Cash retained tides ‘happy businesses’ over the worst of Covid-19 crisis
Thomas Reib reckons if he stayed in the corporate lane in which he started his career in the early nineties he probably would have made more money than he had as an entrepreneur. It is no small claim if you consider the success that he has had with the five divergent companies he is currently running.
But, says Thomas, there is something about working for yourself that hooks you. He loves the freedom, even if it means working long hours and weekends. It also allows him to have fun, which is evident in the way he describes his “happy businesses”, how he built them, and how he came to choose finance from Business Partners Limited for three of his business properties even though the banks were willing to finance him.
Thomas grew up in Denmark, and after studying commerce and economics, came to South Africa for a short work stint and some sunshine before travelling on to see the rest of the world. But then he met a girl and never left, he says.
It was 1993, South Africa was opening up to the world, and Thomas was hired by the Danish industrial giant Danfoss to help it re-enter the market. Later he did the same for Volvo, but he discovered that using his considerable sales talents on the showroom floor was much more lucrative than working in the corporate marketing department. He did so well selling Volvos that BMW head-hunted him. “It gave me an appetite for making money,” he says.
With this in mind, he took the “stupid” decision to join a tiny start-up called Inline Media, which had the then revolutionary idea of shaping queues in places like airports by introducing snaking corridors partitioned with belts, ropes and poles. This, combined with display advertisements aimed at the people in the queue, later became ubiquitous in public spaces.
By the time Inline was bought out by a large company, Thomas knew he was never going to work for a corporate again, and he decided to buy a small stake in one of Inline’s suppliers, Q Display, a manufacturer of the poles, ropes, belts and advertising boxes that constituted the queueing systems.
Thomas ran the company with five passive investors, and bought their shares incrementally as he grew it year by year. Meanwhile, Thomas started a hobby business at his home, servicing and maintaining Porsches and preparing them for races. Over the years it has grown into Cafe 9, the biggest independent Porsche workshop in South Africa, situated today in Foundersview, Johannesburg.
His company Q Display scored huge sales in the build-up to the World Cup in 2010 when entire stadiums and brand-new airports had to kitted out with queueing systems.
In recent years, electronic waiting lists and appointment-ticketing systems have diminished the market for traditional queueing systems and Thomas decided to pivot the company towards electronic queueing software development.
On a trip to Australia to scout electronic queue management systems, Thomas came across evaporative air-conditioning systems that are commonly used there but are virtually unknown in South Africa. On a whim, he contacted the largest manufacturer in Australia, Seeley International, and returned to South Africa with a contract to set them up and manage their logistics – and be their landlord.
He registered a new company, Coolstar, and identified a warehouse in Foundersview to house the cooling systems imported into South Africa. He approached the banks for finance to buy the warehouse. “They instantly agreed, because I had a solid business,” says Thomas, “but then I came across Business Partners Limited, who gave me the best deal by allowing me to keep my money in the business as opposed to paying a deposit on the building.”
Business Partners Ltd took a minority shareholding in the building, with provisions allowing Thomas to buy it back in future. In the same way, Thomas also bought new premises for Q Display to accommodate the expansion of the firm into software development.
His third property deal with Business Partners Ltd was to buy bigger premises for Rio-Carb, an innovative company specialising in anti-corrosion cladding for mining equipment which he bought into and took over as CEO. Rio-Carb, which manufactures super-hard chromium carbide cladding developed by its founder, needed new premises to accommodate its fast growth, and Thomas bought a building in Alrode in the south of Johannesburg next door to Rio-Carb’s sister company Aquajet, a high-pressure water cutting workshop also run by Thomas.
He says there are three reasons why he prefers Business Partners Ltd’s finance over that of the banks.
- First, Business Partners Ltd, in contrast to the banks, did not require a deposit for any of the three premises. “Cash flow is the number one thing when you are a small businessman. I don’t have big corporate resources to ride on. Business Partners Ltd is by no means the cheapest, but they do allow you to keep the money in the business and that is critical for an entrepreneur.”
- Second, it is difficult to communicate with the banks nowadays, says Thomas. “I used to have the same bank manager for twenty years, and now I’ve had five relationship managers in two years. I don’t have time to spend five days at the call centre trying to get through to the right person. With Business Partners Ltd I deal with two or three people. They answer the phone, I can talk to them, I can explain things to them and I can send them information.”
- Third, Business Partners Ltd is more flexible than the banks. “Most of the commercial banks are very rigid in their structure. But Business Partners Ltd understands that you are an entrepreneur, and makes allowances and adjustments when things change.”
Just how important it is to retain as much cash as possible inside of a growing business was clearly illustrated for Thomas when the Covid-19 pandemic started. The year before, Rio-Carb had its best year ever with a spectacular sales growth. It would have been easy to pay out dividends and big bonuses, but he convinced the board to retain the profits for major expansion in 2020.
Sadly, the resources had to be used to tide the businesses over the worst of the pandemic, but the good thing is that he did not have to raise any extra finance, says Thomas.
What lies ahead for his five businesses is a period of consolidation. The unpredictability around the third wave is making planning difficult, says Thomas, but growth is certain, especially for Rio-Carb which is set for major expansion in the rest of Africa and Europe.