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COVER STORY: Cracking the numbers game

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It’s been said that if you don’t build your own dream, someone will hire you to help build theirs. It’s a maxim that two small-town entrepreneurs are living by.

Describing himself as the black sheep of the family, Lefa Molete (30) says he was a naughty child who no-one expected would amount to much. In high school, an exasperated teacher told his parents he had no future and that he was bound to end up selling tomatoes on a street corner.

But everything changed in Grade 10, when he realised he had a natural aptitude for maths and accounting. Life would never be the same for the boy from Mahikeng. “My father had high hopes that I would become a doctor, probably because a career in accounting wasn’t something that anyone in my community aspired to,” says Molete. “But I was determined to follow my dream and I applied to study a BCom in accounting at the University of Cape Town.”

He completed his degree and in 2005 he joined KPMG, one of the largest professional services companies in the world and one of the then so called big four audit firms. It was there that he met Peterson Khumalo, two years his junior, and a graduate from the University of Zululand who had completed his honours at the University of Johannesburg. They soon became friends and even shared a home. Working in the same divisions at KPMG, they also shared a number of clients and provided advice for each another.

Surviving failure

By 2011, Molete had gained a significant amount of experience in tax services, which is where his passion lies. He realised that it was time for him to take the plunge and pursue his entrepreneurial ambitions. He returned to Mahikeng and registered his firm, leaving Khumalo at KPMG to complete his training.

But things were slow, and so he went into a mining venture with some friends, a move which he now describes as the worst decision he ever made. The company failed, and he lost everything. For the first time in his life, he was jobless and in debt.

“I decided to go back to basics,” he says. “I was unemployed, but I was still a CA(SA). That was where my skills and expertise lay, so I started to focus on building the firm I had registered.”

Luck was on his side this time. His mother, a teacher, told him that many schools in the area were struggling with their financials. He began making some calls – 500 to be precise. Of those, 45 signed up for his services, which he offered from his home office in Mahikeng. It was certainly not bad going for an inexperienced cold caller and it also gave Molete some idea of his ability to market and sell his services.

Carving out a future

Khumalo meanwhile had completed his articles. By 2013, Molete was busy and needed to bring another CA(SA) on board. He contacted Khumalo who by this stage was earning a very comfortable salary at KPMG. “I took a massive cut in earnings and turned down a number of lucrative offers from other firms,” says Khumalo. “It was hard to go from hero to zero and in those first few months after joining Lefa, I started having debtors chase me. But I was also excited at the idea of the two of us building our own business. Because we are still young, we had few commitments. We are both entrepreneurial by nature, and we decided that there was no time like the present to get Molete & Khumalo up and running. It’s about making a choice: do you want to be a manager, or do you want to determine your own destiny?”

Raised by his business-focused grandmother, Khumalo has entrepreneurship in his genes. He says he entered the accounting profession by chance. Having had excellent marks in high school, he was accepted to study science and accounting. “My best friend decided to go for the science degree. I opted for accounting so we could diversify,” he laughs. Ask him how he approached a degree that has a reputation for being arduous, and he says believing in yourself is vital. Self-belief, he maintains, is something you can learn by examining and discarding the self-limiting ideas you may have.

“If you choose to study accounting, you cannot be fatalistic. Yes, it’s difficult. Yes, it’s hard work. Yes, it takes time. No, it’s not impossible,” Khumalo says. “If you keep at it, breakthrough moments happen and the topics start to make sense. The point is to remain curious and interested in what you are doing.”

Both Molete and Khumalo agree that it’s worth taking some satisfaction in the fact that you’re doing something difficult. Even though accounting is a very marketable skill, that’s not the best reason to study it. The best reason to study accounting is that it helps develop your analytical thinking abilities, and it’s clear that these two young CAs(SA) have thoroughly enjoyed doing that.

Molete admits that completing his articles was tough at first. “I walked into the firm and after the first few days I thought, ‘is this really what my life is going to be like?’, but my motivation got me through those difficult weeks. I knew that if I wanted to pass my board exams, I needed to change my attitude quickly. When you have a goal in mind, it’s easier to survive the tough times.”

That sense of persistence is what got the pair through the first few months of the new business. “When you qualify as a CA(SA), it’s easy to feel quite arrogant and self-assured. Becoming an entrepreneur is a completely different story. It has nothing to do with anything you learn at university.”

Khumalo agrees. “In a start-up business, you have to do everything, from basic admin to business strategy, and look after your client base at the same time. We quickly had to get used to working 12 to 14 hour days and even more sometimes.”

The benefits of incubation

The new firm was given a leg up when Shanduka Black Umbrellas, an incubator that supports emerging black businesses by providing them with a working environment and support services, enabled Molete and Khumalo to set up a Johannesburg office, which has enabled the firm to expand. They now employ a CA(SA) at the Mahikeng office, and one in Johannesburg, as well as additional support staff.

“As the work started to come in, we had to up our capacity,” says Molete. “That was a huge challenge as we had to deliver for our clients while our resources were still very limited.”

They now have a five-year plan for the business, which includes hiring one new CA(SA) every year, and which they have managed to adhere to.

In April this year, Molete & Khumalo Chartered Accountants was one of three companies to win the Johannesburg regional Shanduka Black Umbrellas Enterprise Development Award, which rewards and acknowledges entrepreneurs in its programme who are making a difference and creating employment.

Benefits provided by Shanduka Black Umbrellas include office space, computers, Internet and telephones, vehicles with drivers, and a reliable, structured mentorship programme with a business consultant. Once an SME has signed a contract, the business owners have to attend a three-month programme which consists of a series of interactive workshops to identify what they need to do to run their business more efficiently. The workshops also help them prepare a comprehensive business and marketing plan.

“Having to prepare a business plan was a challenging task,” Molete recalls. “As accountants, we are familiar with numbers, but having to think in the long term about our strategy, our market and our business model was difficult. Putting all of these elements down on paper was a truly beneficial exercise, and it’s obvious now why the programme demands that. In addition, the programme has processes in place to measure how you perform compared to the initial business plan. It has given us the tools we needed to grow.”

Khumalo agrees. “We won the award because we have been able to grow the business in line with our strategy,” he adds. “We’ve done that by always giving value to our clients and understanding their needs because of the personal relationship we have with them. That was always an element of our original business plan.”

The firm has grown its client base significantly and now serves many SMEs as well as the original list of schools which were its very first clients.

“We are targeting the SME market, because there is a natural fit between us and them,” says Molete. “But we have had to learn a few hard lessons too. A healthy working capital is the lifeblood of any business, big or small. Unfortunately, hitting the right balance between money coming in versus what’s going out is a delicate balancing act.”

Bad business is worse than no business

After a few bad experiences with clients who could not pay, he says, they are far more circumspect about who they will provide services for. To grow, SMEs must try to retain as much working capital as possible. In the never-ending search for new consulting work, it’s not hard to forget that not all business is good business. “Putting lots of hours into a client who doesn’t pay not only impacts your cash flow, but it also means you may miss better opportunities because you are too busy trying to recoup your losses from the company that is not paying. On top of that, it’s incredibly difficult to get rid of a bad client.”

They are now far more careful about vetting clients before they agree to an engagement.

While clients may grill them about their qualifications and experience in the first meeting, they too are on the lookout to ensure that the relationship will be good for their business by agreeing on terms upfront. They also conduct in-depth reference checks and  only accept clients who meet a certain revenue benchmark.

“What’s also key is to make sure you always provide excellent service for the clients you have – you can’t always focus on chasing new clients and more money,” says Molete. “Our goal is to grow the business by between 10 per cent and 15 per cent per year, which is achievable given our resources. In the services environment, the only way to grow is to employ more people, but that also means having the ability to manage them and to pay their salaries. Meaningful, sustainable growth requires you to think logically and strategically.”

By his own admission, and Khumalo’s, Molete is the firm’s chief marketer. “We have done little formal marketing of the business,” he says. “Our growth has been the result of word of mouth and one-on-one marketing.”

A big challenge for any SME is how to differentiate your services in a highly competitive market. They’ll tell you that doing the hard yards at KPMG was a huge learning curve that has paid off. “In that kind of corporate environment, you learn quickly to deliver high-quality work,” says Khumalo. “Anything less than exceptional is rejected. It provides an excellent training ground for young professionals. We learned a worth ethic there that we have applied in our own business. We believe that keeps us ahead of our competitors and ensures that our clients can count on the very best service from us, every time. I would rather miss a deadline than deliver an inferior service. When you only have 24 hours in a day, it’s tough, but that’s how it is.”

What lies ahead for them now? Molete is quick to answer. “We want to be in the big five and we’re giving ourselves the next ten years to get there. It’s a big dream, but if you do not set a goal, you cannot achieve much. What’s going to be interesting is seeing how we get there.”

Author: Monique Verduyn