134: Francois Herbst

‘A great businessman is not necessarily the best entrepreneur.’

Always enticed to look for new opportunities, Francois Herbst started his first business at the age of 15, this maverick entrepreneur then went on to establish a host of other businesses over the years, now including House of Growth where, amongst other services, he has a passion for coaching entrepreneurs.

CIARAN RYAN: Today’s podcast is sponsored by Draftworx, which provides automated drafting and working paper financial software to more than 8000 accounting and auditing firms and corporations. CFO Talks is a brand of the South African Institute of Business Accountants. It’s my great pleasure today to welcome Francois Herbst, who is the CEO and founder of the House of Growth, which as the name suggests provides highly level financial and strategic input to help companies in unlocking their potential and putting them onto their next phase of growth. France is a CA and, interestingly, winner of the South African Institute of Chartered Accountants, their annual top 35 under 35 competition and he won the entrepreneur category. We’ll find out a bit about that in a minute, he currently sits on 14 boards and acts as designated business consultant to 17 SMEs and he participates in identifying and pursuing value opportunities in these different companies and organisations. Now, before all of this, he was deeply involved in the fintech, venture capital, luxury goods sector, and even spent some time in craft brewing and the restaurant business. Interesting background there, Francois. First of all, welcome to CFO Talks, where are you talking to us from today?

FRANCOIS HERBST: Thanks Ciaran, for allowing me to be here today and thanks for that introduction. I’m in Cape Town.

CIARAN RYAN: And it’s a freezing cold day in Cape Town, I believe.

FRANCOIS HERBST: It is, it’s such a nice day, no wind at all but still searching for the snow, it’s an icy day today.

CIARAN RYAN: Tell us a little bit about the House of Growth and what motivated you to leave the corporate world and start this operation?

FRANCOIS HERBST: To be honest, House of Growth was always the end goal but before I chat about House of Growth, I just want to sketch some scenarios behind that. I started my first business at the age of 15 while still at school in a small town called Hermanus, which is just outside Cape Town. It’s not a small town anymore but at that stage it was a small town. This business I started was in the construction industry and I was just entrenched in entrepreneurship, but I soon realized that without the financial knowledge, I will always be on the back foot. I therefore decided to study accountancy and become a chartered accountant. As soon as the first opportunity presented itself, I decided to get House of Growth up and running. So what is House of Growth, it’s mainly built on three pillars, so seven years ago we started our first pillar as purely an advisory firm to medium-size enterprises. In layman’s terms it’s providing outsource CA work to businesses that have a need for analysis and assistance but do not necessarily need a full-time CA. So that was our start seven years ago and then three years ago we started our second phase and that was purely bookkeeping, so it’s compliance work, it’s tax, it’s financial statements, it’s processing. So our second phase we rolled out three years ago, being accounting, operating under the House of Growth Accounting brand. Then the third phase of growth was providing funding to entrepreneurs, that stage we rolled out in January 2020 just before Covid struck and it actually was great timing for that. Now we believe we can assist entrepreneurs from cradle to ever-after, through the accountancy firm we can help startups and new businesses, keeping them compliant, providing them with excellent financial information. The second is if they grow to a certain stage where they need advice, we can provide them with outsourced FD work on a consultancy basis and walk the journey with them, and hopefully help them grow their business. If they are growing to a certain extent where funding is required, we can now also provide them, if they’re in a certain sector, with venture capital funding. From the onset, the idea was to assist entrepreneurs through their life cycle, and we’ve broken it down into these three, accounting compliance, advisory and strategic management, and the third one is access to cash.

CIARAN RYAN: Interesting, just a couple of things that you raised there. So you started your first business in Hermanus, which is about an hour outside of Cape Town, a very nice resort town. But I’m interested to find out at the age of 15 you’re in construction, explain that.

FRANCOIS HERBST: I didn’t grow up with a golden spoon in my mouth, by no means were we poor but if I needed to have pocket money, I needed to earn it myself. My dad invested and actually bought me my first hand drill and allowed me to work with my hands. So from an early age he always encourages us and showed us how to work with tools. He started a business in Hermanus which was the buying and selling of wood to clients in Hermanus. I identified the need to add value to this wood, so guys would come in to buy wood for pergolas, wooden fencing and decks, and I saw an opportunity to start erecting these wooden decks and pergolas for these clients. It was through an opportunity presented to me by my dad but when I saw the opportunity to use the drill [unclear].

CIARAN RYAN: Wow, so did your dad come from a construction background, obviously, because he taught you?

FRANCOIS HERBST: No, he wanted to get out of corporate, he’s also a bean counter by profession. So he left his CFO job in Pretoria, they were making drinking porridge, and he left his corporate job to start his own business in Hermanus.

CIARAN RYAN: So you’re no longer in Hermanus, you’re in Cape Town?

FRANCOIS HERBST: Yes.

CIARAN RYAN: And your dad, is he in Hermanus now?

FRANCOIS HERBST: Yes, he’s still in Hermanus, he recently sold his business.

CIARAN RYAN: It’s a lovely town, a lovely place to hang out, if you really want the quiet life, you go to Hermanus.

FRANCOIS HERBST: Yes, and now with remote working I think Hermanus is one of the top three coastal towns where everyone is moving to because they have access to great internet, great lifestyle, great schools. Hermanus is currently a booming town amidst the fact that remote working is becoming more popular.

CIARAN RYAN: Let’s not forget the whale watching during the whale season.

FRANCOIS HERBST: It’s unbelievable to see them, it is really extraordinary to see whales in their natural habitat off the coast of Hermanus.

Winning the SAICA top 35 under 35 entrepreneur category.

CIARAN RYAN: So you’ve got this kind of entrepreneurial thing in your blood and you said your dad is a bean counter, but he also seems to have a little bit of that entrepreneurial thing going as well.

You won the SAICA top 35 under 35 in the entrepreneur category, what was that about.

FRANCOIS HERBST: Having a passion first for entrepreneurs and secondly, being in the construction industry, especially working with wood, I identified that there’s actually an opportunity to upskill people of a certain age. I identified an opportunity to upskill people in the craft of carpentry and also teaching them more about entrepreneurship, so what is entrepreneurship, a bit about finance, a bit about taxes. So in collaboration with House of Growth and Coastal Timber Mouldings in Hermanus, we started a project where we teach people how to work with wood, we upskill them in the craft of carpentry and then thereafter we also teach them about business. Then we assist them in setting up their own business and wherever there’s opportunity for them to do work, we send it to them. So I did it when I was 15 years old and now we are setting up multiple teams in Hermanus, which is a growing town, to assist these entrepreneurs who didn’t have an opportunity to formally study or learn a skill like carpentry, for them to have access to the market. In the first year of the project, we put through six people and the second year 18 people. Some individuals are made for entrepreneurship and others not. We had the opportunity to see many of the guys who we put through the project, actually starting their own business and providing employment for other people as well. So we deemed it as very successful and SAICA as well, they loved the idea of us going above and beyond to help the informal sector and giving them a skill in terms of working with their hands, as well as skills in terms of understanding business and finances better.

CIARAN RYAN: So this was something that you started up and you got no external funding from anywhere else, this was just volunteer work on your part?

FRANCOIS HERBST: Yes, for the first two years we financed it through our own pockets. Then when we saw that there was a decent uptake, just to see the effect we had on people and the community, we decided to register a non-profit so that the non-profit will then run this project going forward and it will enable us to get external funding in order to make this a success and hopefully grow it throughout the country.

CIARAN RYAN: Brilliant, well done on that. Okay, so let’s go back to House of Growth again and tell us what kind of clientele are you servicing there? You did mention the three legs or pillars of your service, following the client, basically through the entire lifecycle of the business, where you look for funding and presumably even position them for exit. So if they want to sell the business or move out, you assist them with that, but just tell us what kind of clientele you’ve got.

FRANCOIS HERBST: Initially we started with anyone willing to engage with us in our services. I think for us, although not the most important one, is affordability. We want a relationship where we provide the best possible services to our clients, and they can be happy with it and make something with it. But if they can’t pay us, then it becomes a struggle for payment rather than opportunity to assist the business in growing. So affordability is quite a big thing. Also, a company that wants to grow, needs to be financially stable. But although clients, the turnover and the affordability is part of the decision, for us a bigger part of the decision is the entrepreneur’s attitude towards finances, that’s more important than affordability. Many entrepreneurs see finances as a result of operations, which is not the case. Finance is a business language being spoken, English is not my first language, but English enables us to have this interview, enables us to communicate, and so is finance also a business language that is spoken in business, to compare businesses within business, so everyone understands. So actually, finance is not a separate division, it’s an integral part of everything, operations, marketing, everything. If we can have entrepreneurs who have that attitude towards finance, they are definitely an ideal client of ours. But in recent times we have also decided to be more selective in terms of sector, and the need for that arises when we believe we want to add value more than just providing you with financials or cash flow forecast, we actually want to be seen as an integral part of your team. For us to do this, we need to understand your business and the environment you are operating in. Unfortunately, even though we are professionals, we can’t know everything about all the industries, so we have decided to narrow our focus to a handful of sectors, for us to be able to entrench ourselves in those sectors and make sure that if we provide you with information, which CEOs need to make quick and reliable decisions on, we know it’s substantiated by our own knowledge of those sectors.

CIARAN RYAN: Now, what sectors are we talking about there?

FRANCOIS HERBST: The sectors where we are only taking in clients is digital marketing, fintech, e-commerce, e-gaming and then the other one is medical practices for doctors. So if you’re in these five sectors, you have a great attitude towards finance and can afford us, we always look to onboard you help you grow your business. One of the reasons for these five sectors is we are very pro tech, we are entrenched in the newest tech in the market, especially from the point of accountancy, we always see what technology, apps are out there to streamline our own business, as well the businesses of our clients. So the synergy of these sectors are also very good, given that we’re very much reliant on technology and apps.

CIARAN RYAN: I’m sure with technology, you can also have a remote delivery. That’s very important in that you don’t have to be physically present in a person’s office in order to guide them.

FRANCOIS HERBST: Yes, it definitely is. In the last year or so, we actually made our move…these sectors were actually [pinpointed] in January 2020 when we brought in the venture capital as well. So our timing on this was actually very good.

Moving to Hermanus inspired the entrepreneurial journey.

CIARAN RYAN: No doubt. Okay, tell us a bit about yourself and your career path. Where were you born, where did you go to school and grow up and how you ended up here?

FRANCOIS HERBST: I was born and raised in a small town outside Pretoria called Hartebeespoort Dam, it was such a lovely place to grow up and find my identity there. But since primary school I have always been very entrepreneurial, I won entrepreneur of the year at the school. We had entrepreneurship days and I won quite a few of those. I started high school at Afrikaanse Hoër Seunskool in Pretoria, I was embraced there, it’s an absolutely amazing school. Then my folks decided to move down to Hermanus and that is where my journey as an entrepreneur really began. In standard eight I started my first business, as I mentioned previously, and when I decided I wanted to go the accountancy route, I decided to move to a boy’s high school in Stellenbosch called Paul Roos Gymnasium, where I matriculated. For me, it was just a better path to take towards my dreams. At that stage I was also very focused on rugby because first of all I wanted to become a professional rugby player, but that didn’t turn out as any young boy hoped for.

CIARAN RYAN: What position did you play?

FRANCOIS HERBST: Most of the time I played lock, I’m quite a tall guy.

CIARAN RYAN: How tall and how heavy are you?

FRANCOIS HERBST: I am 1.94 metres.

CIARAN RYAN: That’s a lot, that’s tall.

FRANCOIS HERBST: I enjoyed rugby quite a lot throughout primary school and high school. Then during the first year of university, I enjoyed university almost too much, so by the end of the year I needed to catch up on a lot of the studies, which I maybe didn’t prioritise at the beginning of the year. But I did get my grade after three years. I didn’t initially get into honours, so I redid my third year to better my grades. I must say, that was actually a turning point in my journey to becoming who I am today. The year I did my third year again, I had a decision to make to do my honours through Unisa or redo my year at Stellenbosch, so I decided to redo my third year. At that stage it was bad to see everyone in my class moving forward or starting their articles and I was redoing my year. But during that time, I spent a lot of time starting to understand a lot of the information that we were studying. Until that point, I was studying just to pass tests but I actually entrenched into myself why and what and how the techniques were or how taxes work. So not to study just to pass a test but really to study to understand. That led to the next year of honours being much easier for me than most other guys. I did really, really well in honours, it was actually my best academic year of all my years and I think it was because I understood more what I was studying than just to, as I said, pass the tests. Then I started my articles at a medium-size firm in Cape Town called Baker Tilly Greenwoods, it’s an absolutely stunning place for anyone considering entrepreneurship and small business, to do their articles. I didn’t pass by board exam the first time, I only passed it the second time but that second board exam I passed immediately and then I was a qualified chartered accountant. In that stage, in my third year of articles, we also embarked on our first property development in Cape Town. We have done two property developments in Cape Town since then. Throughout university and through articles as well, I have been part of a craft brewery, I held an equity stake in a biltong shop, I was buying and selling diamonds, I’ve been in the secondhand car industry, buying and selling cars and I spent some time in the construction industry. So throughout those years I was always looking for an opportunity to grow myself as an entrepreneur…

CIARAN RYAN: Francois, how old are you now, if you don’t mind me asking?

FRANCOIS HERBST: I am 33.

‘The best entrepreneur is most likely not your best businessman.’

CIARAN RYAN: Wow, that’s a lot of businesses to have been involved in at the age of 33, including property development, biltong shop, diamonds, that’s a busy life.

FRANCOIS HERBST: Yes, with being an entrepreneur, I think one of the pros and cons is that you always see opportunity where sometimes there is not an opportunity, but you’re always enticed to look for opportunity. The risk is that you are taking your eyes off something that is already working, while chasing the next opportunity. For me, an entrepreneur is different to a business owner, a great businessman is not necessarily the best entrepreneur, and the best entrepreneur is most likely not your best businessman. So for me, entrepreneurship is having the ability to see the opportunity, be willing to take the opportunity to be in a network of knowledge, people and money to make this business grow to a certain stage and making it profitable and feasible. But at a certain stage, businessmen need to take over and those guys are implementing systems and processes and procedures. Everyone talks about small business becoming corporate, that’s how they define it, but it’s actually where the stage where the entrepreneurs with their shattered minds as to all the opportunities that they see, needs to move away from it and give the business to somebody who is more strategic in mind. Many entrepreneurs are not as strategic minded, they go for opportunities now, they don’t worry too much about the future risks, they only see the rewards now. A businessman is more strategic in mind, they will look five years down the line and say, we need to manage these risks now to avoid any failure in the future. Entrepreneurship is great but too many entrepreneurs cling to the idea of I want to be a CEO of a company. I can guarantee you that 80% of the entrepreneurs are not the best CEO because, yes, they know the product, they know what they are doing, they know their clientele. But those roles are actually a COO role, it’s not the CEO role. The CEO role is someone looking for strategy, looking for risk in the future, trying to mitigate it now through processes and systems and employing the right people. Whereas an entrepreneur knows their product, knows their customer market but that is actually [unclear]. Most of my time I spend coaching entrepreneurs, trying to address this issue and say, you are a great entrepreneur, you are forward-thinking and you’re seeing opportunity, but I think you are not the best CEO of your business. That also comes to play in our venture capital firm, is to say how do we coach entrepreneurs to make sure that they slot in at the correct space in their own business for the benefit of all the shareholders.

CIARAN RYAN: Very interesting. We’re running out of time here a little bit, but a couple of quick questions, if we can. I just want to know, very briefly, what was the most challenging task you had?

FRANCOIS HERBST: That’s a great one. I think having all this knowledge myself and implementing it in my own business, I think one tends to neglect some of this knowledge if it comes to your own business. For me, it is something I need to consciously do and say, I have this piece of advice for my clients but if I really think about it, it’s not something I implement myself. So for me, it is to say what are the shortfalls of my own businesses and how can I implement them in my own businesses, all this advice I am giving to other clients.

CIARAN RYAN: Right, but one of the more challenging things that you’ve had to do, one of the hardest things in your career?

FRANCOIS HERBST: It was definitely through Covid, where we negotiated on behalf of our clients’ terms on their rental agreements, and to see both parties trying their best to get to a middle ground where both are losing. Covid is something that came along not due to us as human beings doing something wrong. The 2008 bubble was due to people over-lending and spending, it was a crisis made by humanity. The pandemic was something different, so you can’t compare a pandemic to any other crisis. To see both parties, if it’s the landlord versus my clients or my clients and their employees, to see both parties around a table, trying to negotiate something or the banks, to negotiate something, but it’s actually a lose, lose. Both parties give up a lot just to make a relationship survive, some of those relationships have spanned decades, especially where employees were involved, and to see that, I must say, in my career that was one of the hardest things to do, to facilitate these negotiations.

‘What I needed to learn the hard way is the importance of leadership.’

CIARAN RYAN: Are there some things you are only going to learn from experience, not from the textbooks? The accounting education is pretty thorough these days but, of course, there are things that you’re not going to learn like entrepreneurship, for example. How do you view that one?

FRANCOIS HERBST: There’s a lot and we don’t have much time, but a textbook only teaches you already know and what the world already knows. Unfortunately, experience teaches you everything that the world doesn’t know by now. For me, what I needed to learn the hard way is the importance of leadership. Leadership is such an important role in any business. Unfortunately, the finance syllabus at university or any other place, actually doesn’t teach us about leadership. As I mentioned, the best founder is not necessarily the best CEO, the best entrepreneur is not necessarily the best businessperson. You need to be out there making mistakes, being a leader, to be able to work with people, to know how to incentivise them, to encourage them, how to become a better person. When growing a business, you are very reliant on your employees, so leadership is people-focused, if it’s customers or employees. Being a leader was actually very hard and you need to do it through experience in the outside world. Yes, there are people who are born with maybe a better sense of leadership than others but at the end of the day, if you don’t go out there and make mistakes, you can’t become a better leader. So that’s definitely something I needed to learn that nobody can teach you from a textbook.

CIARAN RYAN: Okay and very quickly, just a couple of questions here in 30 seconds. What advice would you give to aspiring CFOs?

FRANCOIS HERBST: Your qualification can only bring you so far. If you only compete on a technical level, there will always be somebody smarter and better than you. I would advise any aspiring CFO to become an avid reader, keep learning and read, read, read. Get yourself into networks with other leaders. But if you want to set yourself apart from somebody else who has technical knowledge, make sure you read, make sure you’re in networks of other aspiring leaders. But don’t just fall back on your qualification because there are a lot of guys with the same qualification who may be smarter than you. But if you become a great leader, irrespective of where you sit in a company, it doesn’t need to be a CFO, you can be a leader at any level of a business but that is very hard to replace.

CIARAN RYAN: I totally agree with that, always be a student, always be studying because there are things that you don’t know, and you can master one area, but you can always master more. Okay, last two questions, what do you do in your downtime?

FRANCOIS HERBST: I have a young family, so I try to spend as much time as I can with my four young children, the eldest is five years and the youngest is one year. The second thing I love to do in my downtime is read, I’m an avid reader. Then I’m also a triathlon wannabe. As a child I didn’t learn how to swim but in August 2019, I set myself the goal to do the Ironman. So in August 2019 I first got into a swimming pool to start learning how to swim and actually enjoying it quite a lot. So I still need to do the Ironman but I have done a few triathlons and it’s something I will keep on doing.

CIARAN RYAN: How is your swimming now?

FRANCOIS HERBST: It’s good, I’m actually looking forward to doing the Robben Island to Blouberg swim. I think the first opportunity to do that is in August and hopefully I can jump on that one. I very much enjoy open water swimming in the sea. It’s breathtaking to swim in the middle of the sea, seeing Table Mountain and just being in nature.

CIARAN RYAN: I met a young lady who swam around Robben Island twice. She’s got a few records, she went up to the Arctic and swam in this freezing cold weather, two kilometres, and it’s just staggering to me that people do that kind of thing. This time of year, of course, it’s going to be freezing around Robben Island.

FRANCOIS HERBST: Yes, it is but it’s amazing being there in the middle of the water, swimming. It’s something I wish I had done earlier in my life, instead of the sole focus on rugby and focusing on other sports as well, especially swimming, it’s such a lovely sport to participate in.

CIARAN RYAN: When you’re doing that kind of swimming, I think I would just get exhausted after two minutes. But, of course, it’s all about pacing, as this lady was explaining to me, you can actually go quite a long time, you’ve obviously got to train, you’ve got to get the right level of fitness for that, but it is about pacing.

FRANCOIS HERBST: The biggest struggle you initially have when you start swimming is you just try to kick and swing your arms as quickly as possible because you think that will keep you afloat, and the more you struggle with the water, the more you sink. But if you relax and swim slower, then your buoyancy is better. So most times these guys swimming those distances do not kick very much, so they save energy by not kicking, just swimming with their hands and actually increasing their buoyancy. So there’s definitely a lot of technique in their swimming.

CIARAN RYAN: Okay, final question here, Francois, this has been a great discussion, thanks very much for coming on, but what books would you recommend?

FRANCOIS HERBST: I would say if you haven’t started reading yet, then I would recommend Rich Dad Poor Dad by Robert Kiyosaki. If you’re in business, then something that meant a lot to me was Good to Great: Why Some Companies Make the Leap and Others Don’t by James Collins, it’s an outstanding book. Then reading for general knowledge, I would recommend Sapiens:  A Brief History of Humankind by Yuval Noah Harari, it challenges you on a lot of things you think…

CIARAN RYAN: It’s sort of contrarian, as you say, challenging everything you thought you knew.

FRANCOIS HERBST: Yes, a great book for any person to read, it explains so much about our economy and everything.

CIARAN RYAN: Francois Herbst, we’re going to leave it there. What a fascinating discussion, what a great story, I really enjoyed that. Let’s stay in touch, I think we’ve got to get you back on in a few months’ time, tell us how things are going down there in Cape Town with House of Growth. It’s just fascinating that you’ve been able to marry your accounting and your entrepreneurship. You’ve been creating work for other people, and you’ve been giving them the right kind of skills and it’s just a very unusual story. I’m really impressed.

FRANCOIS HERBST: Thanks Ciaran, it was great being here and I look forward to being invited to come back.

CIARAN RYAN: That was Francois Herbst, who is the founder and CEO of House of Growth.

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