How Tim Legg and Deseré Orrill Brought Their R120-million Business Back From the Brink of Collapse
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- Players: Tim Legg and Deseré Orrill
- Company: Ole! Media Group (OMG)
- Launched: 2009
- Turnover: R150 million
- Visit: olemediagroup.com
2015 was a good year for Tim Legg and Deseré Orrill. After six years, their business, Ole! Media Group (OMG), was experiencing market success.
Turnover the year before was R60 million and thanks to some strategic changes in the business, they achieved R109 million in 2015 and were expecting turnover to increase to R180 million by the end of 2016.
They ended up achieving turnover of R120 million, decent growth, if not quite in line with expectations — and yet the business was on the brink of collapse. What had gone wrong? How had growth actually placed Tim and Deseré in such a perilous position?
The reality is that while growth is the holy grail for many business owners, it comes with its own challenges. Tim and Deseré have experienced many of these first hand. In some instances, they made mistakes —some of which they’d made before.
In others, the strategy was solid, but the sales cycle much longer than expected. And then they experienced their fair share of unexpected bad luck.
Today, the company has a R150 million turnover, 80 employees and a much more solid foundation than it did three years ago. The lessons have been brutal, but worthwhile.
Here’s what you can learn from Deseré and Tim’s journey.
Nothing breeds a gung-ho attitude quite like success. “2015 was a great year. We were profitable, we’d acquired a few small businesses to boost our internal talent and skills pool, and we thought we had finally cracked the magic formula.
It was time to expand,” says Deseré. They hired five new people in sales and business development, invested in technology and even launched new business units.
“These are all things that you do when you’re scaling,” says Deseré. “There were no red flags. We believed the product offering we had and the team we had hired to sell it would secure the contracts we were targeting.” And they did. It just took two years longer than expected.
“We completely underestimated the sales cycle,” says Tim. “We had geared the business in the expectation of achieving set targets by certain dates, and the sales cycle took exponentially longer than we expected.”
The plan was right. The time scale was not. So, what went wrong? First, the product OMG had developed was targeting media companies and seeking expansion in its digital advertising and online business, but the sales team they had hired were all experienced in more traditional media sales. “This was a new field. The skills didn’t exist — but it also meant that the connections and experience our team had were not as useful as we’d first believed,” continues Tim.
Problem number two was educating the market on programmatic and premium media sales, which also took longer than anticipated. The biggest issue however was the fact that OMG was now focusing on the corporate market. Used to an SME customer base, the long lead times associated with corporates hadn’t fully been taken into account.
“When you’re a start-up, you tend to service SMEs, which by their nature are faster, more flexible and tend to make quicker decisions,” says Tim.
“Our focus had now shifted to blue chips. The sales process is longer, the procurement process can be complicated, and we had pivoted from tactical to strategic solutions.
When you’re having strategic conversations, you’re no longer pitching ad hoc projects for R200 000. Now you’re pitching to retainer clients seeking sustainable revenues of R500 000 per month. Naturally, that’s a different conversation with a much longer sales cycle.”
Like so many entrepreneurs before them, Deseré and Tim had based their growth strategy around one positive flag, instead of taking the entire landscape into account. “What’s really interesting about what happened to us is that we’d learnt so many of these lessons before,” says Deseré.
“We’d hit a wobble in the past because we scaled too rapidly following a successful year. We added to our payroll and hired too many people, particularly high-level managers that didn’t actually suit our entrepreneurial culture.
“We thought we’d learnt from those lessons and assimilated them into our business so that we wouldn’t repeat them, and yet, that’s exactly what ended up happening. You think you learn a lesson and move on, that business is linear. It’s not. You can repeat the same mistakes.”
It wasn’t only digital advertising that OMG was focusing on. Believing that they could encompass other elements of the media world in their offering, they decided to launch a new division, called Real Time Images, focused on stock photography. “We used Gallo Images for one of our businesses, TEAMTalk, and we started playing around with the idea of doing our own images and providing the service to other companies,” says Tim.
“By July 2016 we were up and running — we’d invested in the platform, hired an experienced team, and even secured an initial contract for the Winter Olympics with one of the mobile networks to provide them with images. It was a lucrative contract and we thought we’d had a great idea. This was working.”
As it turned out, that was the peak of the new company. “We underestimated the investment required and ended up spending R1 million more than expected, with no new contracts coming in. Instead of adding to the group’s turnover and profits, the business was a drain.”
Bad luck also hit the partners when their financial manager made the decision to leave Cape Town in mid-2016. It was a key position, and Tim and Deseré felt the loss keenly. “This was one of the lessons we’d learnt previously — you need a clear handle on finances.
Since neither of us come from financial backgrounds, we hired a strong group financial manager. It made a huge difference to the business,” says Tim. The risk, of course, was that losing their GFM had a large negative impact on the business.
Each of these issues alone would have been manageable, but together they had an accumulative effect that hit the business hard. “We fund our business ourselves. We don’t have any outside investors, and at that stage, we didn’t even have a bank loan. Everything we did was funded through our cash flow, and that’s where we were hit,” says Tim.
Facing all of these challenges, OMG still achieved a turnover of R120 million that year, around 10% higher than the year before — but at a much higher cost base. Not only was their cash flow non-existent, but the business had debts that would be difficult to pay.
“We sat facing each other across the boardroom table at the end of 2016 and we couldn’t believe what had happened. We’d gone from cash-flush and geared for growth to in the red, with unhappy creditors at our doors,” says Deseré. It was time to take a serious look at the business.
REDUCING OVERHEADS AND INCREASING PROFITS
The reality is that Tim and Deseré could have chosen to close their doors, declare insolvency and walk away from the bad debt they’d accumulated. The partners decided that wasn’t an option. They knew that this was their make or break moment. “Our mettle was tested. We sharpened our pencils, examined the business and started making some tough decisions,” says Deseré.
First, they needed to determine what their core was, both from a product and service offering as well as from an employee perspective. “We looked at which divisions were making money, which divisions were losing money, and which would be making money in the future, even if they weren’t quite there yet,” says Tim. “We also analysed our team members and re-evaluated roles and performance.”
At the time, Tim and Deseré also started working with a business coach. “It was an interesting experience,” says Deseré. “He asked a lot of questions. We needed to explain things that we had taken for granted, and this helped us to clarify our thinking and ended up solving a lot of the problems we were facing ourselves.”
Because they needed cash, they also started looking for potential funders. “We found one business that specialises in purchasing distressed companies for a large equity stake. We knew that was one route we didn’t want to take,” says Tim.
As it turned out, not managing to find a funder might be the best thing that happened to the partners. “For us, it was never a question that we would honour our debts. We felt our reputation was important and we needed to put our money into this. We sold an investment property and emptied out our bond account and personal savings, and then ring-fenced our four biggest creditors and approached them to negotiate payment terms.
“Most of our creditors were angry. We understood, but we also needed to find a solution. The meetings and negotiations were tough, but eventually they saw that we were genuine and wanted to settle our debts and so, despite their initial skepticism, we came to an agreement over payment terms.”
Three of the four creditors have been settled, with the remaining creditor due to have payment in full by February 2019. On the team side, Tim and Deseré knew they also needed to face some tough decisions. “The fact was that we had been making losses in 2016. To honour our commitments to our creditors, we had to cut costs and make money. There was no other option,” says Tim.
The business restructure meant a careful analysis of profitability and performance criteria. “We consciously set out to engender a proper performance culture. As a R120 million turnover business, this was imperative,” says Deseré. “Some people were performing, but not everyone. We are nice people to do business with and to work with, and this has its positives and negatives.
Some people rise in an environment like this because they appreciate the trust and entrepreneurial freedom, but not everyone rises to the occasion and the business was suffering as a result.” Tim and Deseré focused on everyone: What they did, their output, how valuable their role was to the business and if they would be better in a different role. Based on this exercise, some employees were offered different positions within the business and others were offered severance packages.
“It was an emotional time for us, but we knew it was for the good of the business as a whole,” says Deseré. “That helped us — to keep our eye on the bigger picture.” Business units that were underperforming and costing the company money were also closed. “We’d always gone on gut feel — the business needed this or that capability and we’d just add it,” says Tim.
“We were putting together the vision of what we wanted the company to be — an all-encompassing digital solutions house — but we didn’t keep our eye on the performance realities. We’ve changed our approach. Now we look at the bottom line and revenues.
What makes sense for the business? Pulling ourselves back from the brink was as much about investing in the right things as closing non-performing business units, while assessing individual performance. My background is sales, and sales people always think they can sell themselves out of trouble.
“The reality is that it’s much more than that. By reducing overheads and focusing on profitable areas — as well as our individual skills — we developed a plan to work together to drive the business. Crucially, we also instilled financial disciplines, proper cash flow systems and made sure we could honour our debts through a payment plan.”
FINDING THE RIGHT FIT
Tim and Deseré are married, and while a situation like this would put strain on any business partnership, they also had to consider its impact on their personal relationship. “We had to find a solution for the business as well as ourselves,” says Deseré. Part of this was re-evaluating their roles within the business.
“Instead of playing to our individual strengths, we had naturally filled the roles of me as CEO and Deseré as chief marketing officer,” says Tim. “The truth was that we had gotten into these difficulties under my watch as CEO.”
Tim knew he had to leave his ego at the door and do what was best for the business. “We knew we needed to improve a few key areas in the business, particularly execution in terms of management systems, process flow, cost control and recruitment. And — very importantly — we also needed to urgently drive sales,” says Deseré.
“When we looked at ourselves, we realised that Tim is a salesman at heart and my skills lie in management. He’s the rain-maker, I’m the dam-builder. Without rain, there’s nothing to catch in the dam. Without the dam, all the rain in the world won’t build a sustainable business.”
With this realisation, Tim moved into the critical role of Director of Sales and Strategy and Deseré took up the management reins as CEO.
“You look back and you think, ‘why didn’t we do this before now?’” says Deseré. “We built this business together and made all decisions together, but this one key shift had a remarkable impact on the organisation as a whole.
Tim’s focus is outward — it always has been, and yet our roles didn’t reflect that. Sales started immediately once Tim became more involved in client contacts again.”
ADDING FUEL TO THE FIRE
While it sounds like 2016 was a tough year, 2017 would turn out to be even tougher — to the tune of R6 million. By this time though, Tim and Deseré had restructured the business and were able to approach the bad debt from a more solid base.
“We secured a large advertising contract for a telecoms client. We paid them each month and our client paid us,” says Tim. It was a R20 million deal, but by the end of the contract consistent short-payments from the advertiser meant that OMG ended up under-paid by R6 million, a debt they nevertheless needed to settle with their telecoms client.
The increased sales that should have been their fast lane to a profitable year went instead into repaying the advertiser’s shortfall. “Even with firm processes in place, business often comes down to a judgement call,” says Tim. “I wish I could say that we could have cut the client off, but we never believed the advertiser wouldn’t pay, nor that we would end up liable for his debt.”
The case is now going to court, but it could take years to settle, given the debtor appears either unable or unwilling to negotiate constructively. “We didn’t choose that route for ourselves when we couldn’t pay our creditors,” says Deseré. “We have a strong, sustainable business as a result, and because of the systems and processes we’ve put in place, we’ve now secured a bank facility to help us with our cash flow.”
Deseré and Tim’s patience is also paying off. The deals they were expecting in 2016 are finally coming to fruition. “We’ve secured good, solid recurring business that has significantly increased our revenue. Our strategy is finally coming to fruition. We also have some strong lieutenants focusing on key areas of the business.
This was core. We retrenched non-performers, and then recruited well, and we’ve also started outsourcing. For example, instead of hiring for a project because we need skills, we now tap into freelancers who are high level and want the flexibility of gig economy work.
The result is access to great skills without adding to our permanent overheads. “Finally, we’ve merged the various businesses in the group into two divisions: A strategic digital marketing agency and a mobile media company. We’ve also added a key element to our arsenal, a data division.”
A SIMPLIFIED USP
This is one of the investments that the business made in 2016 that had a large impact on cash flow, but unlike the stock images business, it’s proven critical to OMG’s success today. “We developed a relationship with Oracle that has given us a big unique selling proposition,” says Tim.
“When we were re-evaluating the business and our core, we started by asking who we are. We’re a media business and marketing agency. Those are our roots. Then we looked at what was happening in the world of media and marketing and the fact that there’s a convergence between the two.
Brands are looking to become publishers and build up their own audiences, while media companies are having to offer more services and become marketing agencies. We’re where the two meet. “So, we asked ourselves, what are the key drivers of media and marketing going forward?
We see three pillars: Content, technology and data. We had a content offering and tech solutions. We needed data to enable us to offer a real strategic solution to our clients, and so we invested in a data management platform from Oracle that means we’re using our own data and not Google’s to help our clients target the right audiences. Our clients can also overlay their data to improve targeting. We took a big hit investing in it, but we’re seeing the fruits of that investment now.”
Ultimately, Tim and Deseré needed to survive two years in order to reach the growth they were always aiming for. “We’re on track to achieve R150 million at the end of this financial year, which was what we were aiming for in 2016,” says Deseré. “We have a compelling value proposition and we’ve realised that because of everything we’ve been through, we are able to refine and define it in a simpler and more understandable way. Now we can say that we deliver audience, revenue, ROI and results.
Our job is to make our clients money, whether they’re a media partner or a brand or agency. “Because of everything we’ve gone through, we have a more solid foundation and a lower cost base than we would have had, even if everything had gone smoothly in 2016.
Our margins are better and we have a stronger take-to-market strategy. Most importantly, we have been able to recruit excellent people with the specialised skills that are required and the right attitude to succeed.
In particular, we now have an experienced senior management team and recognise the need for collective decision making. This is an important recognition — as founders, we need to step back from feeling solely responsible for the business and allow a new generation of leaders to emerge.”
The new team has also chosen to rebrand the business. “Moving from our multi-brand strategy, which served its purpose in the growth phase, we are emerging in 2019 simply as OLE!CONNECT, a strategic marketing and media solutions company,” says Deseré.
“We present ourselves under the universal OLE!CONNECT brand, with two divisions — one focusing on partnerships with media houses and telco clients, the other with brands and agencies.”
“It’s been a challenging and, at times, stressful journey. We have learnt some hard lessons, but are now confident that with our simplified structure, a clear value proposition and a great team of people, we have built a strong foundation for solid growth over the next few years.”