A Powerful Message For Entrepreneurs | Vusi Thembekwayo Mentor Series

a balance sheet is meant to tell you if you are creating wealth or if you are destroying value you can grow a business and make higher sales and destroy value in the process [Music] but everybody says i'm gonna give you money to start a business this is not the conversation we should be having you should start a business raise money to grow a business and so your passport to holding yourself an entrepreneur is when you've proven the business is fundable for growth this is important because as you know not every business is scalable you know like if i'm uh i'll give an example my wife's a chef she's an amazing chef congratulations this dude like right but i'm you look amazing you know but i'm i am you know my wife's an artist she's not she's not trying to build a wimpy she's an artist so for her every single plate every single there's a you know a watcher just obsessed over where to place the bloody lettuce and i'm like but complete it's just litties you know like just put it put it on the plate man the person's going to eat it anyway right but she's she for her it's an art that's not scalable it's just not scalable you can't gordon ramsay that the minute you scale something you're going to lose a bit of the art and the artistic ability and the nuance as you know the creative aspect goes out the window because you now need to run this thing like a sausage factory this is the difference between uh i don't know uh five star michelin star rich restaurant and uh mcdonald's you know but they offer different things so i think many entrepreneurs just need to try and understand what are you offering and it goes back to that conversation about what's the problem that you're solving hi yasuba sonia i just wanted to remind you about the daily entrepreneur series is a business growth series for entrepreneurs and contains financial information and also information to grow you as a person and your business because we will never grow our business any higher than we grow ourselves so click on the link below and i will send you daily information to grow you as a person and your business and it's for 365 days of the year some years ago if you've never read there is a fascinating book i read this book many years ago changed my life called barbarians at the gate the book tells a story about a company called rjr nabisco the company rjr nabisco created a tiny little biscuit and the idea behind the biscuit was the wafer of chocolate with cream in the middle and they wanted to find a way to express it and the child of the art of rjr nabisco used to say the word oreo a lot and the biscuit became oreo follow me comrades i am leading the revolution here i'm leaving the revolution so anyway so this happens and this company grows to become a massive mammoth business and a couple of people lined up like barbarians at a gate seeking to take over and they bought that company for cents on the dollar then it was called a hostile takeover today it's what we call the alternative asset class or private equity the company was listed so important it was listed they bought the shares and de-listed it so the equity was in public it was private private equity you follow so this if you buy a share today at shoprite you're playing in the public equity space which means private equity is what it's that which is not listed but you see the great thing is if i buy a shared shoprite and i'm having dinner with a friend of mine at i'm having lunch with a friend of mine at a wimpy i wouldn't but let's imagine i am i'm not the lsm no i'm below i'm below i am below [Applause] so i got it i got to tell you guys something so after these master classes we send everybody a link to like rate them and one of the things people say is like yo no i mean it's just my sense of humor please don't take any umbrage anyway so so if that were the case right so i'm sitting with a friend of mine like at lunch over at wimpy and i'm having the wimpy dead wood which i love i love i can't eat it now because i'm on diet but oh man that wimpy deadwood that wimpy decor is so good it has human rights that wimpy deadwood is the truth and i mean old school wimpy deadwood not the new school wimpy deadwood i'm talking when wimpy used to make deckwoods with real bread bread that wimpy deadwood so anyway and this friend of mine says he says dude dude check this out you know you've got some shares at steinov he says they uh there's an accounting scandal a friend of mine who works at companyx told me about it follows you i'd sell my shares so the following morning i call my stock broker or i call my banker now go is do we have any standoff shares in our portfolio he says yes i sell seldom yeah and i sell the shares he can it's an otc he goes to the market he says was he selling shares shares selling at 100 bucks somebody on the other side says i'm willing to pay 100 bucks they pay me i get my hundred bucks they take the shares two weeks later the story brokes goes from 100 bucks to zero yeah that's the thing about the public equity class but private equity is different what's the first thing about private equity that jumps to your mind yeah it's exclusive it's locked yeah so if you buy shares in his business what's your name sir who are you i mean limited so i buy forty percent of secrets business i give him 100 million a million of my money for 40 of his business yeah then you sir what's your name omgarma comes to me and says chief you know sikh is running this business badly and we just got sued by one of our suppliers they're taking us to to the cleaners if i was you i'd sell my shares how do i answer him where i was like where am i going to sell these shares because there's no otc system makes sense to buy shares in his business he would have issued me with a share certificate but before that i did a valuation there was a due diligence then we issued contracts he sent me back contracts guys like i look at the companies we're invested in just the contracting stage alone is a nightmare and so i was saying to the team i was like can we not find a standard template for every single transaction we do where we can introduce a few variables but so we can educate the entrepreneurs we're teaching about a standard term of contract so the guy doesn't need a professional lawyer he has to pay a hundred thousand rand to to raise a hundred thousand rand like his system is broken right so i can't sell his shares because i can't sell his shares i am locked in and so because i'm locked in there is something called a premium that my shares have to generate that's why a lot of small entrepreneurs don't raise business don't raise money it's because if i know the information and i can sell the share immediately it means where there's a risk i can liquidate the risk if i'm locked into your business and i can't it means the return has to pay me for the risk of the fact that i can't get out you have to generate results better than i can get in the public stock market so the way the asset manager evaluates your business asset manager vc firm evaluate your business when you're raising money is he uses exactly the same model typically we would use for a listed asset class so you went and bought a property that was listed at a million rand say for a period of 20 years say at an interest rate of 10 say which means your effective bond is 1.1 million so your effective bond payment is here but over 20 years you pay in equal percentages relative to the interest rates attached to that bond a monthly premium which means the reduction of your interest rate should be all else equal assuming the interest rate stays the same as straight line like so however you and i know this what do properties do if there's a demand for them they what they go up so right now you bought a property at a million i would presuppose your property is under water because you bought it at the retail price and then added an interest rate charge so you have to wait for the rate of your property value to grow beyond this this level that's what you have to do but in that meantime you must keep paying back your monthly payments i get it so here's what's going to happen sooner or later the property value is going to increase because you bought here but the property value should do something like that assuming demand exceeds supply right when this point here hits is when you go to the bank you say you know we bought this thing at a million your exposure as the bank because you gave us 10 as an interest charge is 1.1 million but the value of the property in the market right now is 1.1 million at this point yeah then you say well your cover ratio is zero you're taking no further if you sold today you'd get your money back yeah give us more money the bank's going to tell you just wait a bit more and they're probably going to wait until you get to somewhere here and they'll say well the property is now worth one point four million we are happy to extend you an additional three hundred thousand in credit that's when you say thank you i will take your 300 000 rand bank and i will use it as a deposit on my next property for 1.1 million but if i'm putting in a deposit of a property of 1.1 million what's my net exposure 800 000 and you're gonna follow the same cycle that's why i said to you wear the same t-shirt drive the same car [Music] from a flow of an income statement is an income basically is meant to tell you an income statement is basically meant to tell you if your business is profitable or not a balance sheet is meant to tell you if you are creating wealth or if you are destroying value you can grow a business and make higher sales and destroy value in the process yeah especially if you get your working capital wrong right so top line and you'll hear accountants call it top line the reason is called the top line is because in an income statement it is at the top of all of the lines right first item on income statement what is it right what is the difference between revenue and turnover say again what say again thank you you know why it's important to say same thing because a lot of you here will hear what's your revenue what's your sales what's your turn when you start wondering if i'm even in the right room revenue sales turnover do you know why they're different by the way you don't know when you get an accountant called timberware incorporated he'll charge you for sales when you migrate to a small accounting firm they start telling about turnover when you when you are audited by ernest and young now they took it all it is is just so they can charge you more for doing the same work but they're the same things and revenue is nothing more than the price of a product times the number of products you sell quantity that's it i have this pen i charge one ram for it i sold a thousand of them my revenue is one round times a thousand one thousand round yes why do we call this the ego measure ego yeah i run a 100 million round to your business people who make a lot of money up here are so easy to spot because they'll tell you hey what what did you say mac it's a 750 a yeah basically i'm trying [Music] and then every product you sell costs you something to make do we agree it's called a cost of goods sold which is the cost for the product times the quantity of product so this ram this pen i sell it in one round each but i buy it from my supplier at 50 cents make sense i sell it at one i buy it 50 which means my profit what they call a gross profit or gross margin say anything is this minus this that minus this that's it gp gp gp gp gpgp gpgp gpgp gp 99 of most businesses are typically gp positive why because if you're not gp positive you're not going to survive if you're paying your supplies more than it costs you to sell the product you're gonna die [Music] bye

Channel: Jasper Basson - Entrepreneur Inspiration

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Keywords: Vusi Thembekwayo Mentor Series, Vusi Thembekwayo, vusi thembekwayo, vusi thembekwayo masterclass, vusi thembekwayo motivational, vusi, thembekwayo, entrepreneurship, entrepreneur, leadership, south africa, success, entrepreneurs, masterclass, vusi thembekwayo business, vusi thembekwayo business ideas, vusi thembekwayo business and life lessons, vusi thembekwayo small business, entrepreneur sa, jasper basson, best of vusi thembekwayo, sa

Id: NJtja35uIeo

Length: 15min 17sec (917 seconds)

Published: Fri Dec 11 2020