Beating the SMME odds

When Adri Williams bought a heavily indebted business for one rand 10 years ago, it was clearly a heart-over-head decision. But – she’s still going. Here are her pointers for how SMMEs can beat the odds.

One of the reasons so many startups close in their first three to five years, says Adri Williams, MD and Co-Owner of Khayelitsha Cookies, is that somewhere, somehow, there’s the idea that if you’re an entrepreneur, and you’ve got staff working for you, you yourself won’t have to work very hard.

“On the contrary. It’s the complete opposite,” she says.

Adri should know. In 2013 she “bought” Khayelitsha Cookies, then an eight-year-old venture, for R1.00. The directors at the time had run out of hope for the business, which had R2,5m of debt, and a net asset value of just R100 000. They were happy to have someone take it off their hands.

And what would drive such an apparently rash decision?

Adri is driven by passion, and purpose, and had arrived at Khayelitsha Cookies in 2007 when it was positioned as a social development project, employed four women, and was equipped with a single mixer and four domestic-sized ovens. The women would bake and pack the day’s output, then head off into the streets to sell their biscuits. This, as time proved, was not a recipe for profitability, and by 2013 debt had mounted to the point where the directors wanted out.

But Adri had a vision of a large space filled with the smell of baking, and 1 000 women working happily. She was determined to turn the enterprise around. An agreement with the former directors for a 10-year interest-free “loan” to pay off the debt opened the door for the move. One of the other employees was Eunice Nyobole, who agreed to join Adri as co-owner of what was effectively a large debt and a very small business.

Fast-forward to 2023, and this is the picture now:

• From a less-than R5m turnover business, Khayelitsha Cookies now turns over around R22m
• More than 80 000 cookies are baked, packed, and leave the factory every day – rusks, brownies, butterscotch, ginger, chocolate chip….
• Employees hold ±30% of the company’s shares through a trust
• They’ve launched in the US, albeit with different branding, as the Khayelitsha Cookies branding was expected to have little resonance there.

WHAT DISTINGUISHES A BUSINESS THAT FAILS FROM ONE THAT SUCCEEDS?

Talking at a Food & Beverages Growth Coalition event held at Maker’s Landing, organised by the Economic Development Partnership (EDP) on behalf of the City of Cape Town (CCT), Adri shared her top tips with an audience including SMMEs and entrepreneurs:

PASSION & PURPOSE

Adri lives the philosophy that if you are passionate about what you do, you won’t have a moment’s work in your life.

And that’s just as well, as the the Khayelitsha Cookies journey has not been easy. Adri and Eunice were starting at a clear disadvantage. For instance, the debt burden meant they couldn’t attract third-party financing, and so they perforce had to operate from their day-to-day cashflow. Also, there was no way they could achieve the economies of scale that industrial manufacture does, meaning Khayelitsha Cookies had to sell itself into a competitive market with lower volumes and higher prices. This wasn’t going to change: they had made a job-creation commitment with a particular demographic in mind: previously unemployed women, mostly in Khayelitsha, who (mostly) lack the skills – English skills, literacy, experience, formal schooling – that make them employable in the urban setting. This brings its own complexities with training and skills-building  – such as the need to translate training materials into isiXhosa or picture training; and to have verbal exams. Their commitment to inclusivity is further evidenced by the fact that among the employees are hearing impaired women who, Adri says, have turned out to be amongst the best bakers, due to how well-developed their other senses are. “They can’t hear the oven bell ring, but that’s the only difference.”

In the decade since Adri and Eunice took it over, the business has steadily made progress. Additional ovens were procured; a new space was found; some more women could be employed. The Khayelitsha Cookies story found traction in the hospitality sector, which soon comprised 65% of the business’s client base.

But wait – hospitality sector? Covid19 put an end to that, seven years into the recovery journey.

In between, there had also been a move to new premises which leaked so badly with the first winter storm it took out half the ovens. There had been loadshedding; and a couple of rounds of avian flu decimating the egg market.

This is how it goes. The details will obviously vary, but most businesses can expect the unexpected, and the unwelcome. It’s having a real passion for the business, and a deep sense of purpose, that gets you through.

TELL YOUR STORY – TO THE RIGHT PEOPLE, IN THE RIGHT PLACES

What Khayelitsha Cookies absolutely has going for it is a wonderful story of chance and opportunity, packed with handmade deliciousness. Industrial production is up to 40 times faster than handmade, but handmade is about memories, and love, and comfort. Every 1 000 cookies sold per day equals one more employee, and every employee puts food on the table for five to seven people. What’s not to want to support in that?

And there are some things all entrepreneurs can and should do.

Enter awards, says Adri. “It’s free marketing for your business. Every time you tell your story, it refines your elevator pitch. Awards are not about the Noddy badge, they’re about credibility.”

Also, she says, attend trade shows. They are the very best networking opportunities, and the best way to attract international recognition for your brand. Even though as a SMME you might balk at paying for plane tickets and accommodation, it’s worth it.

BE A LEADER, NOT A FOLLOWER

Khayelitsha Cookies swims against the stream in a number of ways. Since its purpose is to use business to mitigate unemployment and hunger, the business is intentionally manual in a mechanised world. In a world of factory food, their factory produces handmade food.

REGULATIONS: It is the nature of the food sector that health and safety considerations are high on the agenda. Khayelitsha Cookies jumped through all the regulatory hoops, but went beyond and pre-empted any concerns local or global markets might have had through obtaining the globally recognised Food Safety System Certification (FSSC) for its factory.

PUT YOUR PEOPLE FIRST: Khayelitsha Cookies is demonstrably employee-centric. The default is that once someone has reached her target for the day, she is free to go home and deal with what her life demands of her. This has made a significant impact for women who have children needing supervision, households to run, etc

This feeds into Adri’s intensely human-centred philosophy. “You have only one life. What is your legacy going to be?” says Adri. “Make your life count.”

BUILD RELATIONSHIPS

Khayelitsha Cookies has maintained its very tight 1% profit margin. “That does not make us very attractive to investors,” laughs Adri. However, it does mean they have earned the respect and trust of their commercial community. “We prove to our key relationships that our value proposition is better – our price is competitive, our service levels are exceptional, our quality is consistently high.

“To other businesses I would ask: what is the key you have in your hand that will unlock cashflow for your business?

“You are the biggest asset of your own business.”

Adri Williams was speaking at the Food & Beverages Sector Growth Coalition event organised by the Economic Development Partnership (EDP) on behalf of the City of Cape Town (CCT). It was held at Maker’s Landing at the V&A Waterfront, and also featured inspirational inputs from Simon Peters of Yebo Fresh, Alex Kabalin, head of retail at the V&A Waterfront, and Alderman James Vos, Mayoral Committee Member for Economic Growth.