Four years ago Michael Jele, Hilkia Jacobs and Cliff Aylward, three telecoms engineers who had known each other since their apprenticeship days, were facing certain retrenchment. The multi-national firm where they had worked all their lives was shutting down its telecoms network-engineering division because globally it was not profitable enough, despite very good prospects in South Africa.
Today the three friends run a thriving telecoms firm, BlueTel Communications, employing almost two dozen highly qualified engineers and are fast making a name for themselves as sought-after contractors for anyone who wants to roll out a data network.
“Steady but rapid” is how Jacobs, the financial director of BlueTel Communications, understates their growth since their infant company’s first contract in 2012. It was for the roll-out of a Telkom data line from Upington to Vereeniging. The retrenchees-turned-entrepreneurs did all the work themselves, shared a car on the long road and stayed at cut-price motels to complete the job at the standard that became their benchmark and the reason for their success.
It was an exhilarating but difficult transition from employee to entrepreneur, says Jacobs. Employees are cushioned by the fact that the work day ends at 5pm and all the aspects of business is taken care of by various departments. As entrepreneurs, they not only had to work on each contract, but had to build systems for their new business, from admin to marketing. He reckons his output tripled when he became an entrepreneur.
As difficult as it was, the trio also had a certain amount of luck that played in their favour. They took the idea of starting their own company to the corporate that was retrenching them, and their former bosses, seeing an opportunity to score enterprise-development points, decided to back them not only with some contract work, but also with office space.
Without such support it would have been nearly impossible for a new small outfit to break into the fiercely competitive market of telecoms contracts, where track record is everything, says Jacobs.
For the first six months the three lived off their retrenchment packages, and for the first two years they had only one employee. But because they managed to deliver consistently high quality work, things started taking off in the third year.
As their employees increased, they soon realised that they would have to find their own premises. The three partners had decided from the start of their business that they would be frugal, with no dividend payouts for at least the first six years. Any surplus would go into building their company and finding tangible investments which BlueTel could use in future as security for expansion finance.
Buying premises of their own therefore fitted in well with their plans. They identified an ideal building in Centurion that could house 25 desks and had some warehouse space which they needed for equipment and hardware. The only problem was that the banks were not willing to offer a bond to a fledgling company.
Fortunately, an estate agent pointed them in the direction of Business Partners Limited (BUSINESS/PARTNERS), who agreed to finance the purchase of the property. Instead of requiring them to put down a deposit which would have hurt their cash flow, BUSINESS/PARTNERS took a 35% share in the property-holding company that was formed to hold the new BlueTel head office. BlueTel has already managed to buy back 5% of BUSINESS/PARTNERS’ share so that its shareholding now stands at 70%.
Jacobs says in line with their strategy of investing in tangible assets as they grow, they plan to use the property-holding company to house all their investment properties once BUSINESS/PARTNERS’ shares have all been bought back.
Another transition that Jacobs has had to make is from engineer to financial manager. The learning curve was steep, but he was able to turn to his wife, who is a qualified financial manager, for advice when he needed it. “I think I have found my passion,” says Jacobs, who plans to do an MBA soon.
Like most expanding businesses, BlueTel’s greatest challenge is cash flow. Jacobs is proud of the fact that the company has so far always managed to meet its payroll obligations despite the rapid growth of its payroll. He intends to keep it that way, even though the challenge will remain in the years ahead as they continue to grow.