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Johannesburg - When little-known private equity firm Mayibuye took over troubled listed microlending firm Blue Financial Services [JSE:BFS], it looked like a case of throwing good money after bad.
Blue Financial Services had dug itself into a deep hole as a combination of rapid growth during boom years and poor financial controls and systems saw it lending - but not doing correct credit vetting or making collections. Money was going out the door but not coming back, a guaranteed death knell for businesses of any shape or size.
In Blue's case it crippled the business and turned a multi-billion rand company into one fighting for survival across the continent.
Throughout the financial crisis this kind of issue reared its head as businesses, which had been riding on the back of rampant growth, found themselves floundering when growth and business volumes dried up.
While it is too early to pronounce it an out and out turnaround success, Mayibuye believes it has returned some order to the microlending business by bringing in established people, systems and skills from other businesses in its stable to put Blue back on track.
"If you look at everything that went wrong with Blue, these were areas where the rest of Mayibuye had developed skills and technology specifically for these problems," said CEO Johan Meiring. For this reason, he believes Blue will ultimately prove to be a good fit for the group.
Whether your business is listed on the JSE or a one-person start-up, systems are important to help you as you grow.
Adrian Bain, an analyst from the Rival Pioneers entrepreneur support initiative, says this is a common problem for small businesses which don't put enough emphasis on establishing systems early on.
"We see a lot of small businesses with similar problems, including no financial controls and limited use of technology, which need help to make them work smarter."
Bain points to one small business which had access to hundreds of people in a particular market segment, but never developed systems for consistent communication with this group.
"Just by using something simple like Excel and an email system they have developed a cost effective way to stay in contact - and have added another revenue in the form of SMS and email marketing," said Bain.
Good systems, sound business
Entrepreneurs who spoke to Fin24 said they were so busy trying to do business that they often allowed systems to lapse - or in many cases never even had them in place. Many were so taken up with chasing potential business or servicing clients that they were not sure they were actually making money, and any growth was constrained by the number of hours they put in each day.
Leading international business coach Brad Sugars highlights the importance of using systems to change this situation. He has developed a number of rules to help entrepreneurs measure the success of their various initiatives, including advertising.
"From the day I started my newsletter World Money Analyst in 1974, I have kept detailed results of every ad and promotion I have run. When a friend saw my tracking system, he claimed I was a frustrated accountant."
Sugars points to a business he looked at where 90% of the sales were being generated by just 10% of the adverts. By eliminating the 90% that were not working and doubling up on the ads which were, the entrepreneur was able to spend smarter and focus on the parts of the business which were thriving.
A word of advice from the Business Partners SME (small and medium enterprises) tool kit perhaps sums up the situation best, and gives entrepreneurs some food for thought:
"If the business owner understands why the business landed up in a situation where desperate measures are needed to rescue it from failure, then half the battle is already won. Too often the business owner screams for help when it is too late.
"It is a sad fact that more often than not the writing is on the wall, but the business owner is oblivious to these facts and carries on in the hope that things might get better."
- Fin24
Blue Financial Services had dug itself into a deep hole as a combination of rapid growth during boom years and poor financial controls and systems saw it lending - but not doing correct credit vetting or making collections. Money was going out the door but not coming back, a guaranteed death knell for businesses of any shape or size.
In Blue's case it crippled the business and turned a multi-billion rand company into one fighting for survival across the continent.
Throughout the financial crisis this kind of issue reared its head as businesses, which had been riding on the back of rampant growth, found themselves floundering when growth and business volumes dried up.
While it is too early to pronounce it an out and out turnaround success, Mayibuye believes it has returned some order to the microlending business by bringing in established people, systems and skills from other businesses in its stable to put Blue back on track.
"If you look at everything that went wrong with Blue, these were areas where the rest of Mayibuye had developed skills and technology specifically for these problems," said CEO Johan Meiring. For this reason, he believes Blue will ultimately prove to be a good fit for the group.
Whether your business is listed on the JSE or a one-person start-up, systems are important to help you as you grow.
Adrian Bain, an analyst from the Rival Pioneers entrepreneur support initiative, says this is a common problem for small businesses which don't put enough emphasis on establishing systems early on.
"We see a lot of small businesses with similar problems, including no financial controls and limited use of technology, which need help to make them work smarter."
Bain points to one small business which had access to hundreds of people in a particular market segment, but never developed systems for consistent communication with this group.
"Just by using something simple like Excel and an email system they have developed a cost effective way to stay in contact - and have added another revenue in the form of SMS and email marketing," said Bain.
Good systems, sound business
Entrepreneurs who spoke to Fin24 said they were so busy trying to do business that they often allowed systems to lapse - or in many cases never even had them in place. Many were so taken up with chasing potential business or servicing clients that they were not sure they were actually making money, and any growth was constrained by the number of hours they put in each day.
Leading international business coach Brad Sugars highlights the importance of using systems to change this situation. He has developed a number of rules to help entrepreneurs measure the success of their various initiatives, including advertising.
"From the day I started my newsletter World Money Analyst in 1974, I have kept detailed results of every ad and promotion I have run. When a friend saw my tracking system, he claimed I was a frustrated accountant."
Sugars points to a business he looked at where 90% of the sales were being generated by just 10% of the adverts. By eliminating the 90% that were not working and doubling up on the ads which were, the entrepreneur was able to spend smarter and focus on the parts of the business which were thriving.
A word of advice from the Business Partners SME (small and medium enterprises) tool kit perhaps sums up the situation best, and gives entrepreneurs some food for thought:
"If the business owner understands why the business landed up in a situation where desperate measures are needed to rescue it from failure, then half the battle is already won. Too often the business owner screams for help when it is too late.
"It is a sad fact that more often than not the writing is on the wall, but the business owner is oblivious to these facts and carries on in the hope that things might get better."
- Fin24
