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From surfer to socio-economic expert

James Burton started his company, Hero, in 1996 as a below the line design and marketing agency.

At the same time and under the same ownership and premises, he started a sister company specialising in the then rare art of creating websites and other digital marketing products.

In its current form as a now fully integrated division of the Hero “mother ship”, this digital agency is one of a few survivors from the heady dot com boom (and then bomb) days of the late 1990s and early 2000s.

Burton talked to Fin24 about his journey as an entrepreneur.

Tell us a little bit about yourself and your background.

I am 53 years old. When I left school (Sacs) to go to UCT, I was your typical Cape Town surfer boy, complete with long, blonde hair and earring (in the late seventies and early eighties that was really pushing it for a South African).

After graduating from UCT with a BA (English, Geography majors), I spent many years travelling around the world, sailing and surfing the oceans.

I did interesting stuff like making surfboards and being a participant in the world’s first reality TV show and only finally succumbed to my first proper full time desk job, as a copywriter, when I was 29.

How and when did you become an entrepreneur?

I certainly didn’t consciously decide to be one, but I guess my confidence in my own ability plus my tendency to easily take on risk (where it made sense, that is) plus my inherent dislike of being told what to do by others (specifically those not competent to do so) inexorably steered me in that direction.

So, in 1996, with three young kids and a wife who worked only part time, I somehow decided that going on my own from scratch was the best route to follow.

When I look back, it seems quite a dangerous leap of faith to take, given that I had no financial “parachute” at all, plus a large bond and could easily have stayed in my existing cosy and upwardly mobile job rather than risk losing everything.

What made you decide to do that?

After a short time in the mainstream ad industry, I realised that, though I had what it took to succeed, I was not that enamoured with the people and social dynamics within that industry.

To be honest, I found it generally characterised by smug, self-congratulatory, hedonistic types, who lived in an elitist bubble and fancied themselves as somehow socially relevant way beyond the reality of their role.

They seemed to need to think that the stuff they were creating was true art rather than merely a (admittedly, often very well executed) functional component of a standard business process.

Perhaps my rather jaundiced views were a function of entering the industry at the comparatively advanced age of 29, having already experienced the real world and creating a family and all the responsibility, perspective and worldly experience that goes with that process.

Anyhow, bottom line, I enjoyed what I did and was clearly good at it, but wanted to do it on my own terms and to make decent money delivering what the client needed, rather than what my ego desired in terms of peer recognition.

In addition to the above, I wanted to be able to choose with whom I worked - that is colleagues and clients I both respected and liked.

I also strongly wanted to live and die by my own sword, because in my travels and various previous work roles, I had often been exposed to situations where people, who were clearly incompetent, nevertheless had the power to hugely impact my life purely by virtue of their age, length of tenure or rank.

In my view, if I was to suffer (or benefit) from a decision, then that decision needed to be mine alone.

What was the gap you saw in the market?

Interestingly I did not analyse the “opportunity’ in an overt manner at all.

Perhaps naively, I just assumed that in an industry then characterised by smoke and mirrors (rather than the direct measurability, and therefore accountability, characteristic of this modern digital marketing age), egos and other such nonsense, there would always be excellent potential for a business that combined real ability with old fashioned honesty, great service and a simple desire to deliver true, measurable value in return for payment.

It took a while, but that belief was vindicated and today, those values still underpin what is now a very solid, nicely successful and significantly sized business with excellent future growth potential.

What is the basis for your company's success?

Today, based on a deep and, I would venture, unique level of combined conventional and digital experience, Hero has evolved into arguably the most diversely capable single-source South African provider of marketing, communication and ancillary services and technology.

As such, our offering includes everything from high level business and marketing strategy to full ASP or MS.net application development, and everything in between you could imagine as relevant.

In other words, our capability encompasses both the high quality strategic/creative IP generation as well as the wide range of skills and services required to build whatever vehicles are required to deliver that IP to the market in this rapidly evolving economy.

But, in my opinion, underpinning all this is an understated, hard to define but incredibly key skill: The ability to understand “human market dynamics”.

This is perhaps a clumsy way of expressing the fact that over the last 18 years we have become extremely capable specialists in the art and science of understanding both business and people in all their guises, and most importantly, how best to bridge the communication gap between them.

I think this is a very rare skill indeed, especially within a South African context where there is so much social and cultural diversity.

You can think of us as socio-economic marketplace psychologists I guess.

What success have you had in the company so far?

We’ve achieved much to be proud of, but possibly the best indicator of our success is the fact that, against the best efforts of the vastly bigger original incumbents, Hero has grown to be the primary supplier of below the line and digital marketing services to the biggest financial services entity in the country and Southern hemisphere, Old Mutual.

Obviously they are not our only blue chip client, but they are the largest feather in our cap.

Overall, we have grown organically (that is with no acquisitions or external funding) from a tiny operation turning less than R600 000 in our first year, into a company employing over 55 (and growing rapidly) full time staff driving a turnover well in excess of R40m per year.

Incidentally this figure does not include grossed up media billings, nor our subsidiary companies’ turnover, nor do we do marketing material production for Old Mutual - normally a very large, but much lower margin component of this type of BTL service.

We have also managed to fund and spin out our own property owning entity, which owns the various premises housing Hero within a AAA commercial residential building in the heart of the new economic precinct in the Cape Town Foreshore area.

The next three years or so will see these properties being fully paid off and we are currently looking at expanding our property portfolio using the future unencumbered rental to fund a “war-chest” for potential purchases.

One of our other notable successes worth mentioning, was our primary role in the development of an enterprise outbound email management software platform known as Rocketseed.

A further success is our contributory role in the creation of Broccoli Project Technologies.

This sophisticated technology platform which, besides initially winning second prize overall (and most socially beneficial prize) at the World Innovation Summit in Barcelona a few years ago, is today active in multiple sub-Saharan territories.

It helps to track, manage and incentivise positive social behaviour (such as school attendance, beneficial personal health habits, HIV testing and recycling) through a cloud based platform utilising biometrics, mobile payments and “Africa-proof” technology/hardware.

Interestingly, the technology developed to underpin the delivery of the aforementioned lends itself to many uses within the harder-edged business world and we are already experiencing great interest in such potential uses from our commercial client base. Watch this space.

Having said all this, to my mind, our biggest success is that we have created the perfect platform off which to move rapidly further towards our stated aim.

This is the aim of creating a diversified wholly South African marketing and technology services conglomerate capable of competing with and beating the overseas owned entities which are actively dominating the local market.

As proud South Africans, that is something we’d like to change.

What are the challenges?

There are too many to mention them all, but below are the primary amongst them in terms of the South African context:

Red tape

Much has been said in the media about this subject. Suffice to say that it probably eats about 3% to 5% of our GP just to remain compliant with the lengthy list of requirements that government places in the way of doing business at our and lower levels.

Weirdly, despite loud promises to the contrary, every year seems to bring even more convoluted and onerous requirements which seem specifically designed to sap the wallet and spirit of those brave enough to try and contribute to the growth of this country through developing their own businesses.

Slow payment and cash flow

Also an oft debated topic to which it is not necessary to add beyond to repeat the sad fact that that cash flow issues arising from slow payment (ironically, by typically cash-flush bigger clients and and/or government) have taken down many an intrinsically healthy business.

BEE compliance

Whilst we agree completely with the idea of broad based BEE - Hero has been level 2 compliant for four consecutive years and, all proceeding according to plan, will maintain or exceed this into the future - the convoluted nature of the compliance process is such that one now needs to employ a full time specialist just to understand and manage it.

Even the biggest businesses are finding the new codes hard to understand and implement, hence Minister Rob Davies’ recent implementation deadline extension granted at big business’ express request.

So, I am not sure how the powers that be expect lesser-resourced enterprises to get their heads around it or afford that process.

Put it this way, imagine how much more we could contribute to the BEE cause if it were simpler to comply?

Interestingly and to our great satisfaction and delight, we are finding it increasingly easy to find and recruit fantastic "PDI" (Previously Disadvantaged Individuals) talent.

In the past, this was a massive issue in our industry, with a small talent pool resulting in astoundingly high salaries combined with low loyalty levels.

This was a toxic mix for medium and smaller enterprises, especially if time and effort had been invested in training and developing entry level PDI staff only to see those with bigger wallets swoop down and make off with the developed talent.

Today, it is indeed heartening to see that this country is moving, albeit still too slowly, towards true educational parity and eventually, as a result, colour will cease to be an issue.

Internet and telecoms inefficiencies and costs

Another well debated and documented issue. We chew through close to 400 Gb of bandwidth per month and our business is completely reliant on high speed internet for many “mission critical” processes.

Unfortunately, no matter whom one uses, the quality of South African internet infrastructure and delivery is sadly inversely proportionate to its high cost.

Further, just to ensure a decent Skype conference capability between our various offices and clients, we have had to move from our very large capacity Telkom “pipe” and invest in a dedicated leased line from one of the big alternative operators.

Still, even with zero line contention, we often suffer degraded service to the point where we have to shut down video streaming and revert to old fashioned voice-only conferencing.

The fact is, due to a combination of lack of economic foresight, Telkom and plain old government apathy,  within Africa, let alone globally, South Africa is lagging badly.

And it is costing both business and the country hugely, albeit probably too subtly for the government to take much notice, being driven as it is by more overt infrastructural and other demands.

How do you handle challenges?

It is an extremely rare challenge that arrives completely unannounced, so pre-identification of and preparation for challenges is key.

Fact is, with proper foresight, planning and, of course, a generous dollop of courage and self-belief, the biggest challenges can almost always be turned into fantastic opportunities.

We grew by over 35% during the 2013/14 financial year, when many others in our industry had to close their doors or shrink due to the exceptionally challenging economic circumstances.

That is testimony to the power of our kind of approach – and our growth was no coincidence, because we saw and planned for this context well in advance.

How did/do you fund your business?

In a nutshell, we bootstrapped it completely from within.

We had zero personal or external funding and the business has been entirely self-funded to this day.

Make no mistake, it was extremely hard, and perhaps if we had had the time to pause and think about it, we would have sought external funding.

In the early days myself and my co-founder, Doug Lockhart, often did not take a salary whilst working hours that would blow your mind.

And the salaries we did take, were way below market because, for the first seven years, we reinvested virtually every spare cent the business made and took out only the minimum required to survive on a personal level.

But our story is by no means unique – in fact the vast majority of self-powered entrepreneurs will have much the same story to tell.

What lessons did you learn?

If I was a young entrepreneur starting Hero again, I would involve a suitably experienced and trustworthy “greybeard” in the business from the start - at least at senior advisory if not participatory and operational executive level.
 
I see now how many costly mistakes were made and lessons learned – most of which we could have avoided through involving experienced intellects up front.

Unfortunately, that fantastic youthful passion and self-belief, which drives one to start a business, often also drives the dangerous belief that one knows all the answers.

My passion today is to help those less experienced avoid that trap.

What advice would you have for other entrepreneurs?

I would counsel younger entrepreneurs to seek out and listen carefully to the advice of those who have done it before.

Belief and passion are absolute requirements for success in the entrepreneurial context, but, unconstrained, they can blind entrepreneurs to dangerous realities.

So, if possible, always balance that necessary passion and belief with sound, considered critical examination and input by those qualified to provide it.

Importantly, consider that input as dispassionately and objectively as possible and do not reject advice and input simply because it is not what you want to hear.

Remember that no parent thinks their baby is ugly, even if it patently is so to all objective observers.

Put South Africa and Africa in context as far as your business and opportunities for entrepreneurs are concerned.

As mentioned above, it is our aim to establish ourselves as a wholly South African marketing services and technology conglomerate serving South African business and social interests.

This industry market is huge and, sadly, dominated by offshore brands, so we see the local context as our immediate target.

After that, we would definitely want to take our skills and talents into Africa and abroad.

Incidentally, we have done this to an extent in the past and encountered issues around cross border trade restrictions and protocols as well as issues related to foreign payment culture.

So, when we re-enter these markets, it will be with mitigating measures in place.

My advice to others is simple: Always seek to dominate the market you know before you venture further.

What are your future plans?

On a personal level, I am focused on finalising the succession planning that will put the required teams in place that will execute and operationalise the vision for the future of the various operations.

That will free me up to do what I do best, namely to “join the future dots”, and then set things in motion to ensure that our entities are structured to take perfect advantage of those future realities when they occur.

- Fin24

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