Your business needs to sustain itself – you come second

Bring Change Lowveld mentor Mr Kerneels Kruger shares the 10 most important lessons he has learned in business.

Mireille de Villiers

July 1, 2016

Ms Phephsile Maseko and Mr Kerneels Kruger.

MBOMBELA – If doing business was easy, everyone would be making a success of it.

Ms Phephsile Maseko recently embarked on realising her big dream – establishing her own skin-care range produced from indigenous plants.
She registered the company in 2011, and is at last embarking on commercialising it.

The latter has been the most difficult thing she has done, she recently told Bring Change Lowveld mentor Mr Kerneels Kruger.

Luckily for her, the extensive research and groundwork she has been doing earned her the position as winner of the Bring Change Lowveld mentorship programme last year.

As a part of her prize she has had the opportunity to be mentored by a variety of business people who have attained success in the Lowveld over the past 25 years. Most recently she spent some time with Kruger.

A chartered accountant by background, he left his protected job to become a self-employed entrepreneur. “I was not educated or trained to become a car dealer. We went into an alliance with people who knew the business well.”

It took 10 years before he had matured sufficiently to venture out on his own. In the meantime they acquired properties and other businesses – and learned a lot in the process.

Here he shares the 10 most important lessons he has learned in business with Lowvelder readers.

Partnerships are expensive
Be very careful when choosing a partner, Kruger cautions. “They need to add value instead of only collecting a return on their capital investment, as a bank would do. In that scenario, borrowing money from a bank is less expensive.”
He gained valuable guidance from the 10 years he had spent working with his first partner in the car-selling industry. He acknowledges that the right partner could be crucial – if they help you. “I would not have been as successful if I hadn’t spent those
10 years working with him. It took that long for me to know what to do.”

Choose a partner carefully
“However, when we decided to part ways I had to pay him out the equivalent of all the cash we had. The business was there to generate cash anew, but I had to start over.”
Under these circumstances, a partner can be much more expensive than a bank.
“Anyone who puts in equity has high expectations on their returns: they are driven by how much they can make. If they are not adding value to your business, it would be better to pay that money in interest for a bank loan.”

The business comes first
A business must support the business first and foremost, not your lifestyle. You come second, Kruger says.
“You can only live off the business once it can support you, and you should only earn what a professional manager gets elsewhere.”
Failure for start-ups often results when said entrepreneur overspends the company’s income on personal expenses and fails to invest it back into the business.

Complete your 10 000 hours
Everybody talks about the 10 000 hours of experience for a reason. However, Kruger says even this is not sufficient.
“It is an understatement. You have to go through these learning periods. At first, when starting out, you have to not be ambitious, but be conservative in how you spend your resources. After all, you have no certainty at the end of the month.”

Cash flow is king
If you ask a bank for a loan they would be apprehensive if your cash flow is not in order. If they are not apprehensive, ask for double you had wanted.
“Always meet you financial commitments. Be open with creditors. If you hit a spot of trouble, tell them as soon as possible.
“Once you start playing with your cash flow the only way is down.”

Manage risk properly
Kruger points out that he is self-employed, worlds away from an entrepreneur such as Maseko.
“You have an idea you are making into a product and which you now have to get to the market.”
He adds it is rare that people succeeded in turning an idea into a successful business.
“The people making it a success are almost zero per cent. I have been involved in many businesses, and have only been successful in a handful of them.”
However, it is the entrepreneurs who create jobs. “People here need jobs, People like you are going to create them because government can only address short-term needs.”
To ensure you make it a success, you have to be aware of your risks.

Avoid the founder trap
The odds are stacked against you: you start out as an entrepreneur and eventually build a team. As it grows, your role becomes smaller.
Once you become so big you are a corporation, your role decreases more and before long nobody wants to buy from you because there is no personal service, no vision, no soul.
“To build a good team you need solid administration, otherwise you die,” he says.

Get your administration right
Stay on top of your finances. Kruger still looks at his reconciled bank accounts daily. “Keeping the basic administration and paperwork in order are crucial even for a small business.”

Decide on your business model
Once you have done your thorough research, decide on your business model and build your business according to the formula. It may have to change as you grow. To assist, get people with those skills to help you.
“It is difficult in the beginning, but keep going and you will see the results.”

Understand your market
Do your research into who constitutes your market.
Continue to do it, as it changes all the time, and to effectively market your product and get the products to your market, you need to know who they are at all times, Kruger concludes.

Read what other mentors have to say:

At Caxton, we employ humans to generate daily fresh news, not AI intervention. Happy reading!

You can read the full story on our App. Download it here.