Sacrifice a businessman to save the wine industry

Every year in January, the wine industry gathers in the CTICC for a great big session of teeth-gnashing and hand-wringing about why the industry is in trouble. It is organised by VINPRO and is attended by wine industry people desperate for free food and a message of encouragement. Everyone is there. But if they are really looking for answers, they should pay close attention to who is NOT there.

The people not attending the VINPRO information day are the people that can’t be bothered about turning a profit on their wine farms. In other words, people who make enough profit elsewhere. These people are only in the wine industry for the fun, and if their hobby costs them a few million Rand every month, it is considered cheap. We are talking here about the bankers, the industrialists, the mining magnates and the IT entrepreneurs. They get enough return on equity from their core businesses, so what they are looking for then they enter the wine industry is something else: return on ego.

No rich guy has ever thought: “I am extremely successful, preposterously rich and marginally bored. Therefor I will buy a hardware shop”. No, they all buy wine farms because it gives them bragging rights around the boardroom table. And of course, most importantly, the dinner table. Nowhere is this more evident than in Stellenbosch. What was once a nice university town with quaint restaurants, sober architecture and drunk students has turned into a grotesque display of new wealth and bad taste. If this was confined to Dorp Street and De Zalze it would have been fine, but real money needs real space to show itself, and for that a wine estate is just the thing. Without reverting to boring things like research and statistics, I am willing to bet that less than 10% of Stellenbosch estates are owned by people that have the estate as primary business.

No industry can survive when normal market forces are thrown out the window. And that is exactly what has happened in the wine industry. Loss-making estates are being kept afloat by massive money injections from external sources, so they rob market share from the guys that are really dependent on the success of his wine farm.

Externally funded wine estates are making a mockery of the classic market forces of supply and demand. In any normal industry, the unprofitable businesses would go under and the profitable players would move in to fill the gap on the supply-side. But not in the wine industry. Here the unprofitable estates are kept going. And they compete at the top-end of the market – exactly the same space that the normal non-cooperative cellars have to compete in due to lack of scale. It’s a travesty – and while some will argue that the externally funded estates create jobs and boost the industry’s profile, the same can be accomplished by normal estates if their slice of the market was bigger.

The pity about all of this is that the externally funded wine estates have turned the wine industry into a celebration of mediocrity. You don’t have to be innovative if the supply of money behind you is limitless. The industry is filled to the brim with lavishly funded also-rans who only occasionally peek out from behind their lace curtains for a badly executed PR stunt, while excellent home-grown brands are doomed to drown in a sea of unfair competition and discounted prices.

Now you may laugh derisively at all of this and argue that more estates give you, the wine drinker, more choice. But let me leave you with this sobering bit: If you are serving your guests Diemersdal, you are serving them 100 years of authenticity. If you are serving them Lourensford, you are serving them Pep Stores.  

If VINPRO really wants to save the industry, maybe it’s time to force estates to follow corporate branding strategy where a new acquisition is re-branded to fall into the holding company’s overall brand. FNB Wine Estate. Capitec Wine Estate. You would not dare serve these wines to your braai guests – it would be social suicide. Rather, you would approach buying wine like you would approach a freshly discarded handkerchief in Wuhan – with utmost diligence and a deep interest in its origin.

Saving the wine industry? Obviously, it’s a bit more complicated. But we have to start somewhere. You can’t expect little Frikkie from Worcester Pre-Primary’s barefoot rugby team to survive a crash-ball from Duane Vermeulen. Therefor getting the playing field level is a very good start. We can sort out the rest over a glass of ABC Chemicals Shiraz.

Being uninformed is the key to business success

In the last few days everyone who had an opinion was asked to comment on the fact that South Africa is in a technical recession. You just could not escape it. Every news channel, radio show, and podcast was filled to the brim with serious hosts talking to even more serious guests about the impact of the recession and how everyone will suddenly have to sell their children into slavery and go back to the barter system, swopping grandma’s doilies for a tin of defective pilchards. 

The bombardment of bad news was so intense that I wished Eskom would throw us back into stage 6  load-shedding just to shut up the news and radio channels. I was so desperate to get away from the deluge of pessimism and doom that I went for a stroll in the park, where I heard two bergies talk about the drop in consumer spending and how they will soon be forced to buy their own half-eaten pies and empty wine bottles. In a final desperate attempt, I stepped away from the razor blade cabinet and decided to go for coffee with a friend of mine who also has his own business. And not once in the two hours we sat there did we touch on any negative issues. Rather than focussing on the bad, he chose to see the opportunities around him.

Which reminded me of another, similar chat I had with Jannie Mouton of PSG years ago over a cup of coffee and a cigarette about how he managed to grow his company at an exponential rate in difficult circumstances. His advice to me was simple: Choose to see the positive in any situation and look for opportunities when others see challenges.

The problem is that we are bombarded with negativity and that it becomes very hard to see the positives. It is the effect of the news we are being fed. Bad news sells, and if it bleeds, it leads. And these “staccato signals of constant information” (to quote Paul Simon) only manages to get us down and rob us of our creativity and energy.

To be successful, especially when you run a small business, you need to tune out of the news and focus on opportunities around you. If your focus is on the macro-economic woes, you will not notice the micro-economic opportunities in front of your eyes even if they look like Scarlett Johansson in a bubble bath. You need to be in tune with what your direct customers want, because that is who you make your money from.

So switch off the TV, the radio and your Twitter feed and go ask your customers how you can solve their problems.  I guarantee you at the end of the week you will be happier, and your order book will be full.  You might not know what Dawie Roodt said yesterday, but Dawie Roodt never bought anything from you so it does not matter what he said.

So there you go: a solid business case for NOT watching the news.

The Admin Trap: Making Accountants out of Entrepreneurs

The Admin Trap: Making Accountants out of Entrepreneurs

Is it not strange how entrepreneurs turn into accountants the moment they start making money? I have had many clients over the years that started their businesses from scratch. They come from a wide variety of backgrounds like construction, farming, pharmaceuticals, hospitality, law and the arts, to name a few. They started businesses due to their expertise in their respective fields, but the most amazing thing happened after a while: they all became accountants.

You never see a lawyer starting a firm and then servicing his own air conditioners. Or a beautician opening a health spa and then doing the plumbing. So why is it that you so often see entrepreneurs start a business and say: ‘What I need to do now is become my own accountant’?

Maybe it is because accounting and financial management is all about the managing of money, and you remember that your grandpa said never to trust anyone else with that. So, you start a business with you own money and hard work and you dread the day some 20-year-old article clerk with a cheap suit comes over and tell you how much VAT you owe.  Because you know for a fact that you can’t owe seventy trillion in VAT if you had to pay in from your access bond the last few months to keep the doors open. So, you start doing the books yourself.

But that is a problem. Because now you take that most precious of skills, creativity, and turn it into that most mundane of skills: routine bookkeeping. You take away Rembrand’s brush and give him a roller. You take away Husain Bolt’s spikes and give him some safety boots.

But there is method to the madness, like it or not. The one thing that entrepreneurship teaches you is to become an accountant. You must know the difference between income and expenses, and you very quickly learn to understand what cashflow is and how to manage it like a hawk. You will probably learn a little bit about depreciation, and you will learn a lot about debtor management. And as your business grows, you will learn about VAT, PAYE, Tax returns, financial statements, raising capital, the Department of Labour and all the million and one things that a business needs to attend to.

But that does not mean you should do it yourself. Having a business owner do his own books is more expensive than having Warren Buffet do his books. Because if the entrepreneur does the books, he can’t focus on his real job which is making money, going on extended lunch meetings and growing the business.  And soon the business will have books that aren’t much to look at, and a bank balance that’s even worse.

That is why my first advice to entrepreneurs is always to partner with someone that takes care of the whole finance function. You need someone who is actively rolling stones out of your way and who cuts through red tape and admin like Damien De Allende cuts through a primary school backline. This allows you as business owner not only to focus on what is important, but to have on hand the expertise of a finance professional who can advise, counsel, assist and grind along with you.

Everything is better with a partner. Let CFO Consult be your partner in your entrepreneurship journey. Contact us for a free consultation. We will gladly assist you as soon as we have finished servicing our own cars…

Owning your (rat) race

Bookshelves are filled with How to Guides on how to de-stress your life and most bookshops even have sections dedicated to stress management. Even my favourite magazine the Very Interesting, has published numerous articles about stress management and our ability to process information. In the world of Neuroscience, Neuroplasticity is the new buzz-word and it continually challenges our status quo.

Stress Management is a “real” topic, one that affects us all. The World Health Organisation calls it “the health epidemic of the 21st Century”. Recent research indicates that the major causes of stress is not only brought on by external factors such as 24-hour availability, a constant increase in expectation of our productivity and social pressures brought on by information technology. It shows that one of the biggest contributing factors to our high stress levels, are sence of a lack of control.

During my life I have frequently asked these questions; “How do I escape?” ,”How do I get out of this rat-race?”,” How did I get here?” and “Is this truely worth it?”. I have soon come to realise that these question are dangerous questions to be asked, it can either break you or push you to change. In most cases it broke me. I have stopped asking these questions, but the rabbit hole was still pulling me in. I then decided to change the question to myself and dared to asked; “Why do I allow the need for control to have such a strong pull on my life?”. Starting my question whith a “Why” and not a “How” forced me to think about what I was thinking about, which lead me to the question; “Can I change my believe system on how I perceive stress?” Yes, I can.

It all boils down to your attitude and how much you allowed external influences to clog your filters and change your perceptions. The way you look at a situation, is according to me one of the major contributing factors to the lack-of-control issue. It is not about what we have to learn, but what we have to unlearn. This is where the wonderful world of Neuroscience comes in; “Neuroplasticity is the brain’s ability to reorganise itself by forming new neural connections throughout life”. You can change the way you think and thus the way you perceive the world and thus your believe system.