Maditsi Mphela’s strategies for building a R100m business

From running a one-man show to one of the most renowned black-owned law firms, Maditsi Mphela shares his building blocks to growing your business into a multi-million-rand operation

In 1986, a young attorney finished his articles and prepared to follow his dream: to open his own practice and serve his community. With a young wife by his side and a track record of excellence, Mphela seemed destined for success.

However, as a black attorney in SA during the 1980s, he would have to face many challenges before realising his dreams.

Mphela’s childhood had given him the insight and determination to succeed, despite various setbacks. His father lost an arm in a train accident, yet he continued to run his poultry business.

“He was the hardest-working disabled person I knew,” says Mphela. His mother had only passed Grade 7, but she did not allow this to hold her back.

Eager to gain new skills and help support her family, she learnt how to knit and embroider and turned this into a home business. “In fact, my siblings and I never wore a jersey bought from a store, because we had unique, quality, home-made ones.”

So when the young Maditsi had to face hardship, he was already primed for turning challenges into opportunities.

“In the beginning, it could sometimes get tough. I had to work abnormally long hours, travelling to far-away places and also operating under oppressive apartheid policies, like having to conduct court proceedings in Afrikaans and not having my cases prioritised.”

In those days, the traditional banks were reluctant to fund black-owned businesses. To start his enterprise, he was forced to use his life cover as collateral to obtain a loan of R10 000 from African Bank.

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“I only had one employee when I started – a typist who also acted as a secretary, receptionist, cleaner and clerk. I frequently struggled with cash flow. My first deposit  in the business trust account was a measly R50. Back then, there was no EFT system. The cheque was literally in the mail and we would have to wait for the money to clear, but I still had to pay salaries. My wife, Lekgale, was a great supporter. Sometimes she had to help out financially.”

Despite the struggles, Mphela gained enormous satisfaction from working closely with the community. He took on a wide range of cases, usually for people who struggled to pay him. However, in some cases, this did not matter. When the outcome of the case was a large settlement, his fees were covered. This was not the only benefit. “Above all, I enjoyed putting smiles on my clients’ faces.”

Fighting for the underdog in this way brought him to an early turning point. “There was a paradigm shift in the business, because I decided to move from being a general practitioner to specialising in personal injury claims, such as assault by the police. But I needed money to finance this move, because the people I decided to represent did not have money for litigation. Even so, the potential return on investment was much higher in these cases.”

Fuelled by his determination and his wife’s steady support, he applied for a loan to free up some cash. This proved to be an excellent business decision. From 1990 onwards, things started to change. With more money to back him, Mphela became a household name and earned the respect of his colleagues, court o cials and the greater community.

In its first year, the firm’s turnover was a mere R10 000. By 2008, this had increased to more than R6 million.

In 2010, Mphela took on a partner, Tshepho Matlala, and the business changed strategy again, doubling turnover to R12 million and then tripling it by 2013, when it stood at close to r40 million. by 2015, the gure stood at R100 million.

“When I started to deal with multi-million-rand claims, I realised I now had the resources to deal with bigger matters. I said to myself: ‘Hang on a second – I am a millionaire!’ It was a dream come true.”

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Mphela & Associates has grown its staff complement from a single employee to a 46-strong workforce. “The number is expected to rise once our two new office blocks have been completed by 2017,” says Mphela.

“The firm is ranked among the top 10 performers by the Law Society of the Northern Provinces [LSNP] and the Road Accident Fund,” he continues. “From 2004-2015, we consistently received recognition from the Attorneys Fidelity Fund and the LSNP for excellent interest contributions to the fund.”

Mphela’s success has inspired his children too. His daughter is an admitted attorney and his son is a third-year LLB student.

Here are some of the key building blocks to Mphela & Associate’s success.

SPECIALISE WITH THE TIMES

When Mphela chose to specialise as a litigation attorney, he made a very important business move. He chose a direction that kept him inspired, but also offered a higher return on his investment. It wasn’t the most obvious route for a lawyer who wanted to earn high fees. It was a risk, but he knew that he could deliver an excellent product to a market that desperately needed this particular expertise. His clients may not have had the money, but they led him to high-claim cases.

TAKE WELL-PLANNED AND STRATEGIC RISKS
In order to fund his move into specialising as a litigation lawyer, Mphela took a risk. “I had to arrange for financing through the Lebowa Development corporation. I bonded my house and used that as collateral to get the cash from them. I asked them to pay my accounts and suppliers. I was able to get reports and settle the matter with a 60-month loan. This increased my cash reserves and I was able to increase my overdraft limit to R100 000.”

He was able to do this with confidence because he had a solid plan and knew he would be able to meet his clients’ expectations.

STRATEGISE TO INCREASE PRODUCTIVITY AND PROFIT
To move to the next level, Mphela analysed his existing business processes and targeted key areas where he could increase productivity.

“When we moved from R40 million to R100 million, it was because we introduced specific, calculated measures to increase turnover and make this jump.

“We looked at the number of cases we finalised in a year and realised we had the potential to do more. We ensured that we put as many cases on the roll as possible, even though it meant spending more money upfront. We carefully analysed which cases had real merit and were without complications. Before we even recovered the costs of the experts or issued the summons, we started preparing and lining up all the reports. Doing it this way meant re-investing in the business, but it also allowed us to increase our turnover dramatically.”

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Mphela and his team found ways to work around external restrictions by managing all the variables on their side. Through careful planning and upfront investments, they could ensure quicker turnaround times.

RE-INVEST IN THE BUSINESS

With a well-developed product and a successful company, Mphela might have rested on his laurels. However, when things started to go really well, he chose not to keep all his profits. Instead, he re-invested in the business in order to make the most beneficial strategic changes that would take the firm to the next level.

“This is a key problem with many tenderpreneurs. They don’t reinvest. They would rather buy a nice car. But we decided to reinvest half of the R40 million in order to get back R100 million. That’s better than playing the stock market, because you are in charge of the variables. It’s up to you to make it work. You have to turn your business into your own investment safe haven.”

MAKE “BUSINESS” YOUR BUSINESS

As an attorney, Mphela had little business training, but he realised that if he was going to grow his enterprise, he would need to be more than just an excellent lawyer. “It was through the work I did as a SABMiller committee member and as Deputy Chairperson of the Mpumalanga Parks Board that I learnt how to run a business. I looked at my own business in comparison with SABMiller and thought: ‘Wait a minute, I need to run this better.’ I sat down with my Business Manager and told him: ‘We need to map out a plan. I have to look at this as a business, not just as a lawyer. So far, we have only been working as professionals, not business people. We need to have an HR person and a solid business plan with a budget. We need someone to manage things in office – we can’t do everything!’ It became clear how important it is to measure your performance against targets.”

LOOK AT THE NUMBERS

Mphela & Associates made the decision early on to keep a close eye on its finnancial statements. “You have to look at year-on- year performance and gather statistics. This gives you the tools to measure your growth and set new targets. every month, all the professionals in the rm submit statistics to management. Right now, I can ask my finance guy for the stats at any time and know exactly how the business is performing.

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“We have silos and measure each department’s performance in order to calculate bonuses. Incentives are key to retaining and motivating people and making them feel valued.”

LOOK AFTER YOUR CLIENTS

Like any business, Mphela & Associates has thrived because of a multitude of happy clients. These days, the firm serves high-value claimants, but it still supports people who can’t afford to pay lawyers’ fees through a sustainable contingency scheme. It works because of Mphela & Associates’ ability to serve its clients well and win their cases. “We sometimes lend money to our clients. We can do this because we use the future claims as collateral. If we know it’s a strong case, then the risk is minimal. We learnt early on that in business, customer care is everything. We don’t lose customers. They don’t leave this firm.”

This article was first published in the October 2016 issue of DESTINY MAN.