Gallo Images/Getty Images/Istockphoto
THE
DESTINY
E
verything you
need to know
about starting and
maintaining a successful
business – with inspiring
examples of women
who’ve made it
&
ENTREPRENEUR &
FRANCHISE
REPORT 2015
ENTREPRENEUR & FRANCHISE REPORT
The proportion of
black opportunitydriven early-stage
entrepreneurs has
increased by more
than 154% from
22,9% in 2005 to
58,3% in 2013.
CONTENTS
they tell us how difficult it was accessing
finance and how the first few years of
a start-up are often emotionally and
financially taxing. But several of them
have managed to hit the R1 million
turnover mark and all of them believe
in their own tenacity and resilience
as entrepreneurs – which makes for
inspiring levels of optimism.
If Thabile Nhlapo managed to keep
Thokoza’s first KFC open for five years
while riots raged in the no-go areas of
the East Rand in the Nineties (she now
owns no fewer than 11 KFC outlets!),
then other obstacles to success suddenly
look very easy to overcome.
We’ve included an overview of
profitable franchise businesses to
consider, plus essential guides to
entrepreneurial funding and troubleshooting operational problems to get
you started.
As legendary aviatrix Amelia
Earhart said: “The most difficult
thing is the decision to act. The rest
is merely tenacity.”
SHEENA ADAMS
Deputy Editor
page 60 | SEPTEMBER 2015
• 63 Surviving
entrepreneurship: A checklist
• 68 Entrepreneurs in the
making: The role of incubators
in enterprise development
• 70 A fundi’s guide to funding:
Who to approach and how to
secure approval
• 72 Working for you:
Companies providing logistical
support services
• 74 The Millionaires’ Club:
Four African entrepreneurs
tell us how they reached the
magic milestone
• 78 A franchise that fits: How to
choose a franchise with the right
size and budget for you
• 82 Township economies:
Entrepreneurs explain what
you need to run a successful
township venture
Gallo Images/Getty Images/Istockphoto
I
It’s a mixed bag of wins and losses if
one looks at the track record of women
entrepreneurs in SA. The Global
Entrepreneurship Monitor’s 20 Years of
Democracy report, which it released on
SA in 2013, shows encouragingly that
the proportion of black opportunitydriven early-stage entrepreneurs has
increased by more than 154% from
22,9% in 2005 to 58,3% in 2013. The
percentage of white, coloured and
Indian entrepreneurship has meanwhile
been replaced by up-and-coming
middle-class black entrepreneurs.
But the intentions behind starting
businesses, as well as their rate of
success, continue to cause concern. The
established business rate in sub-Saharan
Africa is considered high at 13%, but is
far below the norm in SA, at just 2,9%.
Worryingly, the rate of discontinuance
is higher than the established business
rate, meaning that SA has a net loss of
small businesses – very bad news for
employment creation.
The main reasons for business failure
are a lack of profitability, problems in
obtaining financing or personal reasons.
Further, 61% of young people surveyed
believe that most young adults who
start their own businesses have to work
too hard for too little money.
Most of the women profiled on these
pages defy these odds spectacularly. Yes,
JOIN US
DATE:
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TIME:
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VENUE:
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THE RIGHT
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investment manager.
Rivonia Road,
Sandton,
Johannesburg
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CONTACT:
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Client Servicing, will discuss the pros and cons of active and passive investment approaches.
They will look at whether luck or skill triumphs in investing, and how you can pick the right
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ABOUT ALLAN GRAY
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Allan Gray Proprietary Limited is an authorised financial services provider.
ENTREPRENEUR & FRANCHISE REPORT
Written by Gillian Klawansky
SURVIVING ENTREPRENEURSHIP:
A CHECKLIST
Going it alone needn’t mean a lack of support – asking the right people for advice
sets successful entrepreneurs apart. Three experts share the answers to questions
they’re asked most often by business-owners
H
How do I set a price for my goods or
services? All entrepreneurs struggle with
this, irrespective of how seasoned and
successful they are. The fundamental
rule is that the right price is the one the
market will accept. The only way to find
it is through market research to see what
customers will pay for a similar product
or solution. Commodity markets are easy,
as there are listed ruling prices, but in
non-commoditised markets, prices are
reflections of quality.
How can I get my client to pay without
compromising the relationship?
Late payments are extremely damaging
to small businesses, which are always
cash-strapped. Following up on payments
is something entrepreneurs need to do
themselves and while it’s not a pleasant
task, it’s a crucial one. It’s important to
remember that people sell to people and
the person you’re delivering to doesn’t
want you to fail. So use the three magic
words – “Please help me” – and explain the
situation, but don’t recite all your other
personal, non-related expenses to them:
this is a business relationship.
If you’re still not paid, there could be
two reasons: either your client has a cash
flow problem or their policy is to delay
payments. If it’s the former, you need to
find out when their cash flow will ease
up and whether a partial payment can
suit both parties until the full amount
can be paid. This solution will build
a stronger relationship, as you’ll have
worked together towards a solution. If
it’s the latter, keep the client as long as it
How do I select the right
employees for my business,
even when I’m unable to pay
market-related salaries?
Identify the skills required for your
operation to run effectively. What is your
business’s competitive advantage and
what competencies are required in order
to achieve it?
What are the vision and purpose of
your business and who do you need to
fulfil this?
What values does your business
uphold? This is important because you
need people who buy into those values
and can also live them.
What is the culture of your business?
In order to achieve effectiveness in your
operation, you need to maintain a culture
which represents what it stands for and
it’s important to hire people who can fit
into that.
When you can’t pay employees
a market-related salary, offer them
incentives that will attract them to your
business, regardless of remuneration.
Find ways of packaging these incentives
that will make your employees take
ownership of the success of the
business. Employees need to feel that
they’re part of the vision so that they
can contribute fully to achieving your
business objectives. Hire people who
are passionate about what they’re doing,
who derive satisfaction from it and who
believe in the future of the business.
page 63 | SEPTEMBER 2015 |
suits you, but focus on finding new ones to
replace them in the future.
A competitor is imitating my offering.
What can I do about this?
That’s business: when people realise you’re
commandeering a lucrative market, they
want to enter it too. If a market is large
enough to be profitable, it can usually
accommodate more than one player and
it’s inevitable that they’ll appear.
COST IT RIGHT
You need to differentiate
your offering and the
way your pricing has
been calculated should
reflect the degree of that
differentiation. If your
price is very different
from one the market
will accept, you need
to consider whether
you’re making the
right comparison.
The solution is to keep innovating
and stay ahead of the competition by
introducing imaginative, relevant products
and solutions. As an entrepreneur, you
can’t afford the time or money to protect
your ideas or designs. Your focus needs
www.destinyconnect.com
ENTREPRENEUR & FRANCHISE REPORT
CUTTING TIES
If it’s your client’s
principle to delay
payments to you as long
as possible, you need to
face the brutal reality
that a collaborative
relationship will never be
possible due to a conflict
of values. In this case,
keep them as a client as
long as it suits you, but
concentrate on landing
alternative clients to take
their place.
How do I ensure my business stands out
without spending a fortune on branding
and marketing? You need to ensure that
it adds value to the target market you’ve
identified. Value is created by ensuring
you have a good product or service that
genuinely meets the needs of your clients.
It’s also about ensuring that the benefits
of your product or service exceed the price
your customers have to pay for it. You can
create an outstanding product or service,
but if it doesn’t add value by fulfilling your
customers’ needs, it won’t be relevant.
I’m not always in the office. How do
I ensure that my customers have the
same experience, regardless of who they
interact with in my business?
Create systems and processes that outline
everything you do in the business, how
it must be done and the role each team
member needs to play. This should be
known by everyone in the business and
consistency must be monitored.
It’s important to have a policy in place
which details all the processes in your
business from the time a customer places
an order to the time you deliver the final
product or service. These processes need
to be documented so that everyone in your
company can understand them. The great
benefit is that your staff will be able to
handle challenging enquiries even when
you, as the owner or manager, are away
from the business.
Why is it so important for me to record
all my financial transactions? The only
way an entrepreneur can see how their
business is progressing is by keeping good
records of all the financial transactions
taking place. Financial records allow you
to see whether you’re actually achieving
your business goals. For that reason,
you need to gather and record financial
records, from receipts given to you after
you’ve purchased anything to invoices
you send to clients and receipts you issue
to them in turn. You also need to keep a
record of expenses such as operating costs
(rental, vehicles, electricity, water, etc) and
petty cash that you use daily.
These transactions show you whether
sales are growing, which expenses you
can minimise, whether your marketing
initiatives are working and whether you’re
carrying non-profitable customers who
aren’t paying you when they should be.
In this way, you can tell whether you’re
making a profit – which is the bottom
line of sustainability for any business,
regardless of its size or location. You need
to know your expenses, income, asset
value, debtors, creditors, etc in order to
get a full and accurate picture of how
your business is performing. Only
with that picture can you make sound
business decisions.
How much money do I need? Some
businesses need a lot of money; others
don’t. The question of start-up capital
can be answered by looking at the scale,
page 64 | SEPTEMBER 2015
MORE OF THE SAME
Consistency is an
important part of gaining
customer confidence. You
can have a spectacular
product or service,
but if your customers
don’t receive the same
experience every time
they buy from you,
they’ll lose trust in your
business. Customer
loyalty is built on
relationships, trust
and reliability.
time and effort your business will require
from the moment you start working on it.
If you’re planning to launch your venture
on a full-time basis, you’ll have to save up
enough money to support yourself (ie pay
your own salary), based on your business
plan. If you can’t save up enough money,
it might be a good idea to build your
business in your spare time until it reaches
a point where it can pay you a salary.
Bear in mind that it would be unfair
to expect a bank or any other investor to
support you, unless your business concept
is tried and tested and you have an
established business track record. If you’re
going to need a lot of start-up capital,
consider approaching an angel investor
for funding – there are many organisations
and businesses specialising in funding
for start-ups.
What about added costs and risks that
require insurance? Ask yourself what
the costs of a serious injury or disease
would entail for your business’s income.
If you’re running your new business as a
sideline with a minimal income, insurance
shouldn’t be a problem, provided you’re
covered for your income in your full-time
job. If your business reaches a point where
it’s dependent on your income, expertise
and resources, you should seriously
consider insuring those interests.
Remember: you are your biggest
Gallo Images/Getty Images/Istockphoto
to be on what you’ll introduce to the
market next.
How can I sell more? The reason you’re
not selling more is because you’re not
getting out into the marketplace. There
are many minor reasons why people don’t
buy, such as pricing, quality, affordability,
etc, and these can all be understood and
overcome by being in touch with the
market when your customers and clients
are available, not burying yourself in your
office doing administration. Do your
administrative tasks at night and over
weekends until you can hire staff to take
them over from you. Selling is a numbers
game: the more people you see, the more
you sell. So get out there!
RE
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IN
LEADEREX
ENTREPRENEUR
WORKSHOP
IN PARTNERSHIP WITH DESTINY
Learn more about the world of entrepreneurship and how to grow your business
Join Ndalo Media founder and CEO, Khanyi Dhlomo, at the 1st for Women
LeaderEx Entrepreneur Workshop in partnership with DESTINY and learn what
it takes to become a successful entrepreneur. The workshop also offers the ideal
opportunity to network with other like-minded businesswomen and be inspired.
Portia
Nondo
Sylvia
Schutte
Amy
Kleinhans-Curd
Robyn
Farrell
SPEAKERS:
Sylvia Schutte, Managing Director: Stratitude:
Finding clients and growing your business
Robyn Farrell, Executive Head: 1st For Women
Insurance: Protecting your business
Amy Kleinhans-Curd, Executive Director: LEAP,
PLP Group: Personal branding and mentorship
Portia Nondo, Owner: McDonald’s
franchises : Franchising
EVENT DETAILS:
Venue: Boardroom 6 & 7, Sandton Convention
Centre, Johannesburg
Date: 17 September 2015
Time: 9am-3pm
Price: R280
To book, call Sandy Sadiki on tel: 011 300 6700 or email:
[email protected] with “1st for Women” in the
subject line. Space is limited, so book early.
WIN big for your business with 1st for Women! As an attendee of the 1st for Women LeaderEx Entrepreneur Workshop in partnership with
DESTINY, you’ll qualify to enter our exclusive Innovate and Grow competition, courtesy of LEAP. Three winners will receive an invaluable
three-month face-to-face mentoring programme with an established businesswoman, as well as marketing of their business to the value
of R50 000, plus R1 million Director’s & Officer’s liability cover from 1st for Women Business Insurance for a period of three months.
• Terms and conditions apply. Visit: www.destinyconnect.com
page 65 | SEPTEMBER 2015 |
www.destinyconnect.com
ENTREPRENEUR & FRANCHISE REPORT
asset. As your venture grows, you’ll have
strategically important employees whose
injuries, illnesses, resignations or deaths
could potentially sink your business. If you
lose strategic expertise in your business, it
will cost a lot of money to rectify human
resource shortages and you’ll need cover
in this regard. Give preference to insurance
providers who can adapt to your personal
and business needs.
DO YOUR
HOMEWORK
If you spend time
gathering information
about your customers –
who they are, what they
buy, why they buy it and
why they buy it from
you, rather than another
business – you’ll be able
to connect to them
better, fine-tune
your offering to them
and increase your
brand value.
➥ What ensures a healthy
cash flow in my business?
This is one of the key areas you
should focus on. Good recordkeeping is the starting point to
ensure that a positive cash flow
is achieved. Know your monthly
income and expenses and monitor
these very closely.
Expenses should be kept to
a minimum and sales should
constantly increase. In order to
manage cash flow effectively, try to
collect money from clients as quickly
as possible and negotiate longer
payment terms from suppliers.
Regularly assess your finances and
cash flow status.
OUR EXPERTS
▶ LEOPOLD MALAN
As a Director of life insurance
company BrightRock, Malan helped
set up all the systems and infrastructure
for his soaring business.
▶ BUSI RAPHEKWANE
As the Manager of Programme Service
Offerings and Business Mentor at The
Hope Factory, an enterprise and supplier
development NPO which offers a strategic
page 66 | SEPTEMBER 2015
mentorship programme for businessowners, Raphekwane is passionate about
growing entrepreneurs.
▶ JUDI SANDROCK
Together with her team,
Sandrock – the co-founder and
joint CEO of the Meta Economic
Development Organisation –
implements economic development
programmes across SA.
O&M CAPE TOWN 82210/E
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Written by Mariam Isa
ENTREPRENEURS
IN THE MAKING
Even though SA punches far above its weight in the funds it spends on enterprise
development, the country isn’t seeing a pay-off in terms of a thriving SME
community. Incubators could change that
S
SA spends more money on small
enterprise development than any other
country in the world, relative to the size
of its economy, with some estimates
putting the annual amount at a staggering
R20 billion.
But so far the investment hasn’t
delivered – more than 80% of small
enterprises fail during the first five years
of their lives – and the country has an
astonishingly low level of entrepreneurial
activity, roughly one-quarter the level seen
elsewhere in Africa.
According to a study from the Global
Entrepreneurship Monitor (GEM)
conducted by a consortium of universities,
entrepreneurial activity in SA dropped
to 7% last year from 10,6% in 2013 as
businesses went bust for a combination of
reasons, including rigid labour laws, red
tape and the flagging economy.
The GEM report points out that only
37% of adults in the country see good
opportunities to start a venture – around
half the average ratio in sub-Saharan
Africa. Confidence in their ability to run a
business is at the same low level and more
than one-quarter of adults don’t take the
leap because of fear of failure.
SA’S INCUBATOR LANDSCAPE
This is where business incubators step
in. Their purpose is to ensure that a new
business survives its formative years and
page 68 | SEPTEMBER 2015
maximises its growth potential. Incubation
– which is rapidly expanding globally
– provides support through training,
mentoring, advice, access to networks
and finance, and often to office space
and equipment.
SA has dozens of private and statefunded incubators which focus on
businesses in every sector of the economy,
including the manufacturing, mining,
construction, technology, clothing and
automative industries. The big ones
generally offer a standardised approach,
taking entrepreneurs through a series
of modules – which some complain
lack flexibility.
According to the Department
ENTREPRENEUR & FRANCHISE REPORT
of Trade & Industry, there are more
than 100 incubators in the country, with
75% based in Gauteng and 75% at least
partly funded by the state. Its recently
published business incubator handbook
(see www.thedti.gov.za and sidebar)
provides a list of what’s on offer.
CHOOSING AN INCUBATOR
So how do aspiring entrepreneurs choose
the right incubator to nurture their
business? The DTI’s handbook offers
these suggestions:
• Look for clear evidence of
success, through data showing
how the businesses they incubate
are performing.
• Look for private-sector endorsement,
especially if the endorsing firms
are using the services of the
incubated SMEs.
Entrepreneurs might also want to
consider applying to a multi-sector
incubator, which some believe provides
a more fertile ground for exchanging
ideas, or one which focuses on a
specific industry.
Gallo Images/Getty Images/Istockphoto
EXAMPLES OF INCUBATORS
Enterprise development organisation
Fetola is one of the few incubators to
publish its results. This is unsurprising,
as it says its members have a long-term
survival rate of 95%, while its businesses
grow at an annual median rate of 65% –
well above the national average.
Fetola CEO Catherine Wijnberg believes
the main challenge for the process is to
overcome dependency. Incubators are
supposed to be temporary, supported only
for a set period or until a turnover target
is reached.
Fetola only takes in enterprises which
have been in business for at least six
months, to ensure entrepreneurs are
committed. “We look for someone who’s
put some traction into their business and
isn’t merely dabbling, harbouring the idea
that if it doesn’t work out, they’ll just go
back to their job,” says Wijnberg.
Shanduka Black Umbrellas, which aims
to make black-empowered businesses
the “employers of choice” in SA, does take
start-ups, putting them through a three-
➥ GAUTENG
• Aurik (multi-sector): www.aurik.co.za
• Awethu (muti-sector):
www.awethuproject.co.za
• Impact Hub (multi-sector):
www.johannesburg.impacthub.net
• JoziHub (ICT): www.jozihub.org
➥ WESTERN CAPE
• Reconstructed Living Lab (multi-sector):
www.rlabs.org
• The Shuttleworth Foundation (multi-sector):
www.shuttleworthfoundation.org
➥ KWAZULU-NATAL
• Downstream Aluminium Centre
for Technology (manufacturing):
www.dact.co.za
• Seda – DUT Technology Incubator (ICT):
www.dact.co.za
➥ MPUMALANGA
• Mpumalanga Agri-skills Development &
Training (agriculture): www.masdt.co.za
• Mpumalanga Stainless Steel Initiative
(manufacturing): www.mpstainless.co.za
➥ FREE STATE
• Seda – Agricultural & Mining Tooling
Incubator (manufacturing): www.samti.co.za
➥ LIMPOPO
• Seda – Limpopo Jewellery Incubator
(manufacturing): www.slji.org.za
• Mapfura Makhura Incubator
(biotechnology): 013 268 9324 or
[email protected]
➥ EASTERN CAPE
• Seda – Nelson Mandela Bay Information &
Communication Technology Incubator
• (ICT): www.snmbicti.co.za
• Seda – Platinum Incubator (mining):
www.spi.org.za
➥ NATIONAL
• Seda – Construction Incubator
(construction): www.seci.co.za
• Fetola (multi-sector): www.fetola.co.za
• Furntech (manufacturing):
www.furntech.co.za
• Raizcorp (multi-sector): www.raizcorp.com
• Shanduka Black Umbrellas (multi-sector):
www.shandukablackumbrellas.org
month “pre-incubation” programme
which gives the incubator a chance to
evaluate and train the entrepreneur.
“At the end they’ll have a fully-fledged
business plan drawn up by themselves,
not by people who don’t understand
the concept and can’t engage
with the content,” says Donovan
Goliath, the incubator’s National
Communications Manager.
page 69 | SEPTEMBER 2015 |
During Shanduka Black Umbrellas’
introductory programme, entrepreneurs
are taken to the SA Revenue Service to
learn about small business taxation, do
online courses on the country’s Companies
Act and Consumer Protection Act, and
finally present their business plan to a
panel who’ll decide whether to incubate
their enterprise.
Goliath says one of the most important
criteria – which is true of many other
incubators – is whether the person
applying is someone whose staff think they
can work with. The candidate’s business
plan is assessed on job sustainability, the
potential for profit and sales growth, as
well as a target of net positive assets, all
over a three-year period.
Gauteng’s Innovation Hub, Africa’s first
accredited science and technology park, is
home to the Maxum Business Incubator,
which supports start-ups from knowledgeintensive sectors such as ICT, biosciences,
electronics and the green economy.
“We look for innovations which will
improve the quality of life of South
Africans, not novelty gimmicks for the rich
and wealthy,” says Incubation Business
Development Manager Gary Bannatyne.
“We have a stringent application process,
but we take businesses from any stage of
development. We look for opportunities.”
Raizcorp, SA’s only “unfunded-forprofit” business incubator, has created
a module called the “Prosperator” to
avoid any negative connotations from
the word “incubator”. Its CEO, Allon Raiz,
says 80% of the businesses in its growth
programmes expand by more than 20% per
annum and 95% of its graduates are still in
business when they leave.
INCUBATOR PITFALLS
Wijnberg says there’s a false belief
in SA that entrepreneurs need a big
business plan and a huge loan before
getting started. Many, particularly in the
service industries, can start with basic
communication skills and access to the
Internet, she says.
“We try to create multi-million-rand
businesses as the first shot. The reality is
that entrepreneurship is a kind of ladder of
failure: you move from failure to failure as
a way of reaching the ultimate success. It
doesn’t happen overnight,” she adds.
www.destinyconnect.com
A FUNDI’S GUIDE
TO FUNDING
Your business concept is sound, your projections look good
– all you need now is a financial backer. How can you make your
start-up more attractive to institutional funders?
Written by Lisa Witepski
E
Entrepreneurs have long bemoaned the
difficulty of securing funding for their
start-ups. Bradley Ralph, Head of Small
Business at Nedbank, agrees that the
financial crisis of 2008 has placed added
pressure on all sectors of the economy,
from consumers to businesses and, of
course, banks. “A number of [start-up]
companies were forced to close their
doors, which resulted in them defaulting
on their loans from banks. They’re
consequently considered risky and this has
affected their chances of accessing funding
from financial institutions,” he says. Banks
have had to tighten their lending policies
in line with regulatory requirements, such
as those stipulated in the National Credit
Act, to ensure more responsible lending.
That’s not to say that as a start-up, you’ll
battle to access funding. There are several
steps entrepreneurs can take to make their
businesses more attractive to lenders.
THE FIVE Cs
Chief among these, agree Ralph and Ethel
Nyembe, Head of Small Enterprise at
page 70 | SEPTEMBER 2015
Standard Bank, is heeding what banks
refer to as the “five Cs”:
Capacity to repay the money. Any
financial institution you approach will
expect you to provide proof that you can
service not only the capital part of the
loan, but also the interest.
Capital is the amount of money you
personally have to invest in the venture.
It’s an important marker for banks, as
it relates to how much the business is
worth and the amount of risk you’ve taken
on board.
ENTREPRENEUR & FRANCHISE REPORT
Character needs to be taken into account
too. Lenders want to be sure you can be
trusted to repay any money they grant you
and that you have what it takes to turn
your start-up into a success. They’ll base
their opinion on things like your former
employment records, business experience
and educational background.
Collateral relates to the assets you have
available to repay the loan, should your
business fail.
Conditions are the external factors that
may impact on your success, like the
prevailing political, social or economic
trends in the country. However, conditions
also encompass the reason for the loan:
will it be used to develop your business, or
simply keep it afloat?
Some banks add a sixth criterion:
common sense. This is linked to
character, as it encompasses basic things
like business nous.
WHY WOULD YOU BE
TURNED DOWN?
If you’ve ensured your business can tick
the boxes in each of these categories, you
can safely assume that your loan will be
granted, right?
Not necessarily, warns Keobaka
Mahuma, Head of Enterprise Development
at Absa. “There may be a number of
reasons a bank turns down your loan.
The most common ones are failure to
demonstrate the viability of the business,
or insufficient experience to manage the
start-up. The business may already be
insolvent, or you may not have shown
its ability to generate future cash flows
to service the funding obligations.
Finally, you may not have identified the
funding needed clearly in your cash
flow projections.”
Gallo Images/Getty Images/Istockphoto
YOUR CHECKLIST
How can you avoid these potential pitfalls?
Start by preparing a well thought-out,
credible business plan, advises Mahuma.
You need to explain where the opportunity
in the market lies and how your business
will capture it. To make yourself more
attractive to banks, it’s a good idea to
amass significant experience before
establishing your business. Banks will
also feel more secure if you already have
customer contracts in place, as well as a
strong management and support team.
Provide them with evidence of how you’ll
manage repayments: if your company’s
facing financial difficulty, be proactive
about arranging a repayment plan with
the bank and show them how you’ve
handled past cases where your payments
to creditors have fallen behind.
TICK THE BOXES
• Can you prove your credibility?
• Choose a bank that’s familiar with
your industry and target market.
• Provide all the necessary
documentation when you apply
for funding: a comprehensive
business plan, realistic cash
flow projections, audited financial
statements and up-to-date
management accounts, as
well as identification and
verification documents.
• Be prepared for questions you
may be asked, such as the exact
amount of money you need, how
the business will be managed, the
length of the loan, how it will be
used, how you’ll repay it and what
you’ll do if you don’t get it.
Any financial
institution you
approach will
expect you to
provide proof
that you can
service not only
the capital part of
the loan, but also
the interest.
page 71 | SEPTEMBER 2015 |
www.destinyconnect.com
NO FINANCE? NO PROBLEM
Jeremy Lang, Regional General
Manager of Business Partners, suggests
some lesser-known alternatives for
obtaining funding. “Essentially, these
are just variations of the traditional
mechanisms open to entrepreneurs –
financing the business yourself, equity
instruments, finding an investor, or
debt,” he says.
• Crowd-funding involves several
people investing small amounts in
your business, usually via an online
platform. The advantage of this Internet
exposure is that you’re not restricted to
South African investors; also, because
you’re not looking for large amounts,
your market for investors is larger. The
downside is that you’ll be competing
with many other businesses’ proposals
and there’s a risk that your ideas may
be copied.
• Bootstrapping refers to financing
your venture from the profits it
generates. There are no other parties
involved, which means you have
complete control over your business,
but it takes longer to grow it because
your profits are inevitably smaller than
the equity you could borrow.
• Lang points out that your creditors
can be used to finance your business:
if you establish solid relationships
with your suppliers, you can buy stock
on terms. You won’t be making any
initial capital outlays; instead, you’ll
repay your suppliers when you sell
your goods.
• Don’t forget trade and debtor’s
finance. The former refers to financing
off the back of an order you already
have in hand, where you ask financiers
to finance the order before you invoice
the client. This is a good option if you
have long working capital cycles ( for
instance, if you’re ordering components
from overseas, which will need to be
shipped and later assembled). Debtor’s
finance is where you have an order
that’s already been filled, enabling you
to obtain cash upfront from a financier.
The financier may opt to purchase the
debtor from you (in which case you’ll
have to work out margins so that you
don’t make a loss) or it may charge
interest on the order.
The many
complexities
that come with
running a business
often necessitate
logistical support. We
highlight companies that
provide transport, legal
and financial resources and
services for entrepreneurs
Written by Gillian Klawansky
I
In an ever-changing business landscape,
logistical innovations are happening
constantly. Whether you’re looking for
technological tools to manage your fleet,
ways to streamline your accounting
processes, information about business
legalities or just good, old-fashioned
business advice, there are numerous
options available.
TRANSPORT
Fleet management is potentially one of
the trickiest logistical challenges facing
entrepreneurs. According to figures
released by the Southern African Vehicle
Rental & Leasing Association and the
National Association of Automobile
WORKING
FOR YOU
Manufacturers of SA, our country’s
corporate fleet market was estimated
at 1,2 million vehicles in June 2014, with
600 000 of these subject to some form of
external management, whether through
leases, rentals or vehicle maintenance,
reports Automative Fleet magazine.
With evolving technology comes
increased innovation, enabling SMEs
to take a more active role in fleet
management with the help of online
support. One example is the MTN Fleet
Management Solution for SMEs. This
allows business-owners to use their
cellphones to track, monitor and assess
their fleets, offering solutions that include
tracking vehicles and managing financing,
maintenance, drivers, customer records,
speed, fuel, health and safety.
“There are two schools of thought when
it comes to fleet management services for
the SME and start-up entrepreneur,” says
Jeremy Potgieter, Group Manager for M2M
(Machine-to-Machine) and IoT (Internet
of Things) at the MTN Group. “The first
maintains that entrepreneurs should
focus on delivering the core service or
product which they understand and have
taken to market. Utilising external fleet
management, much like utilising cloudbased offerings, allows them to maintain
this focus and not detract from their core
business. It also drives long-term reduction
in costs and overheads.
ENTREPRENEUR & FRANCHISE REPORT
“The second school believes that
keeping things in-house allows the SME
to maintain control and take a ‘hands-on’
approach towards monitoring the use of
its assets. It also allows them to customise
services for specific requirements,” he
explains. “At MTN, the customer benefits
most from a medium between the two.
We deliver an outsourced model which is
both customisable by and accessible to
the entrepreneur, allowing them to focus
on their core business. By receiving all the
required support and monitoring services,
as well as monthly reporting statistics
which highlight rogue/good driving
behaviour, the SME can plan for the future
and mitigate risks.”
Gallo Images/Getty Images/Istockphoto
LEGAL SERVICES
For entrepreneurs, finding yourself in
legal hot water can be a nightmare. While
companies may choose to bring risk and
compliance expertise in-house, it’s often
advantageous to outsource legal services.
A passionate entrepreneur herself,
Minikazi Mtati co-founded Johannesburgbased Mtati-Magangane Compliance
Solutions (specialising in legal, risk and
compliance) with friend and former
colleague Neli Magangane in 2014. “We
discovered a niche market of SMMEs
which couldn’t afford in-house legal
and compliance departments. As such,
they’d operate running the risk of noncompliance with various legislation,” she
explains. “We decided to offer a different
approach to compliance.
“It’s common for entrepreneurs not to
make a profit in the first year, when you’re
just working to keep your doors open,” she
continues. “For that reason, it’s advisable
to outsource most functions that are
beyond your expertise.” Mtati says that
outsourcing legal and compliance services
offers you the following advantages:
• You’re able to focus on your bottom line/
core business.
• Having proper contracts and agreements
protects the business, as the expectations
of all parties involved are documented. It
also ensures that a certain level of service
is maintained and advises you on how to
deal with negative situations.
• Having proper compliance policies and
processes in place ensures the smooth
running of the business. You’ll be kept
updated on all regulatory changes that
affect your particular industry. Remember,
non-compliance may result in hefty fines.
Leaving legal issues to chance can
sabotage your business, adds Graeme
Wilson, founder and CEO of Cape
Town-based law firm Whipping the Cat.
“Because entrepreneurs assume lawyers
are expensive, inaccessible and apt to
over-complicate things, they take a chance
and either do nothing or rely on the advice
of ‘a friend of a friend’ who has a degree
from the university of Google,” he says.
“By outsourcing legal services, the business
opens up a channel of communication
to draw on as much or as little legal
support as is needed, as well as on a
wealth of experience.”
Aware that many are deterred by the
high costs of legal firms, Wilson ensures
that Whipping the Cat provides a full
spectrum of commercial law services at
a fixed rate. “The hourly rate can pit the
interests of the lawyer against those
of the client,” says Wilson. “By doing away
with the hourly rate and working for preagreed fixed fees, or a monthly retainer,
we’ve introduced price certainty to the
legal market.”
FINANCE
While hiring a financial director may be
viable for some entrepreneurs, others
lack the budget to pay the high salary
the position often demands, finding
outsourced financial functioning to
be more cost-effective. “In most cases,
business-owners are receiving far
more value when outsourcing, as the
cost is often less and they have access
to professionals with advanced tax,
accounting and business knowledge if
and when the need arises,” says Real Time
Accounting (RTA) MD Colin Timmis.
As in the transport sector, technological
innovations have simplified financial
processes for entrepreneurs. A case in
point is RTA, which is the first South
African accounting practice to take
advantage of the tools offered by Xero,
an award-winning software accounting
solution for SMEs. “When we found Xero,
we realised there was a massive change
taking place internationally in the way
SME accounting was being done by
using tools like Xero, which give businesspage 73 | SEPTEMBER 2015 |
owners more access to and visibility of
their business performance,” explains
Timmis. “South African businesses have
had little to choose from in the past 20
years in terms of accounting software
and entrepreneurs are often excluded
from the financials of their companies
because of software that’s designed
for accountants, not business-owners.
By choosing Xero, RTA offers SMEs a truly
unique sales proposition.” Like Whipping
the Cat, the company offers agreements
at a set monthly rate for all accounting,
bookkeeping and statutory services. It also
caters for clients throughout the country.
“We only work on Xero, which means we’re
connected to our customer and we’re both
working on the same set of accounts in
real time, from any device, anywhere in
the world.”
Another countrywide accounting
provider for entrepreneurs is the Business
Accounting Network (BAN) franchise
group, founded in 1999 by its current CEO,
Monique Sharland. She set up a unique
franchised network of mostly ex-auditing
firm accountants and bookkeepers who
are now business-owners themselves,
offering big-firm expertise at small-firm
rates. “BAN provides more than just
accounting, tax, company secretarial and
payroll services for SME business-owners:
it also offers them effective financial
management and business guidance,
ensuring that they receive the information
and advice they need to sustain their
business,” says Sharland.
www.destinyconnect.com
CONTACTS
• MTN Mobile Fleet Management
Tel: 083 1 555 or email:
[email protected]
• Mtati-Magangane Compliance
Solutions Tel: 073 227 9738
or visit: www.mmcompliance
solutions.co.za
• Whipping the Cat Tel: 021 300 0993,
email: [email protected]
or visit: whippingthecat.com
• Real Time Accounting Tel: 011 745
8900, email: [email protected] or visit
www.realtimeaccounting.co.za
• BAN Tel: 0861 226 226, email: info@
ban.co.za or visit: www.ban.co.za
THE
MILLIONAIRES’
CLUB
It’s a great milestone for a business to reach the R1 million turnover mark
– as these four African entrepreneurs tell us
R
G AU T E N G
YANDISWA KARADEBE
KaRadebe started out as a primary school teacher
and later worked as a financial advisor, but she says
she feels most fulfilled now, as the head of a social
development management company.
Akhani Development evaluates, recommends and
manages socio-economic programmes on behalf
of blue-chip corporates like Alexander Forbes and
Tsogo Sun.
She started the company in 2013 with just R60 000
in savings. In two years, she’s grown her turnover to
R1,5 million and employs six staffers.
Due to it being a largely service-driven enterprise,
KaRadebe worked from home and used most of the
start-up capital on statistical software, laptops and
phones. The first few months were difficult and she
and her first two employees had very unpredictable
salaries; however, they began making a profit in less
than a year.
The growth of the business has exceeded her
expectations. “We’ve been well received and have
a lot of repeat business. We didn’t have to oversell
ourselves to get access to the market: many of
the corporates we’ve approached understand the
necessity for our service,” she says.
Another challenge is making the business of social
development accessible to grassroots NGOs and
helping them put systems in place. KaRadebe has
achieved this by offering intensive training and good
relational management. “I’ve trained my team not to
speak to those running NGOs in the same way they
page 74 | SEPTEMBER 2015
Yandiswa: Photographer: Sarah de Pina. Make-up: Lindiwe Sokhulu
AKHANI DEVELOPMENT
ENTREPRENEUR & FRANCHISE REPORT
Plan, but
don’t overthink things.
Rather learn
by doing
things.
speak to the executives funding them. We must be
relatable and speak in their language. We change our
approaches, based on who we’re addressing. Instead
of imposing our views, we invite participation and
interaction,” she says.
In this way, Akhani has made a big impact,
including correcting internal systems in social
development programmes to ensure money’s going
to the right beneficiaries. “If an intervention’s
good, we’re able to replicate and scale it. We can
also terminate programmes that aren’t making an
impact,” she explains. – Atlehang Ramathesele
KWAZ UL U-N ATA L
INDRANI GOVENDER
RICINZ CONSTRUCTION
Given her skill at running a building, landscaping
and electrical company which boasts several major
contracts, it’s hard to believe Govender was once an
out-of-work shop manager battling stress.
After more than a decade working in retail, she
was involved in a serious car accident and then
endured two armed robberies – all in the space of
six months. These events changed her life. “When
my psychologist diagnosed me with post-traumatic
stress disorder and my physiotherapist told me
I wasn’t ready to go back to work, I fell into a
depression. It was only when I booked for a free
women’s empowerment workshop that things
started to change,” she recalls.
She launched Ricinz Construction in 2008 (at the
age of 47) and soon started applying for tenders. The
work these required helped her heal, she says.
However, she really struggled to find the start-up
capital for the company. Eventually she was given a
loan of R20 000 by a friend to get things going and
was awarded a tender on her 37th application.
Cut to 2015 and she’s running a highly successful
operation. “I’m distributing and installing
generators, including winning a tender of over
R500 000 for generator supply in Kokstad, and doing
building maintenance for 25 Eskom buildings. I’ve
also electrified 100 houses in rural areas,” she says.
Her turnover’s increased from
R197 000 to R3,5 million in three
years. She also has a complement
of 194 employees, 74 of whom
are permanent and has hired
some former offenders in a bid to
alleviate recidivism.
She’s had to scale back
empowerment workshops she’s been
holding in rural areas, as the time
spent away from her office saw her
turnover dropping to R2,2 million.
“I now allocate two hours on
Wednesdays for intensive one-onone sessions with women and I
invite everyone to one big workshop
in one area, rather than travelling
everywhere,” she says.
– Atlehang Ramathesele
ZAM BIA
MONICA MUSONDA
JAVA FOODS
A 2013 World Economic Forum
page 75 | SEPTEMBER 2015 |
www.destinyconnect.com
Young Global Leader and Archbishop
Emeritus Desmond Tutu Leadership
Fellow, this Zambian native studied
law at the University of Zambia and
holds a Master’s degree in law from
the University of London. Her career
began at the office of the AttorneyGeneral of Zambia and led her to
work in several legal firms globally.
She later became a Partner at Edward
Nathan Sonnenberg in Johannesburg.
However, it was a trip to Nigeria in
2007, where she met billionaire Aliko
Dangote, that really paved her road to
success. He invited her to help expand
his company, which she joined the
following year, remaining there until
2011 as Director of Legal & Corporate
Affairs. During her stint at Dangote
Cement, she assisted with its $13
billion listing onto the Nigerian Stock
Exchange. “In Lagos, everyone hustles
and it dawned on me that I could do
the same,” she grins.
ENTREPRENEUR & FRANCHISE REPORT
REPORT
In 2012 she returned to Zambia, where she
established Java Foods. “I realised that the country
was becoming fairly urban. Consumers were
younger and were demanding different things, so
I knew I had to start something targeted at that
group. I hit upon noodles, for which there were
no indigenous brands. In that way, eeZee Noodles
were born.”
They’re now the leading instant leading noodle
brand in Zambia – but it hasn’t been plain sailing.
“The cost of doing business in this country is
very high, which I didn’t realise until I started my
company. There are lots of licences required, high
logistical costs, a depreciating currency and taxes to
pay,” says Musonda.
Financial discipline, consistency and leveraging
networks to expand her customer base have been
crucial to the success of her company. “Plan, but
don’t over-think things. Rather learn by doing
things. The business will teach you what you need to
know,” she says. – Lerato Tsebe
from her friends and family.
“We used bootstrap finance to
keep our cost structure low. We
currently employ five people, but
this can fluctuate seasonally with
contractors for big jobs,” she says.
Clients include hotels, tour operators
and travel start-ups.
“On the advertising side, we
work with brands such as Lycatel,
a pre-paid international calling
card company and a few Fortune
500 companies,” she says.
If you’re passionate and serious,
the benefits will show.
TES
U N IT E D STA
FARAI GUNDAN
FARAIMEDIA AND AFRICA TRIP DEALS
Another World Economic Forum Young Global
Leader, Gundan hails from Mpopoma township in
Bulawayo, Zimbabwe and holds a Master’s degree in
business administration from Florida Agricultural
& Mechanical University, USA. She’s the co-founder
of FaraiMedia, an online advertising and media
advisory company that aggregates online traffic
and packages it to potential advertisers. Africa Trip
Deals, her other company, is essentially an end-toend reservation platform for travellers in Africa.
As with most ventures, starting both companies
caused her headaches. “Raising capital for a start-up
is a major challenge, especially for an ‘unproven’
market such as Africa. However, it’s up to us to
prove the viability of the continent as an economic
frontier,” says Gundan.
She says her start-up capital came primarily
from her savings, as well as borrowed funds
She stresses that entrepreneurs
need a solid revenue model, a sound
business plan and the right team.
“I believe Africa is our inheritance,
including its challenges. In fact, it’s
in those challenges that the greatest
opportunities lie. My advice is to get
in the game and stay there until you
realise your vision. Will it be easy?
Absolutely not. So find the joy in the
service or product you’re offering and
the market will reward your efforts,”
she says. – Lerato Tsebe
SEXY START-UP
Born in Malawi, raised in Ethiopia
and schooled in Kenya, Maria
Thundu (37) used her English
degree to work as a content
specialist for more than a decade
before becoming an entrepreneur.
Nowadays she’s the owner
of Sweet Life Accessories and
Mars Photography, specialising in
portraits and weddings.
“Sweet Life Accessories started
unofficially while I was sewing bags
by hand when I was an intern, many
years ago. I’d cut up old clothes and
page 76 | SEPTEMBER 2015
up-cycle them. I had no means to
purchase new materials to work
with, so I simply used what I had
around me,” she recalls.
Her business is small, operating
from her garage, and she employs
one full-time tailor and a number
of part-time women who do the
beading on the bags by hand.
However, the venture
has involved several
challenges. “Finding
and training tailors who
understood my design
aesthetic wasn’t easy.
Also, the high costs in
shipping are a problem
and hinder the interest
we receive in the bags from
outside Malawi,” says Thundu.
She credits planning ahead and
using social media to enhance her
brand’s visibility for her success.
“Don’t give up. Entrepreneurship
can be unpredictable and
exhausting, but nothing succeeds
overnight. If you’re passionate and
serious, the benefits will show. Talk
about yourself: no-one will know
about you if you don’t put yourself
out there. Advertise yourself. Wear
or use your own product,” she says.
• Visit: www.mariathundu.com
– Lerato Tsebe
ADVERTORIAL
TOTAL
Commitment
Meet Mellisa Makgotlwe – a beneficiary of
Total South Africa’s Siyakhula Enterprise
Development Programme
M
ellisa Makgotlwe’s
journey towards success
was one of grit and
determination.
Despite a financially
tough upbringing, she refused to let
life’s challenges prevent her from
achieving her goals. Mellisa was born
in Hammanskraal
in the township of
Temba, just north
of Pretoria. After
graduating with a
BCom from Vista
University, she
joined Total South
Africa. In 2007, she took a
bold step to pursue her dream of
operating her own dealership and resigned
from her position at Total to participate
in the Siyakhula Entrepreneurship
Development Programme.
Upon completing it in 2008, Mellisa
applied for a dealership and low-interest
loan and was allocated the Leratong
service station in Kagiso township near
Krugersdorp, a
dealership which
she’s operated and
managed for five
years. “It’s been an
exciting journey
and I’ve learnt a
great deal about
the petroleum industry and how to run a
dealership. My goal is to purchase more
“Anything is possible if you
have a positive mind-set,
a can-do attitude and a
desire to succeed.”
sites where I can operate and manage other
dealerships,” she says.
“My message to aspiring entrepreneurs
is never to let challenges prevent you from
achieving your dream. Anything is possible
if you have a positive mind-set, a can-do
attitude and a desire to succeed.”
• Siyakhula is part of Total South Africa’s
commitment to transformation through
the development of black entrepreneurs
and enterprises. The initiative empowers
entrepreneurs by providing the tools they need
to develop into medium to large businesses and
establish themselves in their respective markets.
A FRANCHISE
THAT FITS
Comprising a sector that contributes
about 10% of SA’s GDP, generates a
turnover of R302 billion and employs
more than 323 519 people, franchises
are a compelling proposition for
aspiring business-owners.
But what size franchise – and
budget – is right for you?
Written by Gillian Klawansky
ENTREPRENEUR & FRANCHISE REPORT
A
According to a recent survey conducted by the
Franchise Association of SA (Fasa), there are over
30 000 franchised outlets in our country, 28%
of them owned by women who were attracted
to the flexibility and established systems this
business model offers. “Global and local statistics
are undisputed proof that franchising is a
much lower risk investment, with only a 10%
failure rate, as opposed to 90% in independent
businesses,” says John Baladakis, Fasa Chairman.
That’s not to say that buying a franchise
is an easy option: only franchisees who spot
a good opportunity and put in the required
hard work can succeed, whether it’s a small,
medium or large entity. “In the current economic
environment where many are battling, potential
franchisees have to be careful,” says franchising
expert Eric Parker, Senior Partner at Franchising
Plus, which specialises in franchise development
in SA. “Do your research and speak to other
franchisees. For many businesses, sales are
static and costs are increasing. Before buying a
franchise, investigate the market and identify
which categories are still growing to ensure you’re
not addressing a declining sector. For example
the ‘lipstick factor’ is worth considering, due to
the unwavering popularity of health and beauty
outlets. Or consider businesses that address a
common need, such as cash or clean water. You
have to get the concept right,” he says.
Parker also stresses the importance of finding
the right location. Your franchise outlet needs
to be a desirable area providing direct access to
your target market and, ideally, not too close to
similar outlets. “Check the sustainability of the
financial model – those with innovative products
and services, protected technology and new,
growing markets are ideal,” adds Fasa. Good
customer service is also imperative in creating
a successful franchise. We explore profitable
franchise options in various sectors.
SMALL
All new franchises start small. “Dig down to find
the gems – if you get in early, you can potentially
make a lot of money,” says Parker, who – as one
of the co-founders of Nando’s – speaks from
experience. “Small players that become big
generally have a strong concept.”
However, a lack of infrastructure can
seriously impede smaller franchises. “Look at
the competition as well, because most new and
successful concepts will soon attract copycat businesses which can dilute profitability,”
cautions Fasa.
page 79 | SEPTEMBER 2015 |
Despite the risks, the following small
franchises (all immediately available) are
good bets:
SHERPA KIDS
Runner-up in the Newcomer category at the 2015
Fasa Awards, Sherpa Kids is an international
brand founded in Australia in 1996 and now
throughout SA and the broader continent.
An out-of-school hours care (OSHC) business
offering its services before and after the
school day, as well as during holidays, Sherpa
Kids is managed by franchisees who employ
qualified staff to operate directly on primary
school premises.
COSTS: An initial fee of R100 000 for an
individual franchise, plus an estimated R80 000 of
working capital. A monthly service fee of 11% of
sales, plus a monthly group marketing fee of 2%,
is paid to Sherpa Kids.
REQUIRED FINANCE: At least 50% of the
total investment in cash and a plan to fund the
outstanding amount.
FRANCHISOR SUPPORT: The franchise fee
includes five days’ initial training and a further
week of on-site training at your school. There’s
also ongoing expert business and marketing
support, as well as opportunities to upskill and
build a financially sound entity.
FRANCHISEE QUALITIES: Entrepreneurs
with an interest in children, community and
relationship development and employee
management. While the role offers flexibility
which may appeal to working moms (especially
those who enjoy working in the educational
space), long hours are needed to get the business
started and an ongoing commitment is essential.
An educational qualification isn’t required.
THE LASER BEAUTIQUE
Started in Johannesburg in 2009 and launching
a franchise model in 2010, The Laser Beautique
is a unisex beauty/grooming and medi-spa
destination. Staffed by professionals in this
sector, it offers the latest non-surgical and mostly
pain-free aesthetic treatments using state-ofthe-art technology. “The great perk of joining a
small franchise is that more attention’s paid to
you, whereas in a larger franchise, you might
sometimes feel like just a number,” say founders
and owners Tzvia and Neil Hermann.
COSTS: Franchise fee: R100 000. Estimated setup costs for a Nail Beautique: R720 000-R900 000.
Estimated set-up costs for a Laser Beautique:
R1,5 million-R2,2 million. Estimated set-up costs
www.destinyconnect.com
“The great perk of joining
a small franchise is that
more attention’s paid to
you and you don’t feel like
just a number.”
FRANCHISOR SUPPORT: There’s total
dedication to the training and ongoing
support of franchisees. “We aim to give
our franchisees the same passionate
commitment we give our clients,” say
the Hermanns. This includes ongoing
administrative and marketing support,
business management and comprehensive
training in all aesthetic technology
for therapists. There are also standard
operating procedures for every aspect of
the business.
FRANCHISEE QUALITIES: “Potential
franchisees don’t need to be doctors,
aestheticians or beauty therapists.
However, they should have a business or
marketing background with very strong
people skills,” say the Hermanns. “All our
franchises are owner-managed and require
the owner to be involved on a full-time
basis. The ideal candidate is someone
who’s entrepreneurially minded, but wants
the support of a proven business model.”
BODYTEC
Also a runner-up in the Newcomer
category at the 2015 Fasa Awards, health
and fitness studio chain Bodytec offers
personal fitness training using electromuscle stimulation (EMS) that requires
only 20 minutes’ training once a week.
Originally founded in Europe, it now has
22 micro-fitness studios across SA and is
growing rapidly.
COSTS: An upfront franchise fee of
R105 000 is required, plus set-up costs
of R605 000. Working capital of R50 000
is also needed, subject to the size of the
premises and amount of equipment
needed. The management service fee is
6,2% of total revenue or R3 200 per month,
whichever is greater, while the marketing
fee is 2,5% of total revenue or R1 200 a
month, whichever is greater.
REQUIRED FINANCE: The minimum own
contribution is 35%.
FRANCHISOR SUPPORT: There’s an
initial two-week franchisee training
period, as well as quarterly staff training
courses, pre-opening assistance and
ongoing support across the board
(location, operation, organisational and
financial advice).
FRANCHISEE QUALITIES: An open,
flexible person with a solution-driven
attitude and an affinity for sport and
fitness, as well as a passion for EMS
technology. Franchisees benefit from a
hands-on, full-time approach and
should have strong planning and
communication skills.
MEDIUM
Offering ongoing support with a
wider network than that offered by
smaller franchises, medium-sized
franchises are a viable prospect for an
entrepreneur seeking a substantial, but
affordable business.
LEVINGERS
From small beginnings as a shoe clinic
over 60 years ago, Levingers is now a
dry-cleaning, shoe repair and mending
company with a national footprint.
Perfectly placed to access business people
with depots on the premises of businesses
such as Discovery, RMB and Telkom’s head
office, as well as traditional retail locations,
there are over 91 branches countrywide.
According to CEO Yadhir Mooloo,
there’s a six- to 12-month waiting list
for franchisees.
COSTS: Franchise cost: R850 000
(excluding VAT). Joining fee: R155 000
(excluding VAT). There’s also a fixed royalty
amount that escalates per annum, as well
as province-specific licensing fees.
REQUIRED FINANCE: 75%
unencumbered cash. The balance
can be financed.
FRANCHISOR SUPPORT: There’s ongoing
quality control, with operations managers
page 80 | SEPTEMBER 2015
in each area. Ongoing training is also
offered to franchisees and their staff.
FRANCHISEE QUALITIES: A people’s
person with a passion for retail.
“Determination and a will to succeed
are integral to franchise success,” says
Mooloo. The franchisee doesn’t need to
be at the location 24/7, but must put
strict controls in place, particularly in
terms of monitoring customer service and
employee theft.
KUMON
A world-renowned supplementary maths
and English franchise and the largest
independent education provider in the
world, Japanese franchise Kumon has
been in SA since 1991 and serves over
24 000 pupils in the country. While there
are numerous branches throughout SA,
start-up costs are relatively low.
COSTS: When buying a start-up franchise,
a minimum investment of R60 000 is
needed, which includes R7 000 as an initial
licence fee. In the case of franchise re-sales,
a fee is paid to the outgoing instructor for
taking over their business.
REQUIRED FINANCE: The minimum
owner contribution is 35%.
FRANCHISOR SUPPORT: From the
application stage to the opening of the
Kumon Centre, the recruitment and
development teams work hand-inhand with franchisees, offering advice
on everything from site selection to
suppliers. After the opening, a dedicated
area manager works with each franchisee
to help them get the most out of their
business. In addition to the compulsory
pre- and post-opening training, Kumon
offers ongoing workshops.
FRANCHISEE QUALITIES: Ideally, you
should have a degree or a relevant diploma
and be proficient in maths and English.
Business acumen, high energy levels and
enthusiasm for working with children are
required to succeed in this continuous
learning environment, which is an
attractive prospect for working mothers.
Owner-operation is required.
SORBET
Launched in 2005 by Ian Fuhr and
franchised from 2009 onwards, Sorbet is a
well-known South African success story.
Now one of the top beauty salon chains in
Gallo Images/Getty Images/Istockphoto
for a Beautique Medi-Spa: R2,5 millionR10 million. A royalty of 12% of turnover,
which includes a marketing fee, is payable.
REQUIRED FINANCE: 50% of the
franchise cost in cash is required.
The balance can be financed through
the banks.
ENTREPRENEUR & FRANCHISE REPORT
REPORT
the country, with over 110 outlets (most
of them franchised), it offers franchisees a
myriad of business models, from all-round
beauty therapy to hairstyling and men’s
grooming. Sorbet also sells a full range of
beauty and grooming products.
COSTS: Estimated total cash requirements
for new premises: Sorbet Salon: R1,25
million. Nail Bar: R715 000. Dry Bar (an
express hair salon): R1,45 million. Sorbet
Man: R1,6 million. Candi & Co (a salon
specialising in ethnic haircare): R1,55
million. All figures include a R115 000
franchise fee, as well as required working
capital. Franchisees have the option to
convert existing salons at tailored costs.
Management fees are 6% of monthly sales
and include the contribution for marketing
and advertising.
REQUIRED FINANCE: 50% of this amount
should be available in unencumbered cash
as a deposit ( funding can be obtained for
the balance).
FRANCHISOR SUPPORT: Sorbet prides
itself on its “critical-care” relationship with
franchisees, offering a turnkey solution.
Ongoing support includes everything
from site and staff selection to in-depth
training for franchisee and staff, as well as
preferential supplier terms and discounts.
FRANCHISEE QUALITIES: Franchisees
don’t need to be beauty therapists, but
should have a business or marketing
background, strong people skills and a
passion for excellent customer service.
Sorbet franchises must be ownermanaged, generally require full-time
commitment and are open seven days
a week.
LARGE
“Opting for a strong, established brand is
always a safer bet, but a franchise that’s
saturated the market might not give you
the best returns, as you have to share the
proverbial pie,” cautions Fasa. However
there’s no denying the popularity and high
sales potential of the following franchises:
McDONALD’S
Recently ranked the second-best brand
in SA in a survey of 45 restaurant chains
conducted by Acentric Marketing
Research, McDonald’s is a good
investment. Added to this is the fact that
South Africans love fast food and have
made the country one of McDonald’s’ most
successful international markets, so you’ll
be working off a solid base.
COSTS: Estimated at R4 millionR6 million, depending on the size of
the outlet and other factors.
REQUIRED FINANCE: A minimum of 35%
of the purchase price of a restaurant in
unencumbered, non-borrowed cash. The
remainder can be financed through banks.
FRANCHISOR SUPPORT: After a lengthy
application process, franchisees undergo
nine to 12 months of training in a selected
McDonald’s branch. The assistance
provided to them includes local and
national support in the areas of
operations, training, advertising,
marketing, real estate, construction,
purchasing and equipment.
FRANCHISEE QUALITIES: A strong
entrepreneurial spirit, as well as a business
and people management background.
Owners need to work full-time.
OBC CHICKEN & MEAT
Named Fasa’s 2015 Franchisor of the Year
due to its outstanding financial results,
growth and impact on the marketplace,
OBC Chicken & Meat is a retail chain with
over 50 outlets supplying everything from
chicken and meat to fish, dairy products
and selected groceries. For the past 28
years, the chain has catered to the low- to
mid-income sector’s demand for affordable
protein, with most stores situated close to
taxi ranks throughout SA.
COSTS: Franchise joining fee: R80 000.
Stores cost R4,5 million-R5,5 million to
establish. Working capital: R100 000R150 000. Royalty fees: 2% of the monthly
turnover on the first R1,5 million, 1%
of the monthly turnover on the next
R1 million and 0,5% of monthly turnover
for everything above R2,5 million.
REQUIRED FINANCE: 30%
unencumbered cash with the National
Empowerment Fund, the Small Enterprise
Finance Agency or the Jobs Fund. A 50%
deposit for commercial banks is required.
FRANCHISOR SUPPORT: Offering a
unique support system based on a mutual
partnership from the set-up of the outlet to
its ongoing operation, OBC helps identify
the best location for the branch and
provides franchisor training and
support, central distribution for both
page 81 | SEPTEMBER 2015 |
perishable and non-perishable foods, and
central bulk buying.
FRANCHISEE QUALITIES: Applicants
are extensively screened to assess
their suitability for a competitive retail
environment. While owner-operated
stores aren’t obligatory, they’re preferred.
No formal qualifications are required.
CASH CONVERTERS
International brand Cash Converters –
a Fasa Franchisor of the Year runner-up
– buys unwanted quality items and sells
goods and household essentials, as well
as providing cash loans, making it a viable
prospect in tough financial times. There
are over 67 outlets in SA and the brand
is growing.
COSTS: R2,1 million-R3,5 million is
required for a franchise (excluding VAT),
including working capital. There’s also a
4% royalty and a 3% marketing fee.
REQUIRED FINANCE: R1 million or 50%
unencumbered capital is required. The
balance can be financed.
FRANCHISOR SUPPORT: Initial training
entails two weeks of comprehensive
classroom training and 300 hours of instore training. Ongoing operational and
technical support are provided.
FRANCHISEE QUALITIES: Business
experience, willingness to make a longterm commitment, an ethos of hard work
and a hands-on approach to running a
customer-orientated business.
www.destinyconnect.com
T
11 KFCs – AND COUNTING
TOWNSHIP
ECONOMIES
The township economy in SA is changing fast and
whether on the upper or lower end of profitable
franchises, there are many options. Find a few ideas
from these hyper-local entrepreneurs
Written by Sheena Adams
Thabile Nhlapo (55) took a leap of faith
after coming across an advert in a local
newspaper calling for interested KFC
franchisees way back in 1992.
She, her sister and brother-in-law
pooled their resources for a deposit, raising
a total of R90 000. Even so, she says, KFC
still had to intercede with the bank on their
behalf and the threesome were eventually
granted a R410 000 loan in order to build
Katlehong’s first KFC franchise. But disaster
hit quite quickly.
“We opened in 1992 – pretty much in the
middle of the Thokoza riots. Those were
dark days. We thought the trouble would
last a few weeks, but it went on for years.”
With no cash reserves to fall back on,
Nhlapo had to hastily renegotiate the
terms of her loan with her bank, her royalty
payments with KFC and her rent with her
landlord. Mercifully, both the bank and KFC
froze the repayments, while her landlord
decreased her rent by 65% – a lenience
afforded to her for at least five years, until
the situation normalised.
These days, she owns no fewer than 11
KFCs – all of them in the East Rand areas
of Thokoza, Katlehong and Kathorus – and
employs 449 employees. By contrast with
the R410 000 her first franchise cost, her
most recently acquired restaurant in
Dawn Park cost in the region of R6 million.
She says a few things have helped ensure
her success.
KEEP YOUR DEBTS LOW “We funded
two of our 11 restaurants out of our own
pocket. With others, where we’ve required
loans, we’ve put down 50% as a deposit.
This approach has really helped keep us
profitable. We’ve mostly managed to repay
our loans in under two years, although we’ve
been known to do it in under six months
with restaurants that are really popular.
Generally, with new restaurants, we start
seeing a profit after 12 months of operating.”
Your business must be next to or near a
taxi rank, or directly on the main taxi route,
otherwise a township franchise won’t work.
page 82 | SEPTEMBER 2015
ENTREPRENEUR & FRANCHISE REPORT
Magdalene
Tshangela
Ebrahim
Abubaker
HAVE A FOOL-PROOF ECONOMIC
MODEL“Check the area you’re interested
in thoroughly. Assess the viability of the
shopping centre and see who its anchor
tenants are. If there are more than 75% of
chain stores in it, it’s a good bet. Also, study
the LSM of the residents nearby. Even if
they’re living in a township, that doesn’t
mean they’re all categorised as the same
LSM. Know who you’ll be selling to.”
BE EASILY ACCESSIBLE “Your business
must be next to or near a taxi rank, or
directly on the main taxi route, otherwise a
township franchise won’t work. Also, about
60% of your trade will be done after 5pm,
so increase your staff at night.”
DON’T DECLARE DIVIDENDS “Defer
declaring any dividends, especially if your
business is still in a growth phase. We
didn’t declare dividends for more than
seven years and while I’m not suggesting
you wait that long, delay doing so for about
two years, until your retained earnings are
at a significant level.”
Photographer: Sarah de Pina. Make-up: Lindiwe Sokhulu
1 + 1 = R50 000
Magdalene Tshangela runs Soweto’s first
Kumon franchise at Soweto Power Park,
which she purchased in 2010 for R12 000.
These days a franchise costs in the region
of R40 000, although an additional R20 000
in working capital is required.
She’s driven by a passion for education
and says seeing children turn their maths
skills around in three months is all the
encouragement she needs to keep going.
In a good month, her turnover’s about
R50 000, although she’s required to pay 40%
of her profits to Kumon. Her overheads
are rent of R4 500 and paying her subject
tutors an hourly rate of R45-R60.
Tshangela’s biggest headache has been
dealing with non-paying parents who
see her business as akin to a community
service. “They’d rather tell me about
their divorce and the R40 000 a year they
pay in private school fees. I’m like their
psychologist and accountant at the same
time,” she says.
She’s invested in a Sage accounting
system to manage her weekly accounts
and give herself more time to explain
basic payment principles to recalcitrant
CHOOSE THE
RIGHT SECTOR
Banie Claasen, who heads
up the retail sector in
business banking at Absa,
offers pointers to bear in
mind if you’re seeking a
franchise opportunity
parents in a personal way.
“I basically sit down with them and
explain that I deserve to be paid; that I’ve
earned it. I ask how much they value their
children’s education – that normally helps.”
Quick-service restaurants are huge.
“We’re going to see a lot of them
moving into other African countries.
Sushi is also a growing trend.”
Look at creative options in the retail
trade, like Cash Crusaders. “DIY
and building brands are also seeing
a surge, while beauty is one of the
fastest-growing sub-sectors.”
Consider your personal work
experience before making final
plans. “From the bank’s perspective,
your level of experience should
go hand in hand with the type of
business you’d like to acquire. For
instance, if you’ve never been a
manager, it will be difficult to run a big
company with many employees.”
Start saving. “Franchises cost
anywhere from R50 000R50 million. A franchisor wants
a potential franchisee to make
their own contribution of at least
50% of the total cost.”
WINGING IT
Ebrahim Abubaker is the Manager of two
Chicken Licken franchises in Umlazi,
Durban. They each turn over R500 000 a
month – not bad for a franchise that cost
R3,5 million eight years ago.
“I think the township has a lot of
potential. Although the unemployment
Although the
unemployment rates
are high, there’s a lot of
spending power.
rates are high, there’s a lot of spending
power,” he says.
He strongly advises against starting up a
franchise with a loan. “This will put you in
an ongoing debt cycle, because you need to
revamp the store every five years.”
He adds: “Buying a franchise guarantees
you growth. Head office will often send
people down to support your franchise
if they see a drop in your sales. We pay
our franchisor 10% of our profits, which
supports marketing and branding and
ensures we don’t run short of goods.”
.com
Nandi Dlamini owns 19
KFCs in Durban. Meet her
– Nombuso Dlamini
page 83 | SEPTEMBER 2015 |
www.destinyconnect.com
@ www.destinyconnect.com