The Deal
Avocado Vision has spent the last few years enjoying steady growth. When Jules Newton launched the company, she recognised a significant gap in the market and was able to address social issues by offering financial education training to the bottom of the pyramid market.
Avocado’s model upskills local community members to be able to provide the training themselves, creating jobs, raising overall literacy levels, feeding the community during training days and providing a link between big corporates who pay for the training and the lower LSM market.
Then she employed a project manager with experience in big infrastructure projects across Africa.
“Hilton Johnson was able to take a holistic view of our business and immediately spot how our skills were suited to large infrastructure development channels,” says Newton.
“I’ve learnt that when you’re in the business, focused on what you already do, you don’t necessarily step back and evaluate where other, new opportunities lie, and yet we are perfectly positioned to not only provide financial education training on big projects, but to spearhead off-site change programmes as well.”
For example, the Medupi power station not only impacts the local community during construction, but once the plant is up and running, 5 000 skilled labourers arrive. This is transforming the community.
“The local chiefs focus on employment exposure, but not on career planning or growth. The result is local towns with hundreds of welders waiting for their work rotation, but there are thousands of houses that need to be built. Our focus will be to inspire the local community with a vision (and the skills) for self-employment.”
This requires a lot of stake-holder management, from contractors to unions, chiefs, community members and of course corporate stakeholders.
290 value propositions pitched for the project, and six were chosen, of which Avocado Vision was one. The deal is worth R11 million to the company, which is more than half its 2012 turnover.
“We signed two contracts this year that matched our entire turnover in 2012, so it’s been a big growth spurt for us, but that hasn’t been without its challenges either,” says Newton.
The learning Curve
Signing such a big contract requires a business to scale to accommodate the extra work.
“We were already running 30 smaller projects this year. The Medupi and large insurance company contracts meant we would experience 100% growth by the close of 2013. The Medupi contract was set up in November 2012, and we were meant to start operating in March 2013.”
So Avocado did what any business would do in anticipation of such a big contract: They put the capacity in place to handle the project, knowing that money would start coming in from March. And then the Medupi workers went on strike.
“It was an almost impossible decision to make. The new capacity was costing us hundreds of thousands each month. We had people sitting around being paid who weren’t working. We had no idea when the strike would end and when we could start the contract. It was an incredibly nerve-wracking time.”
An additional challenge was that Avocado needed to maintain a big team able to run fast – as soon as they were given the green light on both contracts, they needed to hit the ground running.
“We needed to cut costs to survive. I approached SARS and struck a deal to pay our tax off. We needed a tax clearance certificate for the contract, but we couldn’t pay tax if we wanted to make it through the month. I’ve found that SARS will always accommodate where it can, as long as you have an agreement in place and you stick to it. We then spoke to all our full-time staff and consultants. Everyone agreed to being paid just enough to cover bills. It was going to be an incredibly tough few months, but we were doing it together.”
Between SARS, Newton taking advances out on various bonds she holds for investment properties, and cutting costs, the business was able to raise R3 million, enough to survive for six months.
“The strike ended just in time. It was close – but worth it.”
Vital Stats
- Player: Jules Newton
- Company: Avocado Vision
- Est: 1996
- X-factor: An agile ability to face a crisis and make a plan has led to extreme growth.
- Contact: www.avovision.co.za • +27 (0)11 614 0206