🦾 This R250bn Industry Needs More SaaS…
Hi
Need a hand? Scientists developed a new soft-materials technology for 3D printing robots with ligaments, tendons and such. Meaning new Luke Skywalker-style limbs are not that far off.
In this Open Letter:
- Sales gap: This R250bn industry needs more SaaS.
- DStv solar, delayed Christmas & the new EasyEquities competitor.
- Smart money: How to set yourself up tax-savvy in SA.
- Who’s buying stablecoin? The results are in.
- Free stuff: Share this and get cool tools for business.
TRENDING NOW
Why Aren’t We Building More SaaS for Cars?
Ten, 20 years ago buying and selling a second-hand car meant navigating dealerships or a trek to Pick n Pay for a printed copy of the AutoTrader. Problem was, by the time you’re done browsing, the one you wanted might have already been snapped up. Not ideal.
SA’s 2nd-hand car market
Used cars are a big business. Out of the ±11 million vehicles on the road, more than 1 million change hands every year. Consider an average price of R250’000, that’s a R250bn industry!
But WhoBuysCars?
WeBuyCars changed the game over the last few years – one of SA’s leading vehicle buying (and selling) platforms with over 2’500 employees, and 70 branches (including Morocco).
At first, the name seems odd for a company that sells 2nd hand cars. But it's indicative of the fact that selling your car has more pains than finding one to buy. WeBuyCars solves this pain like so:
- Get a good price for your car
- Get money quickly (in 3 easy steps – with immediate payment) – if you need cash and have a car you can sell, these guys make it happen quickly.
This put WeBuyCars in the position to acquire a lot of stock, to offer the widest choice to buyers. But it also means they have to sell quickly, which is where the tech comes in:
- Cars get listed quickly
- Online presence and ATL marketing ensure they are top of mind
- Tech-enabled financing processes.
Tech & business process engineering make the model work
Chatting informally to a WeBuyCars buyer, we learnt they try to sell a car within 5 days or less. If not, it goes up for auction. Unsold cars cost money and moving stock fast is crucial.
And 2022 was a massive year for them.
- They increased their revenue by 66% from R10.723 billion to R17.848 billion.
- They sold 125’812 cars (up from 88’271 in 2021), on average moving 10’484 vehicles per month (up from 7’356).
- E-commerce was no slouch either, with sales volumes increasing 27% from 26’810 cars to 34’300.
But then the wheels came off a bit in 2023. Rising interest rates and a downturn in the market dealt the entire car industry a blow, and WeBuyCars are expecting 20% less profit this year.
That said, though, the use of tech to empower their business processes has unlocked margin and powered their business model – and therein lies the opportunity. This is an R250bn a year industry with thousands of independent dealerships. So the question is: Why aren’t we building more software to help second-hand car traders cut costs, improve efficiency and unlock more margin?
And it might make sense now more than ever. Official numbers aren’t showing a recession in SA (yet) – but there is definitely a lot of pressure on consumers and the industry. Players across the board, from WeBuyCars to Weelee, Cubbi, getWorth and all the small independents will be looking for cost savings and better margins. And what can do that better than great niche SaaS products?
We are watching this space.
OUR TOP OPPORTUNITY PICK FOR THIS TREND
Keen to capitalise on this trend? Here is our top pick idea to make the most of this trend
OVER TO YOU
IN SHORT
🛰️ Leaving the Nest. Just like a little bird getting ready to leave the nest, SpaceX looks to be preparing for Starlink to spin off via IPO. With assets being moved to a wholly owned subsidiary, the listing for the fast-growing satellite division could happen as soon as next year.
🍍 How you like them (Pine)apples. Local AI-powered digital insurance provider Pineapple announced the closing of their R400 million funding round led by new investors with existing investors also kicking in some cash.
☀️ Let the sunshine in. MultiChoice released its interim financial results this week, revealing a 5% drop in active subs. Apparently, loadshedding is to blame, so the video entertainment group is exploring a subscription-like service for solar to help its customers stay entertained – even when the lights go out.
📱 Invest Tech. Investec is set to launch its EasyEquities competitor Clarity (previously only available to its private banking clients) to offer easy, affordable access to financial markets. And if Investec’s six months’ financial results released yesterday are anything to go by, doesn't look like they’ll need to charge R25 per month…
🧌 The Grinch That Delayed Christmas. SA’s busiest container port, Durban, is suffering heavy congestion with some container ships taking up to 20 days to offload their cargo – 4 times longer than normal. To add to importers’ headache, shipping operator MSC says it’s going to start charging customers a $210 per container “congestion surcharge” from 3 December 2023.
30-MINUTE PODCAST
How to Start Up Tax-Savvy in SA
If you’re deliberating company structure or being smart about tax, this week’s How Would You Build It podcast is for you. We spoke to tax advisor and Irhafu founder Andre Bothma about setting up your startup in the SA company and tax landscape.
And he dives straight in with the No 1 biggest mistake most startup founders make…
1. Don’t just run to the CIPC to start a company
It’s way easier and cheaper to just test ideas out as a sole proprietor first, especially if you don't have official long-term contracts or lots of sales yet, Andre explains here. Just use revenue share contracts to sort out things with your co-founders and go test your ideas.
Once you grow or land big longer-term contracts, take your time and register your company properly, he says here. Avoid equal share structures (like 50/50 or 33/33/33 splits) and redefine all your business agreements to reflect your new structure. Plus: Remember, the main reason you want a company is for the business benefits and to protect you personally from the credit agreements necessary to grow, so be clear about why you need a specific structure.
2. When and how to register internationally
If you’re targeting international markets or especially if you’re going to raise funds outside of SA, then setting up offshore’s an option – maybe Delaware for the US and Malta for Europe – Andre says here.
Just do it when it’s financially viable, ‘cos it can cost a whole lot more to get done. And be aware of Controlled Foreign Company (CFC) regulations – for example, if the majority of your overseas company is owned by South African residents, you actually pay tax here in SA, not over there. It’s best to get a professional financial advisor to help you set up overseas.
3. South Africa could be set up for business-beneficial tax
With SA’s company tax now down to 27%, it’s a good time to start keeping more cash inside your business (as opposed to spending it all to post a loss just to save tax). Andre even mentions here that he imagines South Africa could lower corporate tax even further, down to maybe 25% sometime in the next decade.
This wouldn’t be a bad move for the country, since lower taxes make it more attractive to post profits, and more profit drives more business, economic growth and employment. This would also make SA more attractive to investors, so keep your eyes on this one.
Or if podcast app is your vibe, catch them here:
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THE RESULTS
We asked if you see yourself using a stablecoin soon, and would you believe the majority still opt for normal currency?
🟨🟨🟨⬜️⬜️⬜️ 🤙 Yes, I use it all the time. (29%)
🟨⬜️⬜️⬜️⬜️⬜️ 😕 Still not sure what a stablecoin is. (17%)
🟩🟩🟩🟩🟩🟩 🏦 No, I only make use of FIAT (50%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🛏️ I keep my money in my couch (like a president) (4%)
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