The following article was published in the February issue of Forbes Africa.
It’s a story that has stuck on Bradley Porter like a tattoo. When you are in the business of renting office space, not being able to pay rent as the leaser can be quite ironic.
Born in the Free State province in South Africa and growing up in the coastal city of Durban, Porter’s future in entrepreneurship was inevitable having had a father who had a tiling business.
“It’s almost an affiction you are born with and I can’t really help it. I had a burning desire to have control of my own fate and destiny. And whatever it takes, you have to fulfil that desire and passion.” says Porter.
He grew up at the height of apartheid, attending the University of Durban-Westville which at the time was one of the political institutions in the country. When he didn’t succeed in university, he joined the army and from there decided to go live in Britain for nearly 10 years. It was during this time as an employee that he realized he couldn’t work for someone else for the rest of his life.
He packed his bags, returned to Durban, and with the little money he had saved he started two businesses. Along the way, one of his friends, who had purchased space in a building, suggested Porter hire 200 square meters for his ‘Experience This’ business on Florida Road in Durban, a hub of activity for and locals and tourists.
“I said I don’t need all that space. I don’t need 200 square meters’… but I said if you are prepared to try start this business with me, I’ll take the 200 square metres and we will experiment with this business’ which became known as Flexible Workspaces,” remembers Porter.
In October 2005, Porter founded Flexible Workspaces after spending eight years in the serviced office industry of Britain. The company provides fully serviced offices in South Africa’s KwaZulu-Natal province and Johannesburg. It was founded as a solution to the ever-changing business environment and to offer alternative options to the business community.
The business caters for small businesses that are starting out. Finding the right office can be daunting space especially when your budget is limited and you working with a small team.
Porter and his friend set up offices. They started with just furniture, the phone system that already supplied and was around $10,500 to get the business going.
“we were so undercapitalized it was unbelievable and we didn’t have cash. To start off your business
any spare these days, realistically for i,000 square meters, you would need at least R4 million ($350,000). For 200 square meters, you would need around R million to R2 million ($87,000 to $175,000,” he says.
Two years later, Porter says they decided to open up their next offices in Umhlanga, around 17 kilometers from Durban, even though the first offices on Florida Road were not flourishing.
“The reason we opened in Umhlanga was because of the trend at the time. This was around 2007, the trend was very much up north, outside Durban. We needed to be able to provide a presence in Umhlanga, which is becoming the commercial hub for KwaZulu Natal or Durban anyway,” says Porter.
But this move ushered in his worst day. “I think every entrepreneur will have one and for me personally it’s so real it’s like a tattoo on the back of my brain. I can relate to it now. I get goosebumps when I think about it because it’s just so real still,” says the 44-year-old.
He calls it Black Friday. It was September 7, 2007 and they had just expanded Flexible Workspaces and the rent was due. Porter was abroad on holiday but had to come back to South Africa to solve numerous problems, the main one being that they hadn’t paid R73,000 ($6,360) in rent for the 500-square-meter Umhlanga offices.
Unfortunately for them, with a business renting out space to other small business, Flexible Workspaces didn’t have any bringing in money so that they could pay rent. Porter sat in one of the offices looking at the Gateway shopping Centre with one hand on his head and the other holding the telephone to his ear. He was calling the landlord, apologizing for the late rent and begging for some leniency.
“The business model worked in such a way that we take a risk, we’re a bit like a hotel but for businesses. So we’ll go into a space, we do a deal with the landlord, we take a risk on all the capital expenditure. We fit it out, we staff it, we supply the internet, tea and coffee. Everything gets supplied. These services all have to be supplied on day one. And on day one you usually don’t have any clients. Unless you’ve been clever about it and been more strategic,” he says.
“But usually, particularly for us, the day one meant no clients. So by the time we got to day 30, we might have had one or two clients but it wasn’t enough to cover our rent felt like you on the phone with the landlord she agreed to give them an extension for a few days to come up with the rent money to give them and extension for a few days to come up with the rent money.
Fortunately, they made it happen. It wasn’t more than a week when the business signed a deal with a data storage company, who remain his clients today. But they had to hobble through paying rent for the following months. “We went through a three-year recovery period and then in about 2011 we started looking at space in Sandton. And that went really well. We took a small portion of 600 square meters and we filled it very fast. And about a year later, we recovered sufficiently to double the space to 1,200 square meters in Sandton. And we are looking for more now,” he says.
“With the benefit of hindsight I should have started this business in Johannesburg. I think it would have been much more successful by now. Flexible workspaces caters to those who want an office space instead of working from home. Porter says serviced offices reduce the costs and hassles of renting space and combines the best features of low-cost office in a prime location.
“Our objective was to build a network of business centers, so we were never going to stop at Durban or Umhlanga,” he says. Since then, the business has 15 employees and turns over around $1.3 million a year.
In October 2013, Flexible Workspaces opened its third serviced offices next to the swanky Montecasino precinct, outside Johannesburg. Porter says that he hopes to open more offices along the continent’s only fast train the Gautrain, from Johannesburg’s city centre all the way through to the country’s capital, Pretoria. “We want to expand the business nationally and cross borders. I’d like to have a national footprint in five years, international I can’t tell you. We are growing this business organically, so we are using our own money, it’s all self-invested. The pace at which we grow is limited to the amount of money we make.
What did I learn?
Make sure that you properly understand what the financial risks are and that you are covered for them. Make sure you have sufficient contingency. Don’t undercapitalize your business. Because the nature of an entrepreneur is that you go into a business opportunity seeing the positives, you seldom acknowledge there are negatives.
But you definitely won’t focus on that because if you were to focus on the negatives you wouldn’t do anything.
By Brad Porter