Vusi Thembekwayo understands entrepreneurship. Better known as one of the Dragons on South Africa’s Dragon’s Den, he’s had his fair share of entrepreneurial ups and downs.
Player: Vusi Thembekwayo
Company: Motiv8 Advisory and Watermark Afrika Fund
What they do: Strategy advisory firm & private equity firm
Group turnover: R140 million+
Visit: mtv8.co.za & www.mygrowthfund.co.za
At 23 he had a fall-out with a partner in his first business, only to find himself living and sleeping in his car to make ends meet while he built his second business.
He’s made mistakes and learnt hard lessons, but he’s also built a R140 million plus business before his 30th birthday, and he’s managed to do it without killing the proverbial chicken. This is his story.
At 24, Vusi Thembekwayo was living out of his car while he tried to build his business. You wouldn’t know that he’d built (and sold) a multi-million rand business already, or that his latest venture was funded with the proceeds of that sale.
All you’d see was a young guy waiting for his first big deal, and for his business to take off. It took eight months to get his first client. Five years later, he has a healthy turnover of more than R140 million, and he’s still reaching for the stars.
You’ll also want to read Vusi Thembekwayo’s Winning Lessons For Success
21 and Taking Charge
But let’s back-track a few years. Thembekwayo paradoxically began his entrepreneurial career within a large corporate business.
He’d landed the job after having the balls to tell the middle-aged, white male exco running a R17 billion business where they were going wrong, and how they needed to change to get ready for the future. He was 21 years old.
A motivational speaker at the time, with a background in finance, Thembekwayo had been hired to speak at a function for FMCG-giant Metcash’s exco. As someone who prides himself on the research that informs his talks, he delved deep into the company he was presenting to.
His research revealed a company in trouble, and so he decided to offer some real advice, rather than the usual ‘ra ra’ of motivational speakers. While many of the board members dismissed the young upstart, the CEO spotted something else: A young guy who potentially wanted to shake up the business world. A fresh approach for a stale environment.
“And so he offered me a job,” says Thembekwayo “It was a crazy idea. I knew nothing about the industry, and I wasn’t going to get any upfront support. I was basically given a six-month window to come up with some incredible, earth-shattering idea. I’d report to the COO, but other than that I’d have a lot of autonomy.”
He soon realised that he hated the corporate structure, the cumbersome processes and redundant reporting lines that impede innovation. Here he learnt his first and most valuable lesson.
“Bigger doesn’t mean better in business,” he says. “Bigger means more complex, more rigid, less agile and less responsive.”
Fast Fact: Vusi Thembekwayo started his career heading up a business unit at FMCG giant Metcash.
Not one to leave a task incomplete though, he stuck around.
“I agreed to the position because I knew it would be an incredible challenge, but also because it was the ideal opportunity to learn to operate, manage and lead, all under one roof. I stayed on because nothing is a better teacher than an uncomfortable space. If you aren’t challenging yourself, you aren’t growing.”
Six weeks passed, and no grand ideas came. “I was given this blank page and I just couldn’t figure out how to fill it.”
It was starting to look like the CEO’s experiment on an opinionated young jockey was a waste of time. And then Thembekwayo had a stroke of inspiration.
“A family member fell ill and was checked into Chris Hani Baragwanath Hospital. At the time, the local government branch that ran the hospital was having major issues with its food suppliers, which meant there was insufficient food for patients. The realisation struck me. Metcash is a bulk food wholesaler.
“We had begun developing retail and were poor at it. Why weren’t we servicing these guys? The next day I started working on my business plan.”
The idea was a hit, and the board made R2,6 million available in operating expenses for the idea.
“I could draw stock off P&L. All that was left for me to do was get an office, employ sales and admin people, and start selling like hell. In our first year we had a turnover of R16 million. Four years later we’d grown that to R463 million with the highest EBITDA in the group. The growth was nothing short of stratospheric.”
Payments are About Relationships
Of course, this created new challenges. If your business is built on offering credit, you need to ensure you get paid (which is one of the reasons Thembekwayo dreaded the treasury MD).
“I had to learn that payments are all about relationships. The surest way of getting paid is to understand who your customer is, and what drives them. In my specific sector I learnt a few things. For example, they hated golf games. They played golf, but they didn’t like it. What they did like was a hospitality suite at FNB Stadium when the Pirates were playing the Chiefs. So, I made sure we had that and regularly invited my clients. Now I’m not having a conversation with him about the fact that he’s in the red by 60 days because his people haven’t paid me.
“I’m not going to phone or email him. Instead, in a social environment, I tell him I have a cash flow issue. He’ll ask me what the problem is, because he’s now relating to me as a peer, and I tell him that I think his accounts department hasn’t paid me. By Monday everything is sorted, and the money is in the bank. You just need to learn to talk to people in their language.”
Thembekwayo soon had the highest EBITDA in the group and the highest rate of growth. And then everything changed.
“Our CEO left, and the new CEO and I didn’t see eye-to-eye. He wanted to take the business in a retail direction. We were wholesalers. He also didn’t like the way I conducted my hours. I’m not an eight to five guy. I get in early, and stay late. I also spend a lot of time out of the office – business is out there, and I should be out there getting it, not in the office, behind a desk.
“We both soon realised that the business I had created didn’t belong in his new vision. I spent tireless hours convincing the board and shareholders to allow me to ring-fence the business. We did a valuation. I raised my own equity and risk-funding and then we bought it. On the day the board approved the sale, I felt like I was ascending to heaven. I love the thrill of doing deals.”
Learning to Let Go
“There are some things start-ups do better and others that big businesses do better, and this was one of them. Strategically, the business looked good. We made a gross profit of between 30% and 40%.
Turnover was growing exponentially. But, customers paid late, suppliers demanded payment upfront, and too much cash was tied-up in stock. This was fine when we belonged to a R17 billion business. Stock was never a problem given their balance sheet. Doing it yourself is trickier. The economies of scale don’t work.
We couldn’t purchase at the same price. Overnight suppliers wanted us to pay upfront – they knew and liked me, but they couldn’t take the risk of us not being able to pay them. I had lines of credit with my customers, but needed to pay my suppliers higher prices upfront. The commercial model no longer held.
“I’ve seen how many entrepreneurs hang on to an idea long after it’s feasible. If you’re really going to be successful, you need to know when it’s time to say thank you, but no thank you. I could see that our prospects for controlled growth were limited and I like growth companies. If it doesn’t grow and cannot disrupt, it won’t peak my interest. We eventually sold the company to a large listed conglomerate.”
Finding a New DreamVusi-Thembekwayo
At 24, Thembekwayo now had a nice tidy sum of money that he could use as seed capital. “I’d spent four years learning about business,” he recalls. “I really felt like I was ready to start something on my own, from scratch.” But of course, the journey is never that simple.
“I’m a big believer in betting on yourself, so I put all of my money into me,” he says. “I started a small speaking company, and a strategic consulting business.” The logic went like this: Thembekwayo ultimately wanted to end up in the private equity (PE) space.
Fast Fact: By 25 Vusi had cashed out and launched a business of his own, only to realise that even with his background, start-ups are tough, and building clients takes time.
He had a finance background, was passionate about business and loved valuations. PE was the ideal space to be in. In order to enter that space however, he needed board exposure, both for his own CV, and to start making the necessary contacts to build his portfolio.
“I thought that I could use the speaking business to network and meet people, and the strategic consulting business to grow my reputation in the boardroom.”
There were two problems. He didn’t get a single speaking gig in eight months, and no one was banging down his door for him to mediate their next strategy session.
“In the beginning the speaking business actually hurt my strategy business,” he says.
“I went to potential clients to flight the idea of facilitating their next strategy session and even helping them to roll it out. No one cared. They didn’t want it, and they certainly didn’t see the value I could bring. I was branded as a speaker; no one saw me as a strategist.”
Meanwhile, Money was Running Out
“I thought I’d paid my dues at Metcash. As it turned out, I was still right at the beginning of my journey. I’d taken my savings and signed the lease of an expensive office in Centurion, furnished it and hired an assistant, because I thought that that’s what you do.
“I’d also heard somewhere that you should never answer your own phone. Turns out, none of those things actually helped me to land clients. I used all my savings on the business’s rent and salaries, which meant I couldn’t afford personal rent, to pay my car off or even food half of the time.
“The bank kept trying to repossess my car and I kept fending them off. I needed that car to drive around and drum up business. Plus I was sleeping in it, in my office park’s basement. It was the dead of winter, so I had to start the engine every few hours to warm myself up, but it was a place to put my head down. I ate my meals at my girlfriend’s house.
“What got me through? Entrepreneurs are crazy. Certifiable. If you’re not crazy enough to think wild things, and have the courage and will to pursue them, you’re not going to make it, because start-ups are tough. The only way to do it is to remember that everything you’ll ever need to achieve your wildest dreams, you’ve already got. I had that mantra printed on my wall, and I looked at it every time I wanted to throw in the towel. It helped me refocus and carry on.
“Then one day, after a long day of those cappuccino meetings where things are discussed but never executed, I got back to the office after 6pm and my PA was still there. ‘You won’t believe it,’ she said. ‘Somebody just called. They’re going to book you.’”
Don’t Kill the Chicken
“From there, business started steadily coming in for the speaking business, but the strategy side was still not taking off. I realised I needed to rebrand, and bring in a partner who complemented my skills set. I approached very talented people to be part of the business and gave them the tools and mandate to build the advisory function. I created the opportunities and the team would monetise them.
Fast Fact: Today Vusi has built a R140+ million speaker, strategy and consulting business, and is busy building an investment fund.
“I anchored the team with a key individual and together built the business. I used money from my speaking engagements to finance the business. I am intimately involved in this business, from strategy to client engagements, partnerships and product development. My focus is giving the team the vision of what we seek to do, creating the opportunites and ensuring that we remain true to our culture.”
It’s a good lesson for other entrepreneurs: Play your role and get the best people to play theirs. Allow other people to do their thing. “Steve Jobs couldn’t build Apple alone. He was a marketer and salesman, not an engineer. Teams build businesses, not lone rangers or heroes. Building a business is ultimately about building a team. Great entrepreneurs hunt in packs.”
It takes time and talent to build a business. Thembekwayo admits that his speaking business is the most valuable part of his eco-system.
“I spoke in 21 countries in 2014 and am the only speaker to speak by invitation at the World Bank. My speaking talent has given me access to amazing leaders, capital and opportunities. People ultimately trade not on skill, but reputation.”
Today, Thembekwayo is building Watermark Afrika Fund, his private equity firm. “We’re not just financiers, we’re entrepreneurs, so we know how to build a business to scale and do it quickly. Our real strength has been the access to the transactions that we get and our strong Africa network.” Both of these, Thembekwayo acquired through his public speaking.
“Our next step is to build our own fund, and we’re busy with that now, but first we had some lessons to learn. I’ve made mistakes, but I’ve made them without being a fund manager, which basically means that I didn’t kill the chicken. I could learn from them and grow, without betting the farm. Now we’re ready for our own fund.”
Story originally appeared in entrepreneurmag