“I hit the roof,” says Carelse of his reaction when the call finally came from Business Partners Limited (BUSINESS/PARTNERS) to say that his application for no less than R8 million had been approved so that he could start his own foam rubber factory.
He had staked his whole career on this one business plan, and Carelse admits that it is highly unusual for a financier to invest any money in a business that has not been started yet, let alone R8 million. Even by the standards of BUSINESS/PARTNERS, which prides itself as the leading risk financier in South Africa, backing a business purely off plan was extraordinary.
But a look at Carelse’s CV quickly makes it clear why the financier was prepared to make an exception. He matriculated in East London in the early eighties with distinctions in maths and science, but gave up his chance for a university education because he felt that his family was already under too much pressure putting his older brother through university.
Rather, he decided to train as a fitter and turner and do an engineering diploma part time. Apprenticeships, previously reserved for whites only, were just starting to open up for coloured people and he was accepted by a sweet factory in East London on the strength of his matric marks.
Carelse has never worked at any place for long before being promoted, from apprentice to maintenance manager, production manager, factory manager. From the sweet factory he moved over to manufacturing of white appliances, first in East London and later in KwaZulu Natal, where he became plant manager of a foam-rubber factory for the Steinhoff group. From there he was promoted to head up the group’s entire foam-rubber division, consisting of three factories with 250 workers, which he transformed from a struggling unit to a profitable one in his last year at Steinhoff.
From the moment he entered the foam-rubber industry, the gap in the market was clear to him. A few large manufacturers had a stranglehold on the market, selling foam-rubber at high prices to independent furniture producers while supplying their own furniture factories with cut-price foam-rubber. There was a clear demand for a new entrant to disrupt the near-monopoly situation.
Carelse worked on a business plan for his own factory but kept it in the bottom drawer while he enjoyed the challenge of turning the Steinhoff unit around. Once he achieved that, he got the sense that he, now in his forties, was missing the opportunity to start his own business.
One day, while researching a coffee-shop franchise opportunity for his wife, he started a conversation with a business broker, who offered to take his business plan to BUSINESS/PARTNERS.
The financier also saw the gap in the market, but Carelse says BUSINESS/PARTNERS officials made it clear to him that they were “backing the jockey and not the horse”, in other words, his track record as a businessman was the key factor. The market opportunity came second.
What happened next is the perfect illustration of why no financier likes to invest in a pure start-up, but it also shows why it is more important to choose the right jockey, and not necessarily the horse.
With the BUSINESS/PARTNERS finance, Carelse and his wife set up Foaming Concepts in a factory which he rented from BUSINESS/PARTNERS in Wadeville, Germiston. The finance was generous enough to order a brand-new tailor-made plant from a reputable equipment maker in England at a cost of more than R2million.
Try as they may, the engineers who designed and built the machine could not get it to work, despite the assurances that they had done it many times before, and for close to two years eighty percent of the products produced by Carelse’s machine had to be scrapped.
The calamity laid waste to all of his careful plans and Carelse went into crisis mode, negotiating hard with suppliers and new customers not to give up on him. In such circumstances, only the best jockeys can stay on top of the horse, and eventually Carelse, who himself found the solution to the problem by changing the design of the mixer on the machine, pulled through. To Carelse, who followed a strategy of total transparency with everyone affected by the crisis – clients, suppliers and financier – it felt like a miracle that his venture survived.
Soon Foaming Concepts returned to more pleasant problems – how to keep up with the enormous demand in the market. Turnover grew, and he even managed to convince a bank to provide finance for a second plant that could run around the clock.
By the time the five-year lease of the factory ran out, he was ready to buy it from BUSINESS/PARTNERS, who had also honoured him with the Medium Business Entrepreneur of the Year award in their Entrepreneur of the Year® competition sponsored by Sanlam and BUSINESS/PARTNERS.
Meanwhile, Carelse’s two sons, both of them with a BCom in the bag, have joined their parents’ company. Today, the business has expanded to include a bedding factory, Creative Bedding Designs, in line with Carelse’s plans to venture into downstream, value-adding manufacturing, and he is already eyeing opportunities in the retailing of foam-rubber products under his own brand.
Still a long race ahead, but the jockey is firmly in the saddle.