Jonathan Pepler is the co-founder of the Silverline Group, a South African-based construction, property and architectural firm with a franchise business model. In addition to offering conventional construction services for residential, commercial and industrial developments, Pepler’s business specialises in light frame steel structures which is an environmentally friendly method of construction.
Pepler has been an entrepreneur since the age of nine, and his success in growing Silverline has earned him a place on the finalist list for the 2013 Sanlam/Business Partners Entrepreneur of the Year award. How we made it in Africa asked Pepler about what it takes to be an entrepreneur, his advice to others, and the business potential he sees in the rest of the African market.
What motivated you to become an entrepreneur?
I think that being an entrepreneur is not something that suits everyone. In my case I was stimulated by circumstances to fend for myself and as a result started out as a child at the age of nine, walking with a wheelbarrow 10km to the local fruit and veg market, buying fruit and veg with my savings, making it up in hampers, walking back 10km and selling it to the elderly at the old age homes. With this money I bought chickens, sold the eggs and the chicken litter for compost.
When I was in Grade 8 I started painting houses during school holidays and I mowed lawns in the suburb where we stayed. I operated as far as I could walk in a day. When I was about 13 years of age I started visiting local farmers’ auctions on Saturday mornings, buying up articles of interest only to sell it at another auction the next Saturday. In a sense my motivation was survival but it evolved into a lifestyle.
Tell us about your inspiration for starting the Silverline Group.
I was busy with a property development in the Eastern Cape and was looking for a contractor to assist me with the construction and struggled to find anyone that could build environmentally friendly buildings. I searched the internet and found a small company in Bloemfontein that was doing construction similar to what I was looking for. After contacting the owner and after much discussion we joined forces and established Silverline Group. We relocated to Cape Town and, because we could not cope with the volume of work we attracted, we started to franchise the company. Silverline is now the only franchised construction business in South Africa, and one of very few in the world.
How does your franchise model work and what are the pros and cons of this business model?
We keep the franchise model very simple as we recruit successful and experienced contractors and train them on the light frame technology. We also spend a lot of time training them on how to manage a construction business in terms of cash flow, business structures, marketing, and we offer a lot of software to assist the franchisee in administrating their business. We also offer them on-site training with their first light frame projects. They get an operating manual, all business documentation and marketing material.
Franchisees do not have exclusive territories but are allowed to work nationally wherever they get a contract. All franchisees are encouraged to do their own marketing and source their own work but most work that they do comes sourced from the head office marketing division. We sourced material on behalf of the franchisees and negotiated bulk buy discounts which allows the franchisees to be much more profitable than ‘Joe the builder’ or conventional builders. This also allows the franchisees to be very competitive in the market place with pricing.
The franchise concept allows us to have a national footprint, high standards and consistency in application. We charge the franchisees a small upfront joining fee and a small royalty on the value of their projects. We also offer them bridging finance on projects, engineering, quantity surveying, architectural and design services. We assist them in closing deals and presentations to potential clients so we really offer them a one-stop construction solution.
Tell us about the potential you have seen for growth in the Namibian and Botswana markets.
Part of our strategy is to expand into Africa and the rest of the world as this building methodology is suitable and conducive to any conditions. The methodology is flexible, easy and cost effective to transport or ship to any part of the world. Africa always will have issues with material, but labour is abundant and if we can supply material out of South Africa we can do good business. Africa is one of the best growth opportunities for most industries.
What advice would you offer entrepreneurs starting a company today?
To be successful you have to really apply yourself and think the whole business idea through carefully. You have to write the idea up and think short, medium and long term. You have to think about your business strategy, your money matters, your cash flow, your profit margins, the competition, the market, who you will employ and how you will afford them, [and] the location of your business. These are but a few factors; there are so many issues that can impact your idea and you have to know what they are and how you will deal with them before you commit. Most people just jump into an idea and are soon disappointed when things do not work out the way they should.
It is important to focus on what you aim to do and not to jump around trying to be everything to everybody. Sometimes you just have to walk away from ideas. The issue is that once you have committed yourself to an idea and started involving others it is very difficult to exit.
It is also important to have a business plan which includes a full financial plan for the short and medium term and then to manage it on a monthly basis ensuring that you achieve your financial goals. You can have a business with a good turnover but if you do not make profit and in particular have cash flow you actually do not have a business and could just have done nothing and had the same outcome
Besides money, what is your favourite way to compensate employees?
Respect is one of the greatest motivating factors. I believe that most people want to be worth something to someone. I also believe in developing people and giving them wings. Once people feel responsible and accountable – not only to you the employer but also to themselves – they will deliver amazing results. If you can set up your business in such a way that people are responsible and accountable for their portion of the business, you will have more time working at the business and spend less time working in the business.