A hasty expansion to South Africa’s most popular tourist destination brought about some of the early business challenges entrepreneur Sola Owoloja had to face. After a successful launch of a concierge business, West Chauffeurs, in Johannesburg in 2008, opportunities for expansion to various cities in South Africa soon presented themselves to the company.
West Chauffeurs, based in Johannesburg’s swanky suburb of Sandton, was ready for business in Cape Town. In 2009, it secured the highly sought after travel desk contract to provide full concierge services to the African Pride 15 On Orange Hotel and African Pride Crystal Towers Hotel and Spa. It would offer concierge services from booking spur of the moment transportation, dinner reservations, impossible to book theater tickets, finding presents in a hurry and doing deliveries among many other things to guests of the prestigious hotels.
But it was a hasty expansion and move to South Africa’s international tourist city of Cape Town that turned Owoloja’s world upside down, ushering in his worst day.
“The Cape Town operations were not profitable and we didn’t see the possibility of that trend changing for the better,” says Owoloja.
Nigerian-born Owoloja, started his entrepreneurial endeavours in his early twenties in Lagos. It was here that he learned that there is no structure in doing business, even having a 20-hour working day becomes the norm.
He moved to South Africa with the hope of receiving a contract to run an oil services company, but that did not go well. He moved back home, but later returned to South Africa to complete his studies in business administration.
During his studies, Owoloja established the concierge business with little entrepreneurial experience.
It started off with only two luxury vehicles in May 2009, but soon added another five through financial assistance from the National Empowerment Fund. West Chauffeurs was doing well, servicing clients through a global luxury lifestyle company, Quintessentially. They’re known to have very high net worth clients who travel around the world and often stay at the best hotels. And they trusted West Chauffeurs with their clients, Owoloja says.
The empowerment fund and the vehicles West Chauffeurs had purchased bore fruit which helped the business make more than R1 million ($96,000) after only two years in the concierge industry.
They bought new cars for the expansion and even got into lease agreements to finance the rest of the cars to meet the requirements of their contracts in Cape Town.
“We hoped that the expansion to Cape Town would afford us the opportunity to scale the business and as a result be able to increase revenue and profits,” Owoloja says.
But they had entered into unfamiliar territory, an international tourist city that already had well established hotels and services. West Chauffeurs struggled to find its place in the market, and because it relied heavily on the hotel’s guests for business, the company experienced relatively low sales as the hotels were new and in the process of growing their own client base.
“For a small company, expansion should be managed very carefully. We were profitable in our first year, but we did not think that move carefully. We expanded very quickly without the structures to manage the expansion in terms of cash flow, record keeping, etc,” says Owoloja.
The revenue from the Cape Town branch was very low in comparison to the cost of running it. At the end of every month, West Chauffeurs was short by about 65% which they had to source from the profit made during the previous year.
“It dried up very quickly. We tried to get overdrafts to pay salaries, but it was quite difficult. We picked up heavy losses in Cape Town, but those are lessons learned. They were painful,” he adds with a chuckle reminiscent of the tough times.
“It was a very difficult time for me and as a matter of fact, all of us, including employees. I reckon it is so much more difficult to run a business that doesn’t make profits than one that is profitable.”
West Chauffeurs lost millions. Their biggest mistake, Owoloja says, was for the company to go without management accounts and financial statements for nearly a year.
“With the benefit of hindsight, negotiating better terms with our clients could have saved us the considerable losses we incurred in Cape Town,” he says.
But that’s all in the past now. In early 2011, West Chauffeurs packed up office in Cape Town after 16 loss-making months to focus on the business in Johannesburg.
“We decided to focus on our Johannesburg operations which were profitable. It remains profitable and we plan to make it more effective and hopefully be able to make a little more money without additional investments,” he says.
They relocated from Sandton to the affluent suburb of Melrose Arch to run African Pride Melrose Arch Hotel’s travel desk. It is one of Johannesburg’s trendiest hotels. The guests of the hotel are typically discerning travelers who are accustomed to world class services and that became an opportunity for the company to recover from the Cape Town setbacks and also further its growth prospects.
From then onwards, things started to look up.
“We went from nothing to quite a bit. There’s this very nice feeling that comes with making things work,” says Owoloja.
West Chauffeurs currently has 17 employees including drivers and consultants.
Their client base includes companies who use their services for visiting dignitaries. They include Commonwealth Bank of Australia, First Bank of Nigeria, Liberty Life, Musa Capital, Openwave, Union Bank, clients from Barclays and many other private patrons.
Now that Nigeria has bragging rights as Africa’s largest economy, after overtaking South Africa following the West African country’s rebasing of the gross domestic product data after 24 years, West Chauffeurs’ expansion plans can be accelerated.
“Many doors have been opened especially in the hospitality industry as a spin-off from our hard work and dedicated approach to tasks we were entrusted with. In the not too distant future, we will be partnering with an international hotel group on their expansion efforts into Africa, starting with Nigeria,” says Owoloja.
This time, he’ll be armed with the lessons learned from Cape Town.