How Maditsi Mphela Built A R100-Million Business From R10 000 Startup Capital
Maditsi Mphela was admitted as an attorney in 1985 and started his own practice in 1986. While his practice was successful, it eventually started to stagnate. A new approach was needed to take it to the next level.
- Player: Maditsi Mphela
- Company: Mphela & Associates
- Established: 1986
- Year 1: R10 000
- Current: R100 million
- Visit: www.mphela.co.za
As a lawyer, Maditsi Mphela didn’t really think of himself as a businessman. But working for himself in his own practice, that was exactly what he was. He was a good lawyer, but he needed to figure out how to be a good businessman in order to grow his practice.
Law firms are essentially service-oriented businesses, and these are notoriously tricky to scale. Why? Well, unlike a super-scalable tech operation such as Facebook, Uber or Google, the acquisition of each new client adds complexity to a law firm. Lawyers — like doctors or accountants, for example — are highly skilled professionals who need to spend a lot of time on each new case. Compare this to a tech operation where a new Facebook or Google user adds no complexity to the company involved.
As the owner of a law firm, you therefore need to employ skilled and expensive people who will spend a lot of time on each case you assign them. Now, you might be able to set up a successful practice, but how do you scale that?
Mphela found the answer by finding focus for the business. Instead of being a general practice, Mphela and Associates started focusing on personal injury cases and cases against the state. Entrepreneur spoke to him about how this fundamental change in his practice came about.
Can you tell us about your business? How has it grown and evolved during the last 30 years?
I started my own practice on 1 September 1986 in Groblersdal. I was the first black lawyer in town. My business started as a one-man show and now boasts a staff complement of 48, excluding the partners.
The number of employees is expected to grow to around 60 in the next few years. It expanded significantly in 2002, when a branch office was opened in Pretoria. There was a need to reposition the business to access the growing client base and to facilitate access to the High Court, as our cases were mostly High Court matters. We have also grown our client base from one thousand to over 15 000.
Every business in its growth journey will hit certain ceilings. How did you overcome them?
The business was a general practice, and although it did okay, it started to stagnate eventually. I started looking at the business very closely. Why was it stagnating? How could I continue to grow it? Eventually, I concluded that we were wasting a lot of precious time on cases that demanded a lot of work, but offered meagre rewards. The solution was to reengineer the practice to focus on those areas of the law that yielded huge returns.
We started focusing on personal injury claims and claims against the state. We also broadened our client base by representing people who traditionally wouldn’t be able to afford legal services. This came about because of the passing of the Contingency Fee Agreement Act of 1997. Thanks to this act, we could now litigate on behalf of clients on a ‘no win no fee’ basis.
This meant that the client did not have to pay any money upfront, and we would only get paid if we won. This was risky, of course, but it offered the promise of large potential rewards. Without being willing to take on more risk, you’re going to struggle to grow your business. That said, we mitigated risk by looking closely at potential cases. We didn’t just accept anything that was offered to us. Instead, we chose cases where the prospects looked good. You have to be able to turn away business that demands too much time and effort, or where the risk greatly outweighs the reward.
What do you believe some of the biggest barriers to growth are that businesses face?
The major barriers are funding and a shortage of skills. For any business to grow, it needs money and skilled people. This is especially true in a service business. We’ve grown Mphela & Associates successfully by hiring great people — lawyers who are very intelligent and productive. You want to hire people who will be a true asset to the business. They may not come cheap, but they are worth it. It is all about return on investment. A great employee can do the work of three mediocre ones.
In addition to hiring good people, you also need money to improve the infrastructure of the business. In a law practice, or any other service business, you need to streamline things as much as possible. Inefficiency leads to waste, so you want to make it as easy as possible for everyone involved to get the work done. To do this, you need to invest in technology that allows you to create effective systems and processes.
What growth advice have you received or used in your own business?
I’m a self-starter who has learnt a lot from his own mistakes. I’ve also been lucky enough to serve on the CSI Committee of SAB, as it was called then, and the Mpumalanga Parks Board. I learnt a lot there, specifically how to approach anything from a business standpoint.
You can’t get anything done if you don’t have the money to do it. I think it’s a problem that a lot of professionals have. We tend to think of ourselves as lawyers or doctors or photographers, and not as business owners. You need to look at your practice as a business.
Skill in your particular field is important, but you also need business skills. You need to know about marketing. You need to be able to create a business plan. You need a strategic vision for the company.
What have been the toughest aspects of your business to scale?
Scaling a business is a careful balancing act. In order to grow, we realised that we needed to significantly increase the number of clients we had, but we didn’t want to do this at any cost. We still wanted to be selective in the cases we took on, and we didn’t want to reduce our overall success rate. So, it’s important to grow, but you want to manage that growth carefully.
An aggressive marketing campaign will get you a lot of new clients, but is it actually good for the company? You don’t want more business than you can handle. Don’t lose sight of what’s important. Don’t sacrifice a cost-effective system or healthy profit margins for rapid growth. It’s not worth it in the long run.
How do you stay motivated and focused on growth, even when you’ve been operating for decades?
The more you succeed, the more appetite for growth you have, I believe. I have an insatiable appetite for calculated risk, and my vision is to make this practice one of the biggest in Africa. It is this drive that constantly pushes me on and keeps me focused on my next milestone.
How important has technology been in the growth of your business?
It’s been very important. This is interesting, since you’d think that the impact wouldn’t be that big when a large portion of your client base can’t afford a laptop or smartphone, but technology has found its way into every part of society. We get online leads via our website and official email every day.
We have also invested heavily in Google advertising to ensure that our name always pops up when someone is looking for specialty legal services. Marketing is very important, even to a large and established business. You can’t afford not to market yourself.