups this year, up from $626 million last year, marking an 84% increase in deals.
In November 2011 Chris Hogg, co-founder and CEO of 100Plus, raised a $1.3 million seed round from big-name investors like Peter Thiel of Founders Fund and John Lilly, former CEO of Mozilla. Hogg’s company is developing an app that uses large data sets to assess behaviour and spur healthier living habits – only now possible because of a sea change in the way people collect and share their own data.
“People are hungry to learn more about themselves. They haven’t had this power and access to the tools and services to make it possible before,” he explains. So don’t be surprised if, in a few years, your (virtual) doctor’s visit ends with a prescription for both pills and apps.
Using Transparency to Build Consumer Trust
Weary consumers have had enough of false promises and conflicting marketing claims and are simply seeking brands they can trust.
By Paula Andruss
Experts agree: Weary consumers have had enough of false promises and conflicting marketing claims and are simply seeking brands they can trust.
“In most categories, products are essentially the same and offer the same rational benefits,” says Jim Joseph, branding expert and author of The Experience Effect for Small Business. “It’s the emotional benefits that make you a brand and get you into people’s lives so they come back time and time again.”
Jim Gregory, CEO of New York- and Los Angeles-based CoreBrand, a full-service brand consultancy that works with corporations, says, “Trust is a critical component of overall brand reputation today. People are more likely to do business with a company they trust, which means [trust] generates revenue and increases the enterprise value of the company.”
A survey conducted by Concerto Marketing Group found that when people trust a brand, 83% will recommend it to others; 82% will use its products and services frequently; 78% will look to it first for the things they want; and 78% will give its other products and services a chance.
How do you earn that trust? Start with a brand story containing a human element to which consumers can relate, says Mark Lawrence, co-founder and CEO of SpotHero, a Chicago-based online parking reservation provider. “A lot of people associate negative feelings with parking, and we started this company because we’ve had those same feelings and wanted to make them positive,” he says. “We’re building a brand based on a personal problem of ours that others also identify with.”
Once an emotional connection is made, it’s important to stay true to that brand promise to prolong the sense of trust. “Authenticity is coming back as an emotional connection that people want to make with their brands,” Joseph says. “It’s about speaking truthfully; doing what you say, saying what you do and not exaggerating who you are.”
For Lawrence, a big part of that delivery comes in the form of 24/7 customer support–which has paid dividends for SpotHero. “We want our customers to feel comfortable, so if they have questions, if they’re lost or if they want to get a hold of an actual human being, they can call us,” he says.
“We take that engagement very seriously, so parking is not scary or frustrating, and we’ve found that in doing so, our customers get so excited about their experience they tell their friends all about it.”
Unique Vending Machines Drive Stagnate Industry Forward
Recent innovations like touchscreen technology, electronic payment options and unique products could give the vending machines industry a boost.
By Kara Ohngren
When high heels start to rub, consumers today can take the edge off with a visit to a vending machine – and not just for a soul-soothing candy bar. “Our customers love that they can walk right up, put money in and instantly get a pair of shoes,” says Ashley Ross, who sells ballet flats out of four Rollasole machines in Los Angeles and Las Vegas. “There’s no hassle or sales pitch. It’s simple, and they can go on their way.”
Last year Ross and business partner Lindsay Klimitz bought the U.S. rights to Rollasole from its U.K. founder, Matt Horan. They plan to place seven additional machines in New York, Miami, Los Angeles, Las Vegas and Chicago in the coming months.
The size of the U.S. vending machine industry has stayed steady over the past few years, pulling in about $42 billion last year, according to the National Automatic Merchandising Association (NAMA). And while nearly 95% of that revenue came from traditional options such as beverages and snacks, NAMA president and CEO Carla Balakgie believes recent innovations like touchscreen technology, electronic payment options and unique products could drive the industry forward.
Savvy entrepreneurs are engaging the always-open kiosks to offer everything from $5 works of art (artist Clark Whittington’s Art-o-mats, which utilise retired cigarette machines) to fresh-cut flowers (Raleigh, N.C.-based 24-Hour Flower).
The U.S. is still a ways away from the vending machine dominance of Japan – where more than 5.2 million machines generated about $65 billion in 2009 from sales of everything from eggs to pet rhinoceros beetles. But new companies are bringing new products to stateside machines all the time.
Machines in Las Vegas, New Jersey and New York peddle pieces of 24-karat gold under the name Gold to go. The Semi-Automatic machine at New York City’s Hudson Hotel is stocked with a rotating array of quirky items, such as copies of The Catcher in the Rye, designer threads and a rental agreement for a Ferrari 599 GTB.
The Sandbox’s Beach Shop in a Box dispenses essentials like sunscreen, sunglasses, beach balls and towels. And Greenaid’s seedbomb vending machines – part of the company’s “guerrilla gardening efforts” – dispense balls of clay, compost and seeds that can be thrown into sidewalk cracks or barren parking lots to grow a little green.
“Gen-Y, who has grown up with technology that allows them to define their own experiences, is driving much of the innovation in the industry,” Balakgie says. “They love the anonymity and to be able to get what they want, when they want it.”
Creative Financing Grows in Popularity
Traditional business lending is still faltering, but more people are starting businesses, which means borrowers and lenders are getting creative.
By Michelle Goodman
It’s no surprise that creative financing is on the upswing. More people are starting businesses than before the economy tanked – but traditional business lending is still faltering.
“The majority of small businesses don’t need to borrow $1 million. They need to borrow $25 000 to $50 000,” says Charles Green, executive director of the Small Business Finance Institute, a non-profit that educates entrepreneurs about financing. Little wonder that alternative financing methods – crowd-funding, peer-to-peer lending sites, online pawn shops, you name it – have become so popular.
Take microlending. In 2011 Accion East, a leading U.S. provider of $500 to $50,000 microloans, granted 1% more loans and lent $2.2 million more than the previous year. According to Accion East CEO Paul Quintero, it’s the same story at the four sister organisations in Accion’s national network: more entrepreneurs applying for loans and more microloans disbursed.
Also gaining in popularity is revenue-based financing (RBF), which is repaid based on the lendee’s monthly sales. Since forming in 2010, Seattle-based RBF lender Lighter Capital has gone from making three investments per year totalling $250 000 to 13 totalling $1.5 million, says CEO BJ Lackland.
HireAHelper.com, a booking site for moving and day labour, got a $200 000 business-expansion loan from Lighter Capital a year ago. “It ended up being a pretty important catalyst for our growth,” says Mike Glanz, the site’s co-founder.
Entrepreneurs are also flocking to collateral-free loans, particularly short-term ones. Consider merchant cash advances, in which restaurants, retailers and other businesses doing a high volume of card transactions receive a lump sum in exchange for a cut of future credit or debit card sales – often about 25%.
This year these advances will total $1 billion, up from $800 million in 2011, says David Goldin, president of the North American Merchant Advance Association.
All this is good news for entrepreneurs seeking capital. “Alternative lending is becoming more mainstream,” says Rohit Arora, co-founder and CEO of Biz2Credit, an online credit marketplace. “And as it becomes more mainstream, the cost of those products is going down.”
Inspiring A New Generation Of Learning – Education As A Basic Human Right
Access to education isn’t a privilege, it’s a basic human right – Mzwandile inspires a new generation of learners.
Raised by his aunt and uncle after his parents passed away at a young age, Mzwandile Harmans attended a poor school in Cala, the heart of the rural Eastern Cape. It was his matric year; but with limited resources at Masikhuthale Public Secondary school, the pass rate was low and the learning environment less than ideal for conscientious learners.
Then one day a teacher came round to talk about Engen’s Maths and Science Schools (EMSS) programme, and everything changed for this talented young man who was determined to realise his full potential.
“We were given a chance to take a test to qualify for the EMSS Cala programme. The programme offered supplementary classes in maths, science and English, which ran every Saturday morning, but was 25 kilometres away,” remembers Mzwandile. “Fortunately, I took it seriously and I got in.”
Making the long round trip every weekend to attend the programme saw a steady improvement in Mzwandile’s maths, chemistry, and physics marks, so much so that he was awarded a full Engen scholarship to study Chemical Engineering at the Cape Peninsula University of Technology (CPUT).
Mzwandile later impressed with his tertiary studies and after two-years was offered a one-year internship at the Engen Refinery in Durban, which he passed with distinction. On graduating from CPUT, he landed a two-year employment contract with Engen, as part of the company’s graduate development programme.
Today, Mzwandile is permanently employed as an Environmental Technician at the Engen Refinery. “I am so grateful to Engen for all of this,” says Mzwandile. “I never thought it could happen to me.”
Engen’s Head of Transformation and Stakeholder Engagement, Unathi Magida says access to education is a fundamental human right. “This resonates particularly with Engen as a company, as we believe in the value of education and know how important it is to ensure that young people have the opportunity to realise their full potential.”
Chwayita Mareka, Engen’s Head of Human Resources, says the company’s investment in young talent has focused on the Maths and Science Saturday Schools because they understand the bigger country agenda.
“As Engen, we try and play our part in helping to develop South African’s talent pool, as there is a scarcity of Science, Maths and Engineering skills. We offer bursaries for students to go to universities in these fields and we look after them, especially if they are from disadvantaged communities,” says Mareka.
“Later, they come into Engen as graduate trainees as part of our graduate development programme wherein we assign them a mentor that exposes them to the real business,” she adds.
Mzwandile’s journey is just one of many inspirational Engen stories that will be shared as part of a new TV series that aims to create a positive narrative around South Africa’s success stories. The SA INC. TV series which launches on 7 April is a partnership between Business Leadership South Africa (BLSA), Brand South Africa and producers, Regency Global.
“At Engen, we strongly believe that a country which is educated is a country that will prosper. We are pleased to play a part in helping to develop South Africa talent, especially our young learners based in rural areas,” says Magida
To watch Mzwandile’s story please visit the website: https://regency.global/engen/ and the following hashtags: #JourneyWithEngen #BusinessBelieves #SAINC #humanrightsday #awesomesouthafrica #sustainability #livesouthafrica #weheartsa.
How SMEs Can Stand Out From The Crowd
A recently released SME Landscape Report: An Assessment of South Africa’s SME Landscape: Challenges, Opportunities, Risks & Next Steps’ 2018/2019, revealed that 40 percent of small and medium enterprises (SMEs) find that the industry that they operate in is extremely competitive. It also states that considering the low growth environment, this is likely to continue further into the future.
To assist struggling entrepreneurs, Byron Jeacocks, Regional General Manager at Business Partners Limited (BUSINESS/PARTNERS), says that it is imperative for SME owners who find themselves in this predicament to determine and implement tactics to remain competitive in saturated industries. “A good example of how to do this, is Business Partners Limited’s client, Prashun Sharma, owner-manager of glass and aluminium company, Aluminium Doctor, who was faced with an overtraded industry teeming with informal operators when he started his business seven years ago.”
“This was because the glass and aluminium industry suffered a contraction following the Soccer World Cup construction boom in 2010, and as a result, many tradespeople were retrenched and subsequently started up their own informal glass and aluminium installation operations to make ends meet,” Jeacocks adds.
Explaining how he ensured a competitive edge in his business, Sharma, who was also retrenched from his senior management position at a large aluminium company, says that when he started his company he decided to make it formal, compliant and professional. “I wanted to incorporate my corporate and managerial experience to differentiate my business, and to elevate this, I enrolled in a business management degree.”
“My degree covered everything from strategic management, supply management, first-line management to directorship and it touched on everything from listing on the stock exchange down to conflict management and change management. This really prepared me for business and I believe it was a key ingredient to my business’s success,” he points out.
However, Sharma says that when starting their businesses in a saturated industry, entrepreneurs should not feel despondent if the process is slow at the beginning. “At first in my journey, there seemed to be no difference between Aluminium Doctor and the rest of the informal businesses in the industry, but I continued to lay a formal foundation, whilst consulting with my lawyer and accountant to make sure these foundations were sound. I also started to develop professionally made marketing material, a website, formal email addresses and a fixed phone line.”
Aluminium Doctor’s breakthrough came a year and a half into the business, when it won a substantial contract with the building of the Durban ice rink, says Sharma. “This is when I knew that it was time to formalise my business premises and I found a 1000 square metre factory in Brairdene, Durban.”
However, in order to purchase the building, I needed to obtain funding and I believed that it was clear from the financials that the company could afford to buy the building, but the banks were not sure whether our fast growth was sustainable. “I was then introduced to Business Partners Limited which considers finance applications based on the potential of the business, and also on the capabilities of the entrepreneur rather than just on the balance sheet and age of the business.”
Commenting on this, Jeacocks says that Sharma’s management style and his commitment to furthering himself as an entrepreneur by studying business management was also a contributing factor to the approval of his business’s property finance loan,” comments Jeacocks.
“Today, seven years since he started, Sharma’s careful attention to his business’s formal foundations is still paying off. Just in the last twelve months, in an extremely challenging economy, Aluminium Doctor grew by 35 percent, and the business now has a presence in KwaZulu Natal, the Eastern Cape and Gauteng where it will soon establish a permanent sales office in an expansion that is only possible for a formal, well run organisation,” Jeacocks concludes.
Celebrating The Best Of The Best In Black Business
The 2019 Black Business Quarterly (BBQ) Awards, held at Emperor’s Palace on Friday, 15 March 2019, celebrated the champions of transformation of the South African economy.
Established in 2002, the BBQ Awards 2019 honoured the best of the best in black business. South Africa’s top black business owners and rising stars arrived to the red carpet for a night full of glitz and glamour. Celebrity TV presenter, socialite, radio personality and Idols SA judge Somizi Mhlongo led the festivities as the evening’s programme director. He was joined on stage by A-list celebrities and prominent politicians.
Jeff Radebe, Minister of the Department of Energy, celebrated 25 years of South Africa’s democracy in his opening keynote address and emphasised the importance of transformation.
“Transformation is well recognised as a change management strategy, which aligns people, which aligns processes and technology initiatives, irrespective of the industry you come from, in order to survive and evolve in this business environment. Changing the structure of the South African economy will result in it being more inclusive, more sustainable… with opportunities for all, integrated value chains, and less barriers to entry. In South Africa, the transformation agenda is very critical in all our endeavours and all our decisions.”
Radebe congratulated the winners of the 15 transformation categories on this recognition of their inspiring dedication:
- Platinum Award: Dr Nobuhle Judy Dlamini, founding chairman of Mbekani Group, is an entrepreneur, author, and philanthropist. Her passion for creating and adding value to society and humanity provided her with the overall platinum award for the evening, as well as the Comair Outstanding Woman of the Year Award.
- Hennessy XO Businessman of the Year Award: Sthembiso Elton Nkomo, CEO of Abalandi Risk Management, was recognised as a professionally qualified, dedicated, and respected professional in the forensic investigation and security services environment.
- The Innovation Hub New and Innovative Business Award: AET Africa, a manufacturer and supplier of energy efficient and clean technology products, developed various products targeting the commercial and residential sectors.
- Emperors Palace Community Builder of the Year Award: Emmanel Bonoko, Founder of EBonoko Holdings and a social entrepreneur. He founded EBonoko at the age of 21 with the aim of serving others and fostering leadership, youth empowerment, and entrepreneurship.
- Dormehl Phalane Property Group Transformation Champion of the Year Award: ICT-Works, an organisation that provides innovative technology solutions. At its core it also enhances the lives of millions of people.
- Best Employer of the Year Award: Maredi Technologies CC, an 100% black owned ICT infrastructure solutions provider for the private and public sector.
- Trade & Investment KZN Young Business Achiever Award: Pravashen Naidoo, Founder and CEO of e-Waste Africa, established Africa’s first light bulb recycling business at the age of 30.
- Bentley South Africa Public Sector Visionary Award: Dr Ayanda Vilakazi, CEO of Lama Marketing and Advertising (Pty) Ltd. He published numerous articles on how to improve services and operations in South Africa. As a seasoned Executive he has expertise in corporate governance, financial management and budgeting, enterprise risk management and strategic development.
- BET New Entrepreneur Award: Ms Thobile Nyawo, Director of Nyawo Civil construction. The 19-year-old construction entrepreneur founded her company in 2015 with no start-up capital.
- CSI Ubuntu Award: Vukani-Ubuntu Community Development Projects, a non-profit organisation that is the largest mineral-beneficiation organisation in the jewellery sector in South Africa and a network off grassroots development projects across the country.
- NHBRC Iqhawe Mentorship Award: Musa Zulu, Creative Director of Valhalla Arts, as well as published author, international artist, celebrated motivational speaker, and prominent disability activist in South Africa.
- NYDA Outstanding Young Entrepreneur of the Year Award: Muhammad Simjee, Founder and CEO of A2D24 with a passion for building gadgets and writing software.
- Nedbank Group Individual Transformation in Leadership Award: Karen Rademeyer, Fundraiser and Communications Manager at Go for Gold, having worked in the non-profit sector for 17 years She is passionate about education: Go for Gold as a dynamic Education-to-Employment programme that recruits school students from some of South Africa’s poorest communities and transforms them into technically qualified graduates.
- LTE Holdings Best Established Black Business Award: Thata uBeke Manufacturing (Pty) Ltd, which offers turnkey solutions by designing, developing, manufacturing and assembling electronic and electro mechanical components for a variety of applications including aerospace, telecommunications, mining, commercial, and military specifications.
The BBQ Awards continue to be South Africa’s most prestigious transformation awards. For more information on the 2019 BBQ Awards, visit http://www.bbqawards.co.za/ or follow them on Facebook (@BBQAwards) and Twitter (@BBQ_Awards).
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