Tumi Phake on Becoming a Pioneering Fitness Entrepreneur in South Africa

Tumi Phake on Becoming a Pioneering Fitness Entrepreneur in South Africa

Join me and Tumi Phake in the Presidential Suite at the Fairlawns as he takes us on his pioneering entrepreneurial journey in South Africa’s fitness industry.

 

Award-winning entrepreneur, Tumi Phake is the Founder and CEO of Zenzele Fitness Group and a former Investment Banker with Rand Merchant Bank. Mr. Phake was one of 15 entrepreneurs from Africa chosen to spend time at Harvard on a prestigious entrepreneurship programme. He is a former Mandela-Washington Fellow and is the first black person in South Africa to own a slice of the commercial fitness industry as we know it today. He has been featured by the Mail & Guardian in its Top 200 Young South African’s list where he was recognized as a South African under the age of 35 who is a ground-breaker in his industry.  Zenzele Fitness Group is reported by Destiny Man Magazine to be one of the top three gym brands in the world from a quality point of view. Tumi Phake is the holder of a BCom in Financial Management and was raised in the East Rand township of Tembisa.

Meet Tumi Phake, a young, pioneering South African fitness entrepreneur operating at the highest levels of this niche, capital-intensive sector. Stories such as those of the Tumi Phake’s of this world are meant to be shared because they are so significant in many respects. Our interview, held at the Fairlawns Boutique Hotel & Spa’s Presidential Suite, is a must-read for entrepreneurs, especially those with a pioneering spirit. Tumi Phake’s story shows that to chart a path in unchartered territory can and must be done. His very personal and deeply reflective lessons in entrepreneurship will inspire many out there regardless of whether they are entrepreneurs or not. There are many opportunities out there for young entrepreneurs not just in South Africa but the rest of Africa as well. This is Higher Self’s contribution to entrepreneurial education and we are grateful to our incredibly generous guest.

Please share a bit about your formative years and what shaped you into this man that you are today?

 

My grandmother and grandfather were entrepreneurs but had no formal education. My grandmother was a street vendor who sold vegetables in Tembisa and during those days it was difficult for a black woman to even have major entrepreneurial dreams. But somehow, even in the apartheid circumstance, where a black woman was not even allowed to own a business, I saw her entrepreneurial endeavours feeding, clothing and educating us, and by “us”, I mean uncles, sisters, brothers, aunts and cousins. My grandfather passed away at some point, so everything fell on my grandmother’s shoulders. Reflecting back, I think that’s where I caught the entrepreneurial bug, but it took years for that to manifest to what it is today. My grandmother’s hard work eventually paid off because she, at one point, established a fairly big general dealership in the township. My grandmother never worked for a single person her whole life, she was her own boss. She was able to change people’s lives and create employment. Of course, back then, as a young person, I hadn’t fully connected those dots yet, in terms of thinking, “oh here’s my grandmother creating employment,” but reflecting on that experience is just amazing and humbling.

 

She ticked all the boxes that we tick today regarding entrepreneurship. She bootstrapped, she didn’t go to a bank and try and get funding. She and my grandfather reinvested most of their profits in the business and eventually owned bottle stores, butcheries, cafes, a whole conglomerate of businesses and yet she did not go to school. She managed her cashflow and built a house from scratch. This is a generation that had nothing and so many obstacles to overcome, so it’s totally humbling to be the recipient of such an incredible legacy. From selling tomatoes to running that type of conglomerate is just amazing. So, I think about that in my own journey and I’m inspired to go for it and pursue what I love with determination and passion. If you push enough, eventually you’ll break those walls. There’s still a lot for me to learn and I’m walking this journey of building a legacy business that will be around a hundred years from now.

When I first heard you speak at an event, you spoke about how you made Zenzele Fitness Group a reality, please take the reader on that journey?

 

I think that we all have dreams and passions and things that we want to achieve and having a dream is important, but it is not as critical as executing that dream. My journey in this sector started with my fascination around how established groups like Virgin Active and Planet Fitness actually run these multi-million-rand businesses when it may not seem all that lucrative to the untrained eye. So, inasmuch as I was an avid sportsman interested in physical pursuits, what really got me excited was the business in fitness and its potential for economic growth and job creation in South Africa and the rest of Africa.

 

It began with me asking questions like, how do these established fitness businesses build health clubs? Who goes there and how do they make money? And, how do I get into this industry? To my surprise, I found that this is a very niche and exclusive market in the context of South Africa. The price point is quite high, and this served to exclude most South Africans because the reality is, not everyone can afford a gym membership.

Through my background in Banking and Finance I was introduced to some fitness industry heads who’d been in the game for decades. At some point I was privy to some of their financials and I was blown away because I now had the data: fitness was a huge industry and not many people were looking at it as a viable sector. For example, TechnoGym South Africa, who are my partners now, are an Italian global brand but the local distributors have installed over 1 Billion Rands in gym equipment. You find them in hotels, residential homes, all the major gym chains and they are publicly listed on the Johannesburg Stock Exchange. It is a predominantly white dominated industry and when I began attending the networking events, I would be the only black person in the room. At this level, I’m probably still the only black who has been able to penetrate such a niche market. To do a proper fitness center offering is capital intensive, we’re talking multi-million-rand equipment so the barrier to entry cuts a lot of people out.

 

So, essentially, being able to start the Zenzele Fitness Group, was about me having a dream and a passion for this sector, seeing an opportunity and asking myself, how am I going to execute all of this? Coming from an Investment Banking background, I knew that I had to raise some capital for me to be taken seriously. A solid financial base is not even an option if one wants a seat at the table and have an audience with the industry stakeholders. I was fortunate enough to be able to raise R5 million as a startup and I had no business at the time. So, the people who invested, invested in me as a person, they believed in me and my vision and I was able to clearly articulate what I would do with that money. A bank would typically say sorry, you don’t have any financials and shut me down.

What kind of work did you have to do to be able to articulate your vision so clearly and convincingly to your backers when there was no tangible business to speak of?

 

It took years of research and planning to solidify things and be able to present this business case to my investors. In fact, to be accurate, they approached me because I was the guy at work who was sending my colleagues my business plan and financial models throughout the years. I’d spent about 8 years in total working on my plan and I wasn’t even thinking about money; the plan was to do something that I enjoyed and was passionate about. You get different types of entrepreneurs out there. There are entrepreneurs who want to make a difference in people’s lives. So, their passion is focused on products and services that are there to make our lives easier. Then you get entrepreneurs who start businesses simply because they want to be rich. You also get entrepreneurs who are pushed because of circumstances, like needing to put food on the table, to pursue this route. I was inspired to do something impactful and different, something bigger than me. I was in a good professional career at Rand Merchant Bank. I was not pushed to become an entrepreneur, so money was just not part of the drive or motivation for me.

 

So, I took time in gathering the market intelligence around the fitness industry in South Africa and I got to know all the industry heads. This knowledge, and the fact that these industry heads were willing to help me, was also a factor that counted in my favour when my investors had a proper look at my plan. So, being guided by all these people with years and years of experience is a critical success factor which enabled Zenzele Fitness Group to achieve in 5 years what would have taken 10 years had I gone it alone from that standpoint. How the business grew, how I was able to access market, deploying the funds to access and tap into the market so that people could buy the product, all these, and more, hinged on the guidance that I got from the other industry heads. I got guidance on things like mitigating risk and our company just evolved to what it is today. You can never do this alone, so you must find people to help you make your dreams come true.

 

Five years after we launched, Zenzele Fitness Group is now a full turnkey fitness and wellness provider and we currently run 13 branches in South Africa. Among our clients we count Discovery Health, Alexander Forbes, ABSA, Hollard Insurance, South African Breweries, British American Tobacco, Rand Refinery, Wits University and more recently, even some public sector departments. During the latter period of 2018, we will go mainstream as a commercial operator and launch public gyms. We have close to 100 employees, so job creation is very important and shall continue to be so. It has been such a rewarding journey and I was quite humbled and fortunate last year when I won the South African Entrepreneur of the Year Award through Sanlam and Business Partners. To date we’ve raised R40 million to build the business, so Zenzele Fitness Group is an investable business now. In 5 years, we have built a business that has become investor and next-level ready. The next goal is getting to 100 gyms within a decade.

So, what has become clear to you over the past 5 years of setting up an investor ready business in terms of lessons learned?

 

In the first year we burned through R1.5 million and I had to go back to my investors to explain these losses and these are not easy conversations to have. So, the first lesson that I would share is that in entrepreneurship, there aren’t any quick fixes. Your business is not going to be profitable in 3 months or 6 months of starting. But when you plan, and you know that, then you are not shocked when faced with that inevitable scenario. You’ll be mentally prepared to plough in this investment that you are a custodian of. Plant the seed and wait for the investment to grow. We only turned around in month 14 due to all the work we did for those first 14 months. During the first 6 months of operating I don’t think I slept. My mind was working 24 hours. I was literally anxious. Firstly, my whole life prior to starting up Zenzele I was working for someone. I was waiting for a salary from someone else at the end of every month. Now I had to pay my own salary. So, for every start-up always assess when things will turn around and ensure that you don’t over-project. Rather de-risk yourself and stay conservative in your approach. Don’t think that you’ll make a million in your first year of business, in fact, like I’ve already shared, I lost a million in my first year of operations.

 

A related lesson is that, even the mind shift from employee to employer state of mind is a pretty big mental hurdle to jump. I used to suffer separation anxiety and I’d visit my former workplace. Sometimes I’d have thoughts like, “Maybe I must ask for my job back?” or “Tumi, what are you actually doing, are you crazy?” or “Maybe I’ll fix my CV if things don’t work out.” Luckily, I did not burn any bridges at work, so I could visit and chat with my former colleagues and my boss.

 

Another lesson that I’ve learned is that sometimes in this journey you need to have someone in your corner who believes in you more than you believe in yourself because at some points you will start to doubt yourself. The person that kept me going was my Mother. She’s a prayer warrior. She believed in me more than I believed in myself. When I look back it’s scary. You’re actually crazy enough to believe that your dreams will come true. So, my Mother would say to me when the going got really tough, “you might be insecure, but I believe in you.” When she prayed, she believed that her prayer had been answered. From the get-go, she supported my decision to resign. It was quite lonely in the beginning because there you are, entering a space where you just don’t know how this thing is going to pan out. But after a while, I was certain that this is what I was meant for.

 

When we landed a contract to operate 3 gyms for South African Breweries for a 5-year period, I could not believe it. That contract was next to my bed for what seemed like forever after it was signed, and I’d page through it constantly. This was my first business to business contract with one of the biggest breweries in the world. It was surreal. So, you land that major contract that you’ve been working hard for, and then you learn that this is when the work actually begins. That’s another beast on its own. You spend so much time chasing business that sometimes you need to stop chasing and deliver to your clients and I’m speaking to things like service, turnaround, reputation, building your brand and the entire customer experience motif. So, there are different stages to entrepreneurship.

 

Another lesson that I’d like to share is that it is critical to surround yourself with the right team. I don’t come from a fitness background, but I was fortunate enough to meet a man called Danny Gounden who has built world-class health clubs for decades. He’s an operations guru and was semi-retired when I met him and asked him to help me build Zenzele Fitness Group. We had the right chemistry and although he technically works for me, he’s like the father I never had, he’s got so much wisdom. Before I met Danny, I didn’t quite fully appreciate that there’s an art and thought process around why things are arranged a certain way in a health and fitness club. All the clubs that I’ve built, I’ve built with Danny. He played a significant role in helping me build our 100 person-strong team. You can’t do it by yourself, you always need smart people around you to work with. If you’re the smartest person in the room, then I say there’s something wrong. You need to find those people who’ll take your business to the next level, so my rule of thumb is, you should be the least smartest person in the room. There’s a book titled, Built to Last by Jim Collins and there’s a part where he writes that leadership is about being able to get the right people on the bus and putting each person on the right seat and taking the wrong people off the bus. That’s hard. It’s one thing to know where you’re going but if you’re going there with the wrong people, the chances of failure are quite high. However, if you’re travelling with the right people, seated at the right seats, even if you get lost along the way, you’ll have the ability, as a team, to find your way. The single, hardest part in this whole thing is dealing with people in the quest to build a great organization and it’s one of those things that I’m still learning in my personal journey as a business leader.

 

We’re opening our 14th and 15th gyms respectively by the end of this year and we’ll have a full national footprint. We’re hoping to also tap into markets which are outside of South Africa. All in all, I’m excited to say that South Africa is responding quite well to having a black fitness entrepreneur.

 

It is also important to emphasize just how crucial things like governance, processes and business structure are in those first 5 years of building one’s business. It’s certainly one of my major lessons and what I’ve learned is that the habits of a business owner are critical from the onset. Things like discipline, commitment to the business, treating your business like you’re running a multi-million or billion-rand corporation from the day you open for business and don’t even have an income, are all key. Tune your mind to those bigger things even if your start is small. Start imagining how it would be to manage 500 or 5000 employees and ask yourself what that would require from you as a business leader and start doing those things. Become that person who is entrusted with that huge responsibility even if you’re running a one-man show; and not in an egotistical way, but in a way that will help you and your business to grow.

So, what’s the next level for the Zenzele Fitness Group now that you’ve surpassed the 5-year period and going strong?

 

We’re constantly working on what the future should look like for the business. It’s a very exciting time and we currently have two major organizations that want to buy into the business in excess of R100 million plus. It’s exciting and intimidating at the same time. In the next 5 years we’re definitely scaling up inside and outside South Africa. Job creation is key so we’re looking at 500 employees, at least, on our payroll within 5-10 years. Our youth unemployment rate is at an all-time high in South Africa, and probably among the highest in the world, so playing our part in creating jobs is critical. So, if we keep the momentum, we will get there. Eventually I do plan to step down from an operations point of view, so within the next 5 years I’d like to get a younger, smarter guy who will run this business and I’ll focus on other opportunities. We’re in app development now and I’d like to keep exploring other ventures inside and outside the fitness industry. Establishing this company was about being able to do something really well as opposed to doing 5 businesses at the same time. Sometimes the term “serial entrepreneur” can be misleading because the question is, is that serial entrepreneur really doing well spinning all those plates in the air so to speak? So, for me it’s about spending time in one business at a time and doing it so well that one day, that track record will speak for itself. So, I am careful not to be distracted by the dozens of opportunities out there because they come, and they come at a super-fast rate.

What does it take for a successful young Black entrepreneur like yourself to insist on being that laser-focused when things are opening up to you so temptingly?

 

Every day there’s always someone saying this, that and the other about all these myriad opportunities. I’m fortunate in that my personality also comes into play here. Everything I’ve done in the past, I would sit on it and want to do it well first. The number of hours I spent practicing sports or studying reflect that commitment that I’ve always endeavoured to cultivate. So, I read The Outliers by Malcolm Gladwell and I really resonated with the 10 000 hours rule and that we need to put in those hours to develop mastery in a field because very few people actually will. So that’s the level I’m constantly striving to get to. It’s not even about the business, it’s about understanding and completely immersing myself in the entrepreneurial mindset. Entrepreneurship is a skill that I’m building; the processes, the mitigation of risks, the pros and cons, capital-raising, all of that and more I’m acquiring through commitment to my craft. I value the real-life experience far more than anything else. I am not at all dismissing education or getting an MBA, but nothing will replace getting your hands dirty and learning your way through all the practical real-life scenarios that happen daily in business.

 

It’s also important to give back so I am involved in mentorship initiatives and have also pursued my own personal and professional development through initiatives such as the Young African Leaders Initiative which is also known as the Mandela-Washington Fellowship. This year I went to Harvard as part of Harambee Entrepreneurship Alliance which is a network of young African entrepreneurs hosted by Harvard University. The aim of the Harvard programme is to assist us as African entrepreneurs to understand ways in which we can stimulate our economies and build sustainable and scalable businesses. So, being part of these networks, meeting amazing people doing inspiring things entrepreneurially is key to my own development. My roommate at Harvard, a Nigerian, was the Global Entrepreneur of the Year through Ernst and Young. He’s someone I can call and exchange views and ideas with or solicit guidance from, so that exposure is invaluable. They say you’re the average of the 5 people you spend most of your time with, so I constantly check in with the question of, “who do I spend my leisure time with?”

 

Before I sleep every night, I switch off the TV and my phone and will read any one of the books on my bedside table for at least an hour (I have 3 books currently). During the day it’s too hectic to actually focus on reading. So, it’s about understanding what’s happening in the financial markets and keeping current with global issues. I import my equipment so what happens in those arenas does affect my business. So, what I choose to put in my head and who I choose to spend my time with are all very critical to who I am and who I’m becoming. I also don’t allow things to consume me because I don’t want to lose sight of who I am and what’s important.

Photography by Makgomo Mushwana – Sali Sali Photography