- Player: Derek Thomas
- Company: Letsema Holdings
- What they do: Business starters, transformation consultancy and private equity.
- Est: 1995
- Visit: letsema.co.za
Running multiple businesses under an investment holding company hasn’t always been an easy ride for privately-owned Letsema Holdings, and CEO Derek Thomas is the first to admit that growing Letsema’s private equity portfolio has been a challenge at the best of times.
Despite these trials Thomas and his partner, chairman Isaac Shongwe, have grown and developed several successful businesses from the manufacturing of wax microspheres for the global cosmetics industry to base chemicals trading and industrial welding.
What’s the secret to multiple business growth?
An unconventional but effective strategy that involves conquering devils and hunting rock rabbits while avoiding the Frankensteins on the road to business success.
Face your devils
While growing and investing in multiple businesses it is inevitable that some will fail while others flourish along the way, and business failure is followed by consequences that business owners are often not prepared to face.
Ten years back Letsema Holdings invested in a greenfield investment when the market suddenly turned, leaving the business in a precarious financial state that could have led to bankruptcy. Instead of avoiding the inevitable, Thomas proactively set up a meeting with his company’s bank to discuss the situation.
“I had to say to the financial institution, ‘here I am, we owe you this money, and we can’t repay it.’” They were impressed, as tracing bad debt often took them up to three years to recover, and they would rack up expensive costs along the way. Some debtors would duck and dive instead of coming clean. Thomas and the bank discussed what they would be able to pay and the company was eventually able to make a settlement.
“You have to stare the devil in the face. Business is a collection of these inflection points and if you run away once from a difficult situation, you will always run away.”
Over-invest in your back office
When he joined his business partner, Isaac Shongwe in 1996, Thomas was given the task of managing the business’s administration. He registered it, ordered the accounting package and handed out the first laptop, but as the business grew he had to hand the function over, with dire consequences.
“A year or two later we owed tax when we thought we were doing well simply because we did not take the time to sort out the back office. This took many years to rectify and gave us invaluable insight – these days we over-invest in our back office and it’s now so effective that we use it as a shared service centre across all our businesses.”
Tiki Taka to build your team
One business under the umbrella of Letsema Holdings has successfully cracked the code for retaining staff without having to pay salary market premiums. The magic formula? Build confidence while developing competence.
“We developed a system that is similar to a soccer technique called ‘tiki taka’. Basically it’s a strategy of receiving the ball, and passing the ball so you can make yourself available to receive it again. Translated into business terms this is a process of receiving responsibility for a role in the business for one year, taking another year to master the role and a third year to hand it over to the next person.”
In a business that hires more graduates than professionals this has allowed for faster upskilling of employees. “It’s a system that allows us to build the confidence of our younger staff while increasing their competence. The output that we generate is incredible given the general inexperience within this team.
Respect the rock rabbit hunter
Your business growth is based on bringing in larger contracts and bigger client accounts, and businesses often celebrate the established staff that bring in the bigger deals. But Thomas has witnessed that this company culture can lead to an alienation of younger employees in the business who might not yet have established their networks or mastered the art of bringing in bigger clients.
Thomas recognises that it is important to respect the younger staff who he refers to as the ‘rock rabbit hunters.’ “If your culture is one of only celebrating the mammoth hunters in your tribe then you will have an unbalanced company. Your business will never succeed because the youngsters will feel alienated,” Thomas cautions.
“Today’s rock rabbit hunter is tomorrow’s woolly mammoth hunter. No employee starts out as a woolly mammoth hunter; rather you begin by bringing in the smaller accounts – hunting rock rabbits – slowly building up to the bigger prey.”
Don’t outsource your salvation
As Letsema Holdings continued to grow, a decision was made to bring in executive leaders with expertise to help take the business to the next level. It was a decision that they eventually regretted.
“We brought in a succession of people who were going to grow us into a much bigger company. One executive turned out to be a crook who defrauded us; another was all talk and no action.
“If you are going to outsource your salvation, and hire the great saviour while compromising on your values and ethics in pursuit of growth, you may end up creating a Frankenstein-type environment.”
The company found that its culture had substantially shifted, creating a divide between the non-performing executives and employees on the ground who were adding actual value to the business.
“We made decisions that we weren’t ready to make. Instead we should have continued to grow our company while building quality relationships instead of chasing after what we thought would be our business saviours.”