Whatever the season, stay open for business
…he found that lessons in dealing with the extreme seasonality of the South Coast trade, with its hectic Christmas peak as Gauteng holiday makers flock to the sea, also helps in the up-and-down cycles of the property market.
Leon du Toit
In his colourful business career, Leon du Toit has experienced seasonality in business more intensely than most entrepreneurs. As a retailer he has ridden the extreme peaks and troughs of the holiday-resort economy of the Durban South Coast, and as a property developer he has been through the longer-term boom-and-bust cycles of real estate.
His response to both levels of seasonality is roughly the same – just stay in the market; cut profit if necessary, but keep on trading. It is an approach that has served him well on his remarkable self-driven journey from an artisan on the mining town where he grew up to a successful property owner and developer in Shelley Beach on the South Coast.
As the son of a mine-worker in Randfontein he was destined to train as an artisan, but for Leon it turned out to be “totally the wrong career choice”. He loved retail, and while still at school and even as a young conscript, he worked at the local supermarket. He also loved construction, and built himself a house at the first opportunity he got.
By the time he identified a struggling general dealer in Kroonstad as a business opportunity he had a sound knowledge of retail. He sold his house and bought the shop with the proceeds, fixed and beautified it, turned the operation around and sold it six months later at more than double the price.
This breakthrough propelled him out of the inland mining districts straight to the KwaZulu-Natal South Coast where his heart lay, says Leon. It also set the way in which he would do business for the next twenty years: buy, build or fix, and sell – all the while assisted by his wife Elsabe, who took care of the administrative side of the business.
He would follow the same modus operandi, whether it was for the string of shops that he bought and sold, or his property development projects.
He started with a single shop on the South Coast, the first of many, and progressed to, among others, a Spar as well as the first Tops bottle store in the area. He owned each shop no more than a few years before selling, slowly moving his focus over to property development, starting with an eight-unit project, then one of 27 units before his current three-phase development of 43 units.
Although his first love was retail, Leon knows that the required characteristics of a retailer do not quite gel with his personality. First and foremost, a successful retailer needs to be hands-on. If the vigilance and controls of the owner slips for a second, there will be shrinkage. Second, a retailer must be prepared to keep this up for long hours. Leon never compromised on his trading hours of opening at 6am and closing at 9pm.
But it was the monotony of the strict routines of a retailer that made Leon sell his shop as soon as he managed to fine tune the operation. The entrepreneur in him thrived on the novelty and challenges of new projects and learning new systems such as the ins and outs of sectional-title developments. Ultimately, Leon moved away from retailing and shifted his focus on to property development.
Intriguingly, he found that lessons in dealing with the extreme seasonality of the South Coast trade, with its hectic Christmas peak as Gauteng holiday makers flock to the sea, also helps in the up-and-down cycles of the property market. Leon reckons successful South Coast traders are those who keep their stores open uncompromisingly throughout the quiet periods, and keep up their marketing efforts. They continue to “give away” sachets of milk at cost in order to entice customers into their shops, for example.
It also helps to have an understanding landlord, ideally one who is open to negotiate around a turnover-based rental, so that the rent drops in the quiet times, enabling the shop to keep running. Another way of dealing with extreme seasonality is to have a side-line business, says Leon, and mentions the example of one shop owner who sustains his business in the quiet months by chartering a deep-sea fishing boat.
For Leon, the most important principle of dealing with the cycles of the property sector was to stay in the market despite the financial meltdown of 2008 which hit developers very hard. Just like he never compromised on his shop trading hours over the quiet season, Leon doggedly remained open for business by focussing on small, affordable units, even if it meant making less profit.
One of the most difficult aspects of the recession was the fact that the banks had lost their appetite for financing developments. In Leon’s case, this turned out to be a mixed blessing. He was about to launch a major development of several large units when his bankers pulled out because of the financial crash.
Fortunately, he found in Business Partners a financier who was willing to take a risk with him on the project. Just as important was his decision to scale down the size of the units he wanted to develop. If he had gone ahead and developed the large units according to his original plan, he would have struggled to get them sold. Even though he makes less profit on the smaller units, they are suited to current market conditions, and his business is able to tick over, despite the slow season.