Long-term sus­tain­abil­ity

Cre­ate gen­uine value

Finweek English Edition - - ENTREPRENEURS -

PER­HAPS ONE OF the big­gest chal­lenges when build­ing up a small busi­ness is to cre­ate gen­uine value that will gen­er­ate long-term sus­tain­able wealth for you, the en­tre­pre­neur. How­ever, the con­cept of “value” varies from busi­ness to busi­ness. It may take the form of an­nu­ity con­tracts and long-term clients or in­tel­lec­tual prop­erty, such as patents, soft­ware, cus­tomers or mar­ket niches.

On a re­cent Fin24 en­tre­pre­neur podcast, Tash­mia Is­mail, of the Gor­don In­sti­tute of Busi­ness Science (Gibs), pointed to Blue La­bel Tele­coms [JSE:BLU] as a South African busi­ness that had suc­ceeded in build­ing an­nu­ity rev­enue and one that could suc­cess­fully com­pete in in­ter­na­tional mar­kets. The com­pany – 12% owned by tech­nol­ogy gi­ant Microsoft in the United States – is a lead­ing dis­trib­u­tor of pre­paid se­cure elec­tronic to­kens. It earns rev­enue from the ac­ti­va­tion of starter packs but also from sub­scrip­tion ser­vices and loy­alty packs.

The group is ac­ti­vat­ing more than 200 000 starter packs/month and, apart from earn­ing a re­bate on each suc­cess­ful ac­ti­va­tion, it’s also able to gen­er­ate on­go­ing rev­enue from them. The sys­tem works with Blue La­bel turn­ing a profit of R573m in its pre­vi­ous fi­nan­cial year and rev­enue top­ping R9bn.

Tech­nol­ogy en­tre­pre­neur Rory Mackay told Fin24 that in his opin­ion en­trepreneurs don’t do enough to fo­cus on de­vel­op­ing an­nu­ity in­come when they put to­gether their busi­ness mod­els. “I think it’s es­sen­tial be­cause, first, it’s hard to get to rev­enue and then to get sales re­peat­edly is tough. If you can cut out that bot­tle­neck you’re do­ing very, very well.”

Mackay iden­ti­fies two ways of look­ing at an­nu­ity rev­enue. The first is where a client has a sub­scrip­tion amount deb­ited from his ac­count each month; the sec­ond by cre­at­ing a client in­ter­face that be­comes so trusted clients are loath to change to some­thing new and un­fa­mil­iar.

In a re­cent in­ter­view with Finweek, Blue La­bel founder Mark Levy said: “It’s not just about the tech­nol­ogy – it’s about the method­ol­ogy of how you bank, get cus­tomers and re­tain them. Tech­nol­ogy is cer­tainly im­por­tant, but there are so many other facets to the busi­ness that are very dif­fi­cult to repli­cate.”

“The level of suc­cess achieved by sales­peo­ple will al­ways be de­ter­mined by the num­ber of cus­tomers self-gen­er­ated: that is, other than floor traf­fic or tele­phone en­quiries gen­er­ated by your ad­ver­tis­ing,” says en­tre­pre­neur coach Brad Sug­ars. He ad­vises en­trepreneurs to put in place a sys­tem that will help gen­er­ate clients from re­fer­rals and past cus­tomers. The trick then is to track those cus­tomers and iden­tify where they’re com­ing from so you can make sure they’re go­ing to come back and spend money with you again.



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