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 Seeing business property the entrepreneurial way

 

 Gino da Silva is no ordinary chartered accountant. As a young man, he had quit his comfortable job – only the third he ever had – to start a business with his brother Celes in an industry he knew very little of, and over the next 25 years they built EIS Engineering and Industrial Supplies, one of the biggest in the industry in KwaZulu-Natal.

Chartered Accountants are usually quick to advise businesses to rent rather than buy their premises if they are not in the property business. “Stick to your core business,” is the usual advice. In contrast, Gino strived from the beginning to own the property in which they started their first shop.

Owner-managers see business differently compared to Chartered Accountants who advise large listed companies, says Gino. In the early years of their start-up, it was strategically important to gain security of tenure for their shop in Jacobs, Durban. “The last thing you need is a landlord who increases your rent substantially because he sees you need to be there,” he says.

Gino still believes that the security of position that property ownership brings to an owner-managed business outweighs the advantages of renting, which perhaps allows for better use of capital. When you own your property, once you pay off the bond on your own property, you end up with a perpetual income earning paid off investment. “A no brainer instead of traditional provident, pension and endowment type investments,” he adds.

The Da Silva brothers’ shops also tend to carry more stock than ordinary chartered accountants would advise, because their approach to client service does not allow stock to run out.

In the late eighties, Gino was working as a financial manager in a local company but was itching to start his own business. When a former boss mentioned to him that a building that they were vacating would be a good place for an industrial supply shop, Gino jumped at the opportunity. He didn’t know the first thing about industrial supplies, but he managed to persuade Celes, a mechanical engineer, to join him.

Their parents put up their retirement house as security for a small loan from the Small Business Development Corporation, the predecessor of Business Partners Limited. Gino sold his house and to save costs, the brothers moved in together. Celes worked full-time at the shop while Gino kept his job for a year to feed everyone, including his wife and new-born baby, and worked on the business in the evenings with his brother.

Their commitment to customer service gave EIS an early edge in the local market. The brothers introduced almost within the hour delivery in the local industry by Celes doing rounds in a tiny Nissan 1400 bakkie, which was his only vehicle.

Gino says he never once regretted embarking on the venture. The brothers grew up “packing tomatoes and strawberries” after school on the family farm, and knew how to work hard. The business worked well from the beginning, and within five years they were able to buy the property in which they started.

It probably also helped that Gino and Celes had always been “very positive people”. This is evident in the way in which he describes the biggest setback of his business career as a profoundly moving and inspiring experience. One Friday afternoon in 2003, he had locked up the shop, but was called back scarcely an hour later by the alarm company. When he got there, the entire shop was burnt to the ground. A faulty piece of equipment had leaked electricity and started the fire.

The business was reduced to a single back-up disc that was diligently made and taken off-premises every day. The brothers immediately called the staff together and gave them the stark options: either they would be open for business on Monday, or they would use the insurance money to pay everyone three months’ wages and wind the business up.

“We have a different kind of spirit at EIS. We’re like a family,” says Gino proudly of his staff who got stuck into the plan of opening by Monday without any hesitation. A neighbouring business provided temporary premises, suppliers provided stock purely on the strength of the relationship, and by that Monday they were trading. EIS rose, phoenix-like, from the ashes in a bigger and better premises.

The business kept on flourishing, and their firm belief in owning their business premises enabled the growth of a property portfolio that today is worth more than the business itself. One of their acquisitions was a building which today houses their highly successful Pinetown branch, which they co-own with the store manager, Rajen Gounden.

Business Partners Limited provided a 100% finance deal to buy the property so that much-needed cash didn’t have to leave the business to be put down as a deposit on the building. The royalty payments which form part of the deal make it more expensive than traditional bank finance, says Gino, but Business Partners Limited shared the risk and today the increase in value of the building is already more than the royalties due

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