Connect with us

Entrepreneur Today

The Rise Of The Founder-CEO Firms

There are many opinions on the merits of founders continuing to run their businesses into public ownership. Surprisingly, however, there has been limited analysis to underpin those opinions. Schroders, a global asset manager, provides some evidence to the subject.

Entrepreneur

Published

on

founder-ceo

Growing importance of founder-CEO companies

A growing proportion of companies are led by their founders; 7% of globally listed companies with market capitalisations above $500 million are run by their founders (source: Bloomberg).

According to Ovidiu Patrascu, Sustainable Investment Analyst at Schroders, the tendency is more common among initial public offerings (IPO) with 30% of the companies listed globally over the last five years being led by their founders. “In those cases where track records are limited, the role and effectiveness of business leaders is often judged by intuition more than analysis,” he says.

Patrascu goes on to state that the issue is expected to become increasingly important: “Companies can scale quicker than ever in capital-light, global industries. With venture capital war chests still strong, public market capital is little impediment to scaling a good idea quickly.”

Related: 5 Central Responsibilities Of Every CEO

He suggests that in addition to this, the prevalent internet usage enables companies to quickly tap global customers, employees and suppliers, bypassing the conventional expansion from local to national to international. “As a result, it is increasingly likely that the founder will still be in charge by the time IPO scale is reached,” says Patrascu.

Patrascu explains the approach Schroders took for this particular research: “We set out to explore whether companies led by their founders tend to take a more long-term approach in capital allocation, enjoy superior profitability or perform better than peers. We examined 3,600 non-financial companies with market capitalisations over $500 million.

“Approximately 70% of founder-led companies are listed in the US, followed by China (8%), Japan (7%) and Europe (6%), and the majority operate in the technology, pharmaceuticals and retail sectors (source Bloomberg 31 Dec 2016).”

Founder-CEO companies outperform

According to Patrascu, the research demonstrates that in general:

  • Founder-CEO companies invest more aggressively than their peers in research and development (R&D), capital expenditure (capex), and mergers and acquisitions (M&A);
  • They grow revenues at a faster pace; and
  • Their share prices have outperformed peers over the 5-year period to December 2016

figured-ceo-stats

Sector-specific differences

However, Patrascu points out that the findings become more nuanced when looking at specific sectors in more detail.

“Founder-CEO companies operating in innovation intensive sectors such as internet, software, biotechnology and pharmaceuticals tend to invest more in R&D, capex and M&A than their peers. This often leads to better revenue growth, but not to share price outperformance,” he explains.

According to Patrascu, in more capital intensive industries such as hardware and semiconductors, founder-CEO companies tend to allocate capital more conservatively, and their share prices have generally outperformed their peers.

Related: Sometimes It’s Good To Be Bad Says Sirdar Group CEO

“In some mature but profitable industries, such as electronic & electrical equipment, founder-CEO companies allocate more capital but at relatively high levels of profitability. This leads to strong compounding power and share price outperformance,” he says.

Enabling better research focus

According to Patrascu, founder-CEOs are often found in the most exciting areas of the market. He concludes that by objectively examining their influence on capital allocation and investment performance, Schroders’ investment teams are better able to focus research efforts into specific sectors where founder-CEO companies are more likely to outperform their peers.

Entrepreneur Magazine is South Africa's top read business publication with the highest readership per month according to AMPS. The title has won seven major publishing excellence awards since it's launch in 2006. Entrepreneur Magazine is the "how-to" handbook for growing companies. Find us on Google+ here.

Advertisement
Click to comment

You must be logged in to post a comment Login

Leave a Reply

Entrepreneur Today

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.

Entrepreneur

Published

on

comair-outstanding-woman-in-business_dr-judy-dlamini_

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).

Continue Reading

Entrepreneur Today

Why Just Having A Great Idea Won’t Make You The Next Richard Maponya

Tilldan Bunagni – Brand Manager for Firstwatch Whisky shares some insights into what will help you on the road to business success.

Entrepreneur

Published

on

business-idea

All entrepreneurs have hurdles to overcome on their path to success, and it takes guts and fortitude to survive the journey. As self-made publisher, William Feather said, “Success seems to be largely a matter of hanging on after others have let go.”

Richard Maponya has been described as a living legend, and while his first business idea to retail directly to consumers in Soweto proved successful, it was his incredible determination and work ethic that saw him overcome an extremely hostile business environment for black business under the Apartheid Government.

Today’s up and coming entrepreneurs face different challenges and while there is support for SMEs from Government to Corporates, the reality is that starting a business and seeing it develop into a highly successful entity creating wealth for the owner, employees and other stakeholders, is the exception rather than the rule.

So, what are some ideas that will help you pave the way for a successful business providing for yourself, your family, your community

Ensure you don’t neglect the business while chasing the money

One of the worst mistakes a small business can make is not having a good admin system in place. Without booking keeping records, SARS compliance and financial records for example, you will at some point hit a brick wall.

Whether it’s because you are growing and need to access funding – which will prove very difficult without business documentation – or you have neglected your SARS payments and compliance, the wall be there. From the start, learn how to manage your admin yourself, or employ the part time expertise of a professional. It will be well worth the initial spend.

Don’t be scared to ask for money

Many successful businesses have become so because they sought funding when they needed it. Whether this is at the start-up phase or when the business is already established but ready to be fast tracked to the next level. While there seems to be a lack of understanding of how many and what options are available to SMEs in SA, the truth is there are literally hundreds of funding products available. Search Google with keywords such as: Access to finance in South Africa and you’ll be pleasantly surprised at the what is actually available.

Don’t be scared to look for support

Success often comes with support. Being an entrepreneur or small business owner can be a very lonely existence. Whether you seek the backing of a Mentor or join a support programme, improving your business skills and having a cheering squad behind you is empowering.

Another form of support can be found in initiatives and competitions geared towards developing and rewarding entrepreneurs. Look out for ones that talk to the genuine needs of an entrepreneurial business – such as financial support backed by business training and support.

The journey for entrepreneurs is really tough, but certainly well worth the effort in the long run.

firstwatch-2jpg

How Firstwatch can help you!

Firstwatch is currently running the ‘Firstwatch Entrepreneurs Challenge’. This serves as a platform to move business ideas and concepts to the next stage of growth for the 100 applicants selected to join the two-day workshop.  The training programme is chock-full with robust, hands-on experiential learning with some of the country’s leading business experts.

At the culmination of the programme, entrepreneurs will be given the opportunity to pitch their business or business idea to a panel of judges – where the top 10 will be selected. All entrepreneurs will be invited to attend the closing ceremony on the 19th May, where the top 10 will pitch to the entire audience and a final panel of celebrity judges and successful entrepreneurs.

The overall winner will walk away with R50 000 support for their existing or start-up business.

The entry closing date is the 31st of March with workshop dates on 27 and 28 April 2019.

For information on the initiative simply call or send a Whatsapp, SMS or “please call me” to 072 391 9937 or e-mail info@firstwatch.co.za.

Continue Reading

Entrepreneur Today

Digital Transformation Should Be A Priority For Small Businesses In South Africa

With numbers like that, digital transformation is critical for any small business that wishes to find more customers and grow.

Entrepreneur

Published

on

small-business

When a water pipe bursts in your home one morning, your initial reaction will probably be to grab your smartphone and search Google for a plumber nearby. Perhaps there is one just around the corner, but you wouldn’t know about them if they don’t show up in your search results. This scenario sums up why a good digital presence has become a must for small businesses in South Africa. The internet – and almost any business opportunity – is where the customers are.

According to the 2019 Global Digital Report prepared by We Are Social and Hootsuite, 54% of the South African population are internet users. This means there are 31 million people in South Africa who are searching for products and services online; 29 million of them are active mobile internet users. With numbers like that, digital transformation is critical for any small business that wishes to find more customers and grow.

First step on the road

We believe the journey of digital transformation starts with creating your own online identity. This is creating a place of your own online, starting with a website, and letting people know who you are, what you do, and what you offer. Think of it as your mobile storefront or your online business card. Start small and grow over time: no need to over-engineer or over spend.

Website builders like GoDaddy Website Builder can help you get a professional-looking website up and running in a short amount of time, even if you don’t have a big budget or any technical skills. And it will look amazing on a smartphone, not just yours! Once you’ve created your website, you can start looking at using tools like social media, search engine optimisation, and e-mail marketing to help reach new customers and stay in touch with existing ones.

Thanks to the internet and the digital tools available today, it’s not as hard or as expensive to create and promote your brand as it once was. First, a solid strategy is important, and it should include ways of showing your target audience what makes your brand and products unique.

Here are some other tips about how you can get value from your digital presence:

  • Mobile continues to rise: As we’ve mentioned before, more than 90% of internet users in South Africa are mobile. You should focus on improving site speed, navigation structures and readability on mobile devices, and look to optimise your website from the start for the mobile experience.
  • Simple design: This is an extension of creating mobile-first experiences, and it’s important that your website looks and works great on all screen sizes. This year, web design will focus on relevant and catchy content as well as design to help ensure you catch your users’ attention.
  • Feature “platforms”. What do I mean by platforms? This includes maps, payment solutions, food delivery services, and shared rides fall into this definition. Our friend the plumber might not need these for his website, but a restaurant could truly benefit from adding maps, partnering with a booking or reservation service and even a customer rating solution.

With an increased number of data breaches occurring, protecting your new website and your customers’ data has become even more important for companies of all sizes. Whether or not a website has an SSL Certificate, it can affect your search rankings, so you should ensure your site has the added SSL Certificate protections.

Voice search and chat – are they in your business’s future?

Looking to the future, we can expect to see the digital world evolve at breakneck speed. Two trends to be on the look-out for in the not-too-distant future are voice search and chatbots. Currently, one out of every five internet searches come from voice queries, which means people are speaking their searches into their smart devices.

Therefore, while optimising your website and content for search engines, it will be important to do it for voice searches, keeping in mind the growing use of virtual assistants like Alexa, Siri, Google Assistant and Cortana. We can also expect to see more businesses using chatbots powered by AI on their websites, as well as social media profiles and applications, to provide instant assistance for their customers.

Perhaps your small business is planning to start implementing these tools during the year. Or it could be several years before these features are on your radar. Either way, they highlight some potential ways your evolving digital presence can allow you to find and interact with customers in new powerful ways.

Continue Reading
Advertisement

SPOTLIGHT

Advertisement

Recent Posts

Follow Us

Entrepreneur-Newsletters
*
We respect your privacy. 
* indicates required.
Advertisement

Trending