Two CAs(SA) financed their start-up business, InnoVent, on the strength of a projected break-even within three months. Nine months later they made their first sale, surviving in the interim only by ‘robbing Peter to pay Paul’. By Eamonn Ryan
Thirteen years ago, DJ Kumbula CA(SA) and Zakhe Khuzwayo CA(SA) came together with one desk, two chairs and a phone to form one of the most innovative office equipment leasing concepts internationally: InnoVent and its subsidiary, Qrent. That doubtful start-up business is today a multi-million international success story – and they wouldn’t have had it any other way.
They are not the first chartered accountants to find it more rewarding being an entrepreneur, but they are certainly among the most enthusiastic endorsers of CAs becoming entrepreneurs – without seeing any conflict between the two professions. ‘Often, CAs make the best entrepreneurs,’ says DJ, ‘because we start with a firm grounded in the basics of business which releases one to focus on the business operations.’
Zakhe says since he was a child all he ever wanted to be was an entrepreneur, selling sweets at primary school and cosmetics and perfume after school within his community. For Zakhe, becoming a CA(SA) was an integral part of his quest for entrepreneurship – he sees it as a route to the top. ‘An article caught my eye describing how about 80% of CEOs and CFOs were CAs(SA).’ He came from a family where it was expected that all the kids would follow a profession, ‘so it was accountancy or be a doctor, and I was no good at physics’, he says.
DJ decided as early as primary school that accountancy was for him, motivated by his dad who noticed all the CEOs of the companies he worked for were CAs(SA) , and an accountant uncle ‘who seemed to have all the toys I aspired to’. It was a long route for DJ to become a CA(SA) – he is Zimbabwean and local universities at that time refused to accept DJ’s Zimbabwean BComm, which is a prerequisite for CTA. This meant he’d completed his articles before he had a local postgraduate degree. DJ trained with earlier incarnations of PwC whilst Zakhe joined PwC in the first year post the merger in 1999.
DJ worked at PwC for five years, followed by two years at the Council for Scientific and Industrial Research (CSIR) and three years at a leasing company, where in 2002 he met his future business partner, Zakhe, while gaining valuable experience in the industry. They saw a gap in the market and stepped in to fill it, coming up with an offering which would be more cost-effective for potential clients by finding a profitable use for perfectly good equipment that was being discarded by most companies in the industry as ‘obsolete’.
Since they already knew the market and how it operated, had established relationships with some of the clients that would make it easier for them to break in, they chose to stay in the office equipment industry. ‘We quit our jobs and started our own company,’ says Zakhe.
InnoVent offers a two-phase moveable asset rental and management company which rents new equipment to corporates for 20% less than it would otherwise cost, through residual financing or a ‘second life’ of the equipment which is rented used to the market (at 50% of the new price), including both traditional corporates and the previously underserved SME market via their division, Qrent. Equipment includes desktops, laptops, tablets, printers, servers and other office equipment.
When they formed InnoVent 13 years ago, they scarcely anticipated their business would now have clients around Africa, but it has expanded to 70 employees in South Africa, and a similar number covering Zimbabwe, Zambia and Tanzania, as well as a London office.
So meteoric was the growth that they had to start thinking of corporate issues sooner than they would have imagined as entrepreneurs. ‘Fortunately, we are two quite different people with different strengths and weaknesses and management styles – we complement each other well,’ says DJ. He laughingly describes himself as a ‘dictator’ leaving you uneasily unsure whether to take him seriously, while in a traditional ‘good cop, bad cop’ routine, Zakhe’s the fun guy.
Figures, KPIs and performance is one thing that gets taken seriously. This is essentially a selling business, and ‘what gets measured gets done’, says DJ, though 20% of performance reviews focus on behavioural issues. ’Even though we’re accountants, we accept there has to be balance and strongly believe that the softer issues give a stronger foundation to the business.’
It is a relatively small group, and as such lends itself to a flat hierarchy and open-door policy, which ensures no issues brew and fester for months till performance review time. Zakhe explains that in management style the two are similar, placing enormous emphasis on mentorship. The firm does not so much have mentorship success stories, as the entire management philosophy is anchored on mentorship: it is customary to employ young people with seemingly little going for them in Corporate SA and mentor them into what are often award-winning stars, managing large portfolios.
‘This is important to me because mentoring allows you to step back from the numbers and get a broader perspective of life, especially the human side of the business,’ says Zakhe.
NO GLASS CEILING BETWEEN THE FLOOR AND, WELL, CEILING
All the senior staff have come through the firm, being groomed ‘from the floor’ – literally, as this includes ex-cleaners. The firm takes in six to eight interns each year, with those that excel being kept on. ‘We prefer this style,’ explains Zakhe, ‘as we find they are willing to work hard, being motivated, while outsiders are often unwilling to “dirty their hands”. As managers, our role is primarily to motivate and inspire, which is relatively easy because they can all see the potential for their upward mobility. In addition, we encourage all our staff to study, which we pay for. We’ve really made training and development part of our DNA.’
Of course, it wasn’t always like that. DJ explains that in the early years the business model was simply one of survival, but once the business broke even (after 18 months – long after their business plan had provided for) they realised the model had to be sustainable beyond the two co-founders or they would really have accomplished nothing other than personal enrichment.
‘That is why mentorship, training and succession planning are key elements of our everyday job – the recognition that you cannot be a serious business unless it’s sustainable without the key people,’ adds DJ. He says they are exceptionally proud of the people they have uplifted within the organisation and equally proud if they decide to move on, as ambitious people invariably must.
The flip side of this coin is that InnoVent also lives by the philosophy of ‘giving back’. DJ explains that he and Zakhe accept they had an obligation to do so, whether this involves mentorship, training or social investment into their communities. ‘At the very outset we established a foundation which holds 4% ownership of the firm, and which has been accumulating value for 13 years. We fund students, primarily accounting students, and have already made a couple of CAs. Our corporate clients approve of this activity, of course, and some have offered our graduates jobs.’
‘Being CAs(SA) does not make us qualification biased – we look at the potential in people rather than their qualifications. We have employed nail technicians and shop floor sales assistants, who have become some of our best people. But for ourselves the CA designation is what has underpinned our success: it denotes the discipline and aptitude that you cannot get elsewhere. It means we started a business with all the basics in place, the absence of which contributes to the failure of most start-up businesses,’ explains Zakhe.
NO TIME FOR MR TEN PERCENT
The values and culture of the business are the aggregate of both their family values and those inculcated by the CA(SA) designation. Zakhe says that starting up a new business is not without significant challenges to one’s own value system: ‘You’re hungry for business, desperate for sales, and the opportunity for a big sale presents itself, but accompanied by “What’s in it for me?” This ethical dilemma requires a steady moral compass that you’d rather not have business than have unethical business. This is even more difficult cross-border where there is a virtual 10% rule in some countries.’
DJ is the CEO of the business, concentrating on sales and strategy, while Zakhe ‘loves the spreadsheets’, he claims. Nothing gives him a rise more than balancing a spreadsheet, an excellent attribute for his position as CFO. Both note the extent to which the CA qualification assists. In the more unlikely instance of selling, DJ says the risk aversion engrained in all CAs helps to water down his risk-taking when making corporate deals, while Zakhe refers to its contribution to his problem-solving and structuring tasks.
DJ is married with two children, with the older studying accounting (what else … ). For relaxation he keeps his body active at gym and by walking, and his mind active through reading an eclectic spectrum of books from fiction to non-fiction, with an especial liking for biographies. You will not find a better autobiography than that of Steve Jobs, he says.
Zakhe likes travelling, whether it’s exotic locations or quite simply just the open road. ‘My passion is motorcycles,’ he says. He similarly has a diverse taste in reading, especially business and entrepreneurial books.
InnoVent is really at the start of its story, say the two founders: the focus is now on international expansion, because nobody is doing what they do as far as they know. They want to grow aggressively in the UK and West Africa, building a critical mass which will ultimately enable InnoVent to list as a boutique financial services firm.
TIPS FOR NEWLY QUALIFIED CAs(SA)
Young CAs must remain open-minded about their career and not settle too quickly into a corporate position. ‘I’d say take five years to learn all you can, and experiment to broaden your mind,’ says DJ.
’Look at entrepreneurship as a viable career, and never fear that your years study towards a CA(SA) qualification is consequently wasted. This country desperately needs jobs created by entrepreneurs, and if more CAs(SA) took this route we’d certainly have more start-up businesses – and jobs,’ he says.
Zakhe says of getting that first job: ‘Big is not necessarily better. Sometimes it is better to have a big impact in a small business – you touch more aspects of the business and have more face to face time with the leader than you would in a large corporate.
Take risk: ‘You’ve done the career thing, you have the CA(SA) safety net, now take a chance on something new, knowing you can always go back.’
You increase the chances of success as an entrepreneur by putting in some years with a business that interests you, and in which you can become an expert. ‘A lot of success stories come from building on or innovating on an existing business model,’ says DJ.
Author: Eamonn Ryan