How Rodney Norman Went From R1 Million In Debt To Build A R100-Million Business
When Rodney Norman was 21, his first business ended up R1 million in debt. Ten years later, Chrome SA has a turnover of R100 million, Rodney works with all of his previous suppliers – a testimony to how well he handled the situation – and he's positioned to experience rapid growth over the next few years. Here's what manning up taught him about building a top-class business.
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- Player: Rodney Norman
- Company: Chrome Supplements and Accessories
- Launched: 2009
- Turnover: R100 million
- Visit: www.chromesa.co.za
Ask Rodney Norman why Chrome Supplements and Accessories has grown to a company with a turnover of R100 million, and he'll say it's because things just go his way. He's lucky like that. Except things haven't always gone his way.
He was kicked out of school when he was 15
At 21 his business wasn't just in debt — he owed suppliers R1 million. And just when he found out his wife was pregnant, he lost a distribution deal that wiped out 70% of his business overnight.
It's safe to say that things haven't always gone Rodney's way, and yet his positive outlook on life and business, his trust that things will work out, and his ability to put his head down and outwork everyone around him have enabled him to turn even the most hopeless situations around.
He's also a born trader
If he's not making deals, growing a customer base and finding solutions to all the daily challenges that running a business brings, he's not truly living. Chrome SA is the result of taking life's knocks on the chin, and then manning up, facing the music, and growing stronger through adversity. A lesson he began to learn at the tender age of 15.
I hated following the rules at school. I bucked the system and had a bad attitude.
The result? Rodney was kicked out of school in Grade 10. His parents were not impressed. Determined to teach their son to face the consequences of his actions, they told him to find a job, pay rent, or move out. It was the greatest gift they could have given him.
"I got a job at the local gym as a weight packer. But my studies through Intec College cost R650 a month, my rent was R650, and I only earned R1 050. I needed to find a way to supplement my income."
Rodney was athletic; he worked out, and was interested in supplements. Soon people at the gym started asking his advice on supplements, and he saw an opportunity. He offered to organise products for them, adding a small mark-up for himself.
"The gym had a strict no-supplements policy, so I'd deliver the products before and after my shifts. I once cycled from Edenvale to Isando to make a delivery that was worth R50. I was that serious about building up my client base." It worked. That customer is still a Chrome client today.
"I kept every contact detail I ever received. Soon I had this incredible data base. I found a Durban-based company that agreed to supply me — I couldn't pay cash upfront, so it took a while to find the right supplier, but from there my small side business started to soar. I made a profit of R95 000 in my first few months. That first year I didn't even go on holiday in December because I was so focused on building my business. Soon my cell phone bill was higher than my gym salary."
For 12 months Rodney ran his business from inside the gym. His managers turned a blind eye for as long as they could, but when people started phoning the gym and asking for Rodney or enquiring where their orders were, it was time to part ways.
By then Rodney had a large database, and could continue trading from his bedroom for the next three years.
"I did try employment for a year. My supplier moved to Joburg and opened a store in Edenglen next to the gym where I had worked. My personal sales exceeded the store's sales, so he offered me a job. Within 12 months I realised that I was better off running my own business, and went back to servicing clients from the boot of my car and my bedroom. Employment has never been for me."
And then an old friend approached him with an idea. "He had a connection inside a small gym chain, and could organise a small pop up store for us in their Bedfordview branch. He just wanted to join the business as a 50/50 partner in return."
Rodney agreed, and G-Force Nutrition, as his company was called, opened its first branch. The business took off, exceeding the wildest expectations of the partners. Within two years they had grown from one to 15 satellite stores, with the growth funded by their suppliers.
"If I couldn't negotiate payment terms with a supplier, we walked away," says Rodney.
"When we started we didn't have the cash for COD terms, so we worked with suppliers who agreed to be paid 30 days from statement. As long as we could make the stock move, we had the cash to pay our suppliers. They could see the potential — I had built up good relationships, and good value. We were selling between R400 000 and R500 000 a month. We were not their biggest distributors, but they saw that we'd keep growing."
If a supplier insisted on COD only, Rodney would renegotiate after two months based on the value of their orders, asking for terms of 50% upfront and 50% in 30 days. Two months later he'd renegotiate again, this time to the full settlement 30 days from statement. "You just have to ask. Never be afraid to negotiate. You need to convince people to take a chance on you."
Rodney's tenacious negotiating skills allowed the business to grow at an exhilarating rate — but that would also ultimately be what killed it and landed him in enormous debt.
"We were R1 million in debt — and I had no idea."
What happened next would teach Rodney two of his most valuable lessons. First, you need to always know what's happening inside your company. "I didn't understand margins; I just knew we needed to be trading, getting cash in, and making a small profit.
"I was 100% focused on negotiating the best terms I could, and moving stock. That was the secret — use supplier cash to fund the business, and then move stock so you could pay the statements on time.
"But I wasn't paying any attention to my business partner, or his side of the business. One of his jobs was to collect the cash from stores and deposit it into our suppliers' accounts. We would settle bills at 30 days, but pay in batches as we could, so there was a steady flow of money. Then one day I fetched stock from USN and they said, sorry Rodney, you're very behind in your payments. We're not releasing stock until you've settled your debt.
"USN had been a supportive supplier, so the exchange surprised me, but I thought it was just a misunderstanding. I called my partner and left him a message asking him to send me the deposit slips for USN. He didn't return my call. I tried again. When it became clear I wasn't going to reach him, I started calling the rest of our suppliers.
"There was a pit in my stomach that grew deeper with each call. It wasn't just USN. We owed money to all of our suppliers. None of them would service us. We were R1 million in the hole.
"I felt furious and betrayed, but I also needed to face the facts. I'd let this happen. I'd been trading, and not paying attention to the signs.
"You don't get R1 million into debt with a business our size overnight. It happened gradually and I'd missed the signs. My partner had problems, and he left. I was the one who had built up relationships with our suppliers and convinced them to trust me. This was on me."
Finding a way to get out of debt
Which is when Rodney learnt the second — and most valuable — lesson: Anything is possible if you just get started. Start somewhere, anywhere. But start.
"At 21 I had this enormous debt. Where the hell do you get R1 million? It was a defining moment for me. I could call it quits, or get stuck in and make it happen. I managed to pay it back in two years. That's all it took. I just had to start. I remember my dad telling me he would never see R1 million in his lifetime. It was this huge sum. So how could I do it? The answer? Slowly.
"I was young, but that was also to my benefit. My life wasn't over. I knew it would be a rough few years, but I also knew that if I didn't man up and make this right, I would never build the business I now knew I was capable of building. The first thing I did was speak to all of my suppliers. I explained the situation, and that I would be fixing it and paying off our debt — I just needed time.
"Then I went and found a buyer for my business. We had a name, clientele and premises — but we couldn't pay for stock up front, and our suppliers wouldn't do business with us until our debt was settled.
"I found a buyer who would take over the business and pay me R350 000 in two instalments. They would also hire me. It was an employee in my own business. I'd never been good at taking orders, but I knew it was time to learn. I needed the salary and commissions to pay off my debts.
"I'm proud that nothing was handed over to attorneys. I answered every phone call. They were tough; these are not nice calls to answer, but I did it, and I let every accounts manager who called me know what was happening, how much I was expecting to pay them, and by when.
"I made small deposits consistently, and that was enough. As long as it was being paid, and the needle was moving, everyone who I owed money to was happy. That's the secret: Consistency. Don't avoid the tough calls; take them and face the music."
The result is that when Rodney opened Chrome SA a few years later, all of his previous suppliers were happy to start working with him again. They trusted his integrity.
"By 24 I was debt free, and I immediately quit my job."
Unfortunately, although Rodney could now go back to being self-employed, he still had a 12-month non-compete clause. He needed to find something to do other than supplements, and so he sold surfwear for a year.
"That's what I do — trade," he says. "I'm a salesman. I shared a showroom with a friend who had the rights to Fox. It did well but I realised I had no passion for the products I was selling; it was just a means to an end."
And yet Rodney still maintains he's incredibly lucky. Things have a way of falling into place. "On the day my restraint of trade ended, I got an email from an old supplier saying he was closing down his store, and did I know anyone who'd be interested in buying his PC and shelving.
"I had a better idea — I'd buy everything for R65 000, but I also wanted to take over the store. I even had a supplier — the friend I'd been sharing a showroom with had another friend in Durban who was launching a new supplements product and was looking for a distributor in Joburg. I had a store and a product. I contacted my entire client list, which I'd kept, and let everyone know I was back in business."
Rodney ran his new business with his girlfriend (now wife), Erienne. He handled sales and distribution, and she took care of the administration and finances. They registered the name Chrome Supplements and Accessories, and while they were waiting to move into the store, they filled her old bedroom in her parents' house with stock and started trading.
"In our first month we did R76 000 worth of sales. Within six months we'd sold R1 million worth of products, and business was picking up. There were three of us; myself, Erienne and Gareth-Ashley Munthri, who had worked with me at G-Force. Gareth-Ashley and I did everything, from sales to sweeping the floors. We worked 24/7."
But, while the store was doing well, Rodney was learning that being a distributor brought its own problems. "The more people we supplied, the bigger our cash flow issues became," he explains.
"Many of our customers didn't settle their debts, and we were starting to spend all of our time and energy collecting cash. It was when I realised I couldn't buy the Corsa Utility I needed to make deliveries because I'd just written off R144 000 in bad debts that I decided to start operating on a COD basis only.
"I firmly believed that fewer clients who paid cash upfront was the smarter business decision, and would keep us cash flow positive."
Unfortunately, Rodney's supplier disagreed. They saw their own orders declining as a result of Rodney's new strategy, and made the decision to take over Gauteng's distribution themselves. The move couldn't have come at a worse time.
"We had no formal contract in place. Our entire working relationship was based on the strength of a handshake. I learnt the hard way that you need contracts to protect you, although it's still not a reality I like — I'd rather do business on trust and a handshake, even though I've been burnt so many times."
Starting over.... again
The lack of a contract meant the supplier could cancel the contract overnight. Rodney and Erienne had just found out they were expecting their first child, and Chrome lost 70% of its business. It was a major blow.
"To balance the COD strategy I had promised our supplier that we would open more Chrome stores and boost sales in that way. By the time they cancelled their contract with us we had four stores, and so we poured ourselves into the retail side of our business. We needed to make this work. We were about to be a family."
I learnt my limit was five stores — as soon as I opened my sixth, the wheels started falling off.
The problem with growth is that with each new development, the business becomes exponentially more complex. "We wanted to grow; that was our strategy. But it's very difficult for one person to manage more than five stores," says Rodney. "After the fifth store, I started losing control.
"The good thing about opening multiple stores is that each new store is easier to open. One to two is a massive struggle; it's expensive. But then it becomes easier. Two stores pay for the next one, then three stores pay for the fourth. And so we just kept rolling out new stores. But we didn't have a proper plan.
"I kept changing my mind about how the stores should look; merchandising wasn't consistent, and we ended up with a confused brand. The stores didn't do consistently well, and I needed to be at a store for it to perform well.
"I looked at other chain stores and realised I was getting it wrong. Our stores didn't look the same. We needed to slow down, fix the model, do a revamp and develop a firm expansion strategy. We'd been winging it a bit, and the results were evident. This was no way to build a strong brand."
At the same time, Rodney had started importing international products to give Chrome a competitive edge. The problem was that he couldn't pay suppliers within 30 days of the stock arriving. He needed a different way to approach imports that still kept the business cash positive.
The solution seemed obvious. "We'd received so many franchising enquiries, we thought this was the perfect growth strategy. We could use franchisee cash to buy stock, instead of the bank's cash. Plus, there was the control factor. With a franchise system, we could have a unified brand and get rid of the inconsistencies that plagued us."
There were seven stores when Chrome moved to a franchising model. This soon grew to 12 stores. Franchisees had a buy and sell agreement with Chrome. They had to buy stock exclusively from Chrome unless they could find the same product at a better price. Rodney put a small mark-up on Chrome's product range and handled all the marketing for his franchisees.
Within two years it became clear that franchising had not been the right growth path. "We had more stores and a bigger footprint, but our control issues were even worse. Now we were trying to control people with their own vision for the business — and it didn't align with our own.
"I wasn't a good franchisor, that was the long and short of it, and I needed to accept that. It was time for a shift again."
Although the franchising model wasn't what Rodney had expected, the business had been growing and making a profit, and so he was able to buy all the franchised stores back bar one.
Now the real work began
It was time to get serious about growing his brand. Continuity, systems, finding good managers, incentivising them, formulating one vision and sharing it with the company — these all became paramount.
"I also decided that I would be based in head office only, and not in stores. I needed the retail side of the business to function well without me on the floor. I needed to learn how to hire and incentivise the right store managers."
This is always a challenge for organisations whose previous success has been driven by the entrepreneur's hard work, charisma and personal relationships with clients.
Today, Chrome stocks 59 different brands, with four "house' brands. One of those brands, Amplify, has 17 lines. Chrome is made up of a retail arm with 19 stores and a distribution arm. "We've maintained our COD policy," says Rodney. "We occasionally give bigger pharmacies terms, but on the whole we would rather have fewer clients with a healthier cash flow."
It's taken Rodney almost eight years to build his business into a R100 million organisation, but he's now poised for exponential growth.
"I needed to figure out who we were going to be, what the brand was going to look like, and what our growth strategy was. It took a while, and we had a few stumbles along the way. Once we found the model that worked, the business started taking off.
"Two years ago we built our first warehouse. Since then we've built a second warehouse that's twice the size." Rodney isn't targeting unrealistic goals. He's learnt that the best growth is slow, steady and sustainable. And a little luck goes a long way.
1. Sometimes, what seems like an expensive lesson is actually the best thing that could have happened to you
I wasn't paying attention to my partner or my books. We ended up owing R1 million. In hindsight, it was a cheap lesson to learn. Imagine if that happened today? The fallout would be much greater. We have 19 stores and nearly 100 staff members. It would hurt everyone, not just me.
2. Increase your revenue streams
By becoming an e-tailer we not only have an online presence in South Africa, but we've been able to launch in the UK without funding a physical store.
3. Hire for attitude, not for skill
No qualifications can take the place of hard work. When we decided to launch our website and online store, I recruited a friend of mine from school, Chad Costa. He had a marketing background but no online experience. It didn't matter. I knew he was a hard worker, and that he'd do what it took to upskill himself and build the platforms we needed. He's got an incredible work ethic and I value that above all else.
4. Promote from within
Gareth-Ashley, my first employee who used to sweep floors with me at our first store, is now our warehouse manager. I've learnt that if you find good people who are willing to work hard for your brand, they're more valuable than someone with highly specialised skills. It's amazing what you can learn on the job with the right attitude. Hard workers will always figure it out.
5. Good management is crucial
This goes for store management, warehouse management and head office management. Everyone needs to treat the brand and the store like it's their own, so you need to incentivise them appropriately, and value their contributions.