Mind Your Own Business

Mind your own business

David Bullard

21 March 2012

David Bullard says successful entrepreneurs put in the hours and take the risks

One of the major obstacles in the way of economic progress in this country is the perception by many young black South Africans that the capitalist system is weighted in favour of whiteys. That was certainly the case during the apartheid era but even that didn't deter determined individuals like Richard Maponya who found a way around the rules and went on to become a wealthy and highly respected businessman.  Maponya is perhaps the best known of apartheid era black business figures but there were plenty of others who had sufficient entrepreneurial spirit not to give up and blame the system.

The harsh reality of business is that only the best succeed and this, I suspect, lies behind the constant carping on these pages from readers who simply aren't cut out for success. Instead of coming up with the next big thing they prefer to sit at their laptops and fire off banal and ignorant comments to websites like this.

When I first arrived in South Africa over thirty years ago one of my clients was an elderly Jewish businessman who told me how Donald Gordon had started what would eventually become Liberty Life. Gordon had been a star accounting student in his day and dreamed of starting his own insurance business to compete with the giant Sanlam.

No fairy godmother appeared to give him the start-up capital and the banks weren't falling over themselves to offer funding. Donald Gordon had to convince friends and acquaintances that he wasn't completely off his rocker and find his own financial backing.

It's a tried and tested capitalist thing called raising capital. First you have to convince potential investors that you have a good idea, then you have to get them to part with their money and then you have to set up a business that will give a return to those investors. That can either be through dividends or, better still in the days before capital gains tax, through a rising share price.

I am told that Donald Gordon literally walked the streets of Newtown and Johannesburg selling both the idea of investing in his new company and in buying one or two of his policies. My shrewd Jewish business friend of thirty years ago pointed out way back then that becoming Donald Gordon's "partner" by buying into the company was a much better idea than buying one of the policies if you really wanted to get rich.

When I started my own bond trading company back in 1987 I had the backing of a stockbroking firm who provided 52% of the start- up capital. My 12% share I had to put up myself by bonding my home. In addition to that I had to cede my home and all my assets to our bankers just in case anything went wrong.

In other words, if the business had failed I would have been left destitute. Fortunately the business did well and a partner and I bought out our stockbroking shareholders (at a handsome profit to them) after a few years which meant that all future profits went to us.

There really is nothing to beat working for yourself because you have only yourself to blame if you don't succeed. In the lean months we worried about the future of the business and cut costs and when the good times came around we bolstered our reserves and handed out staff bonuses. Our bankers were supportive but we never once asked for a bank loan (we probably wouldn't have got it) because that was an expensive source of funding.

If we had needed extra funds for expansion we would have increased our share capital. After all, we had a tried and tested five year business model. In fact, we decided that we were quite happy to remain small and had no ambitions to expand. Similar companies to us from that era went the expansion route and are now household names within the investment community.

I don't know of anyone who has started a business that didn't involve risk and a frantic search for funding. The reality is that money isn't simply handed out to people who think they might want to start a business and get rich but haven't a clue how to go about it. Investors are, by and large, savvy people who are looking for a good return on their money.

Some of them have been caught by scams and hyperbolic prospectuses in the past and don't want to be caught again. Years ago there was a company that successfully raised funding to develop an airship that would travel from South Africa to Europe. Needless to say the funds disappeared and the airship never took to the skies.

This country is destined to go nowhere unless there is a dramatic leap in understanding of simple economics and a commensurate drop in the national chip on the shoulder attitude that the house rules are in favour of whiteys.

The house rules are in favour of anyone who works the hours to get a business up and running and thereby creates both wealth and jobs.  And don't even bother to look to the government for guidance....most of our politicians couldn't run a business to save their lives.