How Two Entrepreneurs Have Built a R700-million Business on SMSes
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Player: Charles Stretch
Charles Stretch and James Pearce were students when they launched SMSPortal from a garage in Port Elizabeth in 2002. They had R25 000 and used SMS to alert students about what was happening in the local club scene.
Within six months they realised the system held enormous potential for the business sector: Companies were looking for a reliable, instant and trackable way of communicating with customers – and they had a solution.
The tipping point for the business was when it landed its first large corporate client, a large multi-national retailer who is still a customer today.
The result? today SMSPortal is a R700 million business that lists every major retailer and financial institution on its client list and is the market leader in its sector.
Here’s how Charles and James took a company they started as students and have built it out into a large, successful business.
Q. In what way is a scalable business essentially different from a business that cannot be scaled?
Scalability comes down to the ability to grow without having to entirely or drastically change your internal infrastructure, staffing requirements or the primary way you want to do business.
We have often seen businesses and competitors grow internally at the same rate as their turnover. This ultimately leads to a great looking set of numbers, but your bottom line doesn’t improve because as revenue increases, so do your expenses.
I think that what sets the scalable and unscalable apart, is not the fact that they cannot grow, but the fact that growing also equals a growth in expenses, which them defies the goal of scaling up, which is essentially maximising profit.
Q. In your own business, what fundamentals needed to be in place before you could scale?
For us, it was knowing what we wanted to achieve through scaling; once you know what it is you want to achieve, you simply work backwards.
We wanted to grow profits, but we wanted to keep it simple. I think it’s easy to see growth in office size, staff count, and the overall image portrayed. But numbers do not lie.
We needed to be sure about our goal, which was as simple as an enjoyable place to work. With simple goals, you can create simple, scalable products that maximise output, minimise unnecessary admin and ultimately can be extremely profitable.
Q. What was the biggest challenge you faced while scaling your business?
The biggest issue when we began scaling is that we fell victim to growing internally at the same rate as our turnover, i.e. we were hiring more staff and acquiring more expenses.
It wasn’t until we took a step back and put in the effort to simplify the business and identify what we wanted that this changed.
We didn’t need more staff; we needed multi-skilled specialists who understood the matrix of our business.
Over time we halved our staff count, and in the process created a simple goal-orientated environment with ‘Simplicity Delivered’ being at the core of this.
The challenge was not to become too top heavy as our business grew. Now we know that when we want to expand internally, or take on something new, we go back to our ‘Simplicity Delivered’ mindset and ask ourselves a few simple questions. If we are happy that our expansion adheres to that ethos, then we dive right in.
Q. What was the biggest lesson you learnt, and how has it impacted your business model?
Bigger is not better. It comes down to the simple delivery of service in the best possible way. Without fail. Perfect the small, simple processes and then repeat this a billion times; I believe that is the art of scaling.
Q. How important is the mindset of the CEO in relation to a business’s ability to scale?
It’s paramount, but I don’t think it is a captain who keeps the ship going forward. The CEO merely maintains direction. The art is having the entire organisation believe in the same simplicity delivered mindset, and then the ship sails itself.