Entrepreneurial innovation is often not so much about inventing a mousetrap as it is about improving the existing one. ‘Seeing a gap’ doesn’t need to be about coming up with an entirely new idea. Indeed, it is often those businesses that see an opportunity to ‘do it better’ that are really the game-changers, paving the way for others to follow. Just ask Zakhe Khuzwayo and DJ Kumbula, co-founders of InnoVent Rental and Asset Management Solutions.
Seeing the gap
While working together in an IT asset rental company the pair realised there was space in the market for a business that offered something better. As Khuzwayo explains, “At the time many players in the asset leasing market were offering an instalment model, whereby the client ‘leases’ the asset over time, with interest, and essentially owns it at the end of the period – much as people do today when they purchase a car.”
But that wasn’t really leasing at all. “The whole point of leasing is that clients don’t want to own the asset – particularly in the IT market when the rapid changes in technology make products redundant very quickly,” says Khuzwayo. Even those companies that were offering true leasing services were falling short of the mark, and the entire leasing market developed a poor reputation as a result.
Onerous terms and conditions deliberately made it difficult for clients to return leased assets at the end of the contract period, while large ‘damages bills’ hidden in the fine print obviated any potential saving a company might have made by leasing instead of buying the asset. As Kumbula points out, “It was unsurprising that many clients never wanted to renew their contracts after their first experience with a leasing company.”
Rewriting the rules
InnoVent was established to address all of these issues. “Our vision was to provide customers with a better business model, better terms and conditions and a totally transparent and ethical service,” he adds. So began a business journey that started in a single rented room with two desks and a shared telephone. Today InnoVent has a staff complement of 35, owns its own corporate premises, lists the likes of Discovery Health, PwC and Woolworths among its blue-chip customers and has enjoyed a 100% client retention rate in the six-and-a-half years since inception.
It’s this last achievement that gives Khuzwayo and Kumbula the greatest sense of pride. “We needed to work hard to change the market’s perceptions about asset leasing and management in general, and we believe our client retention rate is testament to how well we’ve achieved our initial goal of providing customers with something better,” Kumbula says. The business model offers true off-balance sheet finance for leased assets, along with the security of warranties, replacements and upgrades, and upfront guaranteed buy-back of old assets. The company has placed particular emphasis on making its terms and conditions attractive and client friendly, something that Khuzwayo believes has been a key differentiator. “We’ve built the business on an ethical foundation and because of this, we’ve been able to win clients’ confidence in spite of their initial scepticism,” he says.
Overcoming challenges
That’s not to say that there haven’t been hurdles to overcome. Khuzwayo explains that the sales cycle is a long one – it can take anything from six months to two years to land a significant client. Landing their first client took seven months, a long time for any start-up.
But Khuzwayo and Kumbula aren’t chartered accountants for nothing. What they describe as a “clear, comprehensive and laser-focused business plan with solid numbers” landed them a 34% equity financing deal from Sasfin Bank. “We targeted Sasfin because it’s an entrepreneurial bank, involved in office automation rental, so it understood the value of the business we were proposing,” Kumbula says.
More recently the credit crisis made it tougher to get financing for assets, but the fact that InnoVent has large blue-chip clients softened this blow to some extent. And the company has diversified. IT hardware accounts for the bulk of its assets, but it also leases motor vehicles as well as yellow metal, telecoms and medical equipment to spread its market footprint. Khuzwayo and Kumbula established Qrent, a fully fledged division of InnoVent, to refurbish previously-rented ICT equipment and sell or rent it on a short-term basis to a secondary market. “This side of the business picked up during the recession as clients sought to save money on equipment,” says Khuzwayo. Looking ahead to the future, he and Kumbula have their sights set on further diversity and growth. “Our goal is to make this a global business – we’re looking at expansion into Africa and beyond.”
InnoVent
Players: DJ Kumbula and
Zakhe Khuzwayo
Est: 2003
Contact: +27 11 884 8274
www.innovent.co.za