Sweat Scale Sell – Pavlo Phitidis
This week we speak to Pavlo Phitidis CEO of Aurik and Business Accelerator and author of Sweat Scale Sell.
How would you contextualise the African startup ecosystem?
A good ecosystem needs to be supported by its local environment. Entrepreneurs need strong incentives to start businesses, such as tax structures, the way the economy is managed and regulated.
Africa is not one country, so it varies widely across the continent and regionally. The Southern African environment is not doing well at all, it lacks political certainty, legislation and policies that favour business. Conditions around investment are onerous and countries in this region have not defined their role in the global economic value chain.
East Africa on the other hand has opened up its markets, led by Rwanda and strong interest by Japanese and German investors. East Africa is open to investment by foreigners and has policies that are favourable for business. The rest of the continent can learn from their approach.
A study conducted by AfriLabs and Briter Bridges found “access to reliable and constant capital as the primary challenge holding back the growth of the African startup ecosystem.” In your experience, what do entrepreneurs need to do, to successfully raise venture capital funding?
Entrepreneurs have the responsibility to invest in themselves and this means deepening the understanding of their business sector and translating that understanding into the design of their business. They need to build businesses that can attract funding. As a business owner, your business has to resonate and correlate to the requirements of the funder or you won’t get access to the growth funding you need.
In any business environment, competition drives innovation, which attracts investment, which attracts talent, which increases competition, which increases investment. So it goes back to having an environment that promotes business and opens the market for more businesses to enter and compete.
Your book “Sweat Scale $ell” focuses on building sellable businesses, why is that important to you?
There are a couple of reasons I wrote the book, the first being I was born to three successful entrepreneurs but failed businessmen. They were South African immigrants who couldn’t get jobs in the formal economy and had to be entrepreneurs to earn a living. They did everything right: They worked hard; deepened their knowledge in what they did; improved work conditions; and built communities around their businesses. However, they had to continue working until they were very old, out of necessity. They had built businesses that provided for their families but they hadn’t built businesses that were sellable. That got me worried, I thought maybe we don’t have the genes and DNA that would make our family successful entrepreneurs and business owners.
Then I spent extended time working in America and got access to data around the performance of businesses in that country. What I learnt from the data was that 94.6% of businesses that started in the USA, failed to sell. I found that astonishing for a country that is geared for entrepreneurial success. It has favourable policies, very little red tape, very little friction in starting a business, there’s talent everywhere and funds are available to support entrepreneurs.
That led to me to think that maybe the system of how we build businesses is broken. I realised that there is a problem, if smart and hardworking people can’t crack the 94.6%. I concluded that it is the process of building businesses that is important and not the individuals and their DNA.
How would you explain the “Asset of Value” method to building a business?
An “Asset of Value” is a business that is built for growth and built to be able to be sold at any time.
The process of building an Asset of Value starts with clear positioning – understanding who you want to serve and who your customer will be. Then it is about finding out the customer problem that you can solve with your product or service. More importantly it is knowing the cost to the customer of not having the problem solved, so that your price can be lower than that. Finally, you have to know what experience the customer needs in order to have the problem solved in a manner that makes them excited. When you have all of that in place you can build a system of delivery, that can deliver that experience consistently.
Good businesses are systems-driven and not people-driven. Once you have good systems in place, you can get the right team with a clear vision on what they’ll do. Then the owner can spend time scaling the business – accelerating its growth.
In addition to being an author, you are the CEO of Aurik Business Accelerator, please tell us about your work and the types of businesses you assist.
Aurik provides customised, scalable growth to companies with revenues of $500,000 to $50 million. We understand how to grow businesses practically not theoretically, drawing on our experience from working with over 2,000 businesses worldwide.
We run diagnostics on companies, understand their systems, learn about their team dynamics and review their revenue / sales numbers. Based on that analysis, we determine if we can have an impact on the business. If so, we partner in supporting and growing the business. We use extensive data in our process and have developed a “growth-as-a-service” software platform, which we use internally. Additionally, we license the platform and it is used by financial institutions, SME funders and accountants, for their professional purposes.
The method and services we offer work. Last year the average annual turnover growth across a portfolio of over 300 businesses was 29.8%.
Lastly what role do you think entrepreneurs can play in accelerating economic growth and employment opportunities on the African continent?
In my view, it is not the job of a business owner to create jobs, their job is solving problems in their environments in a profitable manner. Business ownership is about solving a problem being faced by an addressable market and generating a profit to sustain the business tomorrow. I believe that businesses need to automate and use technology to the extent that they can, so that they are profitable and globally competitive. Data shows us that jobs are created by businesses creating taxable income. Governments needs to focus on promoting those businesses, in order to grow employment opportunities. Entrepreneurship needs to be reassessed, it doesn’t hold the answer to job creation.
Pavlo Phitidis is the co-founder and CEO of Aurik Business Accelerator, through which he has worked with over 2,000 businesses across four continents to accelerate business growth and deepen value. He is a growth commentator for various media outlets including a weekly feature on The Money Show on 702 and Cape Talk. Pavlo is the presenter and host of The Growth Engines for Business Day TV, as well as a speaker at both local and international business conferences. His book, Sweat Scale Sell is available online and in-store as well as on Amazon.