💡 The Barbershop SaaS Moment…

Plus: BrainGPT, 1 Billion for Xmas, Musk University & your first 3 startup employees.

Newsletter

December 19, 2023

Imagining stuff? “BrainGPT” can now read your mind directly and turn it into text on screen. Great, we were getting sick of using our thumbs anyway.

In this Open Letter:

Clear cut: A wide-open SaaS market in SA.
1 Billion for Xmas, Musk University & 100 years of radio.
Dream team: Assembling the right skill set.
The results: Who’s writing the code of the future.
Tell someone: Share this & get free business tools.

The Barbershop-SaaS Run

Building a successful SaaS (software as a service) business in SA is complicated.

When you’re selling SaaS to corporate SA, you’re up against international players with deep pockets and often well-developed products and track records. I mean, as much as we want them to buy locally, who can blame them for picking foreign providers with established, low-risk products?

And those SaaS consultants are so slick.

You do however resign when the implementation is an inevitable mess.

However, there is a segment of the market which is underserved when it comes to SaaS in SA – small to medium-sized businesses (SMEs).

Not agencies and tech companies. No, think SMEs like laundromats, carwashes, barbers and beauty salons. It’s slick ‘cos they’re normally not digital natives and probably don’t browse the internet buying international products to improve their operations.

The Barbershop Business Model

Their business models are relatively simple – cover your monthly expenses (rent, wages, electricity, water, etc.) and the rest is almost pure profit. I.e. let’s say your expenses are R50’000 a month, and you do a standard haircut at R250; after 200 cuts, your margin per cut is almost 100% (given that service costs are negligible).

What can such a SaaS product do:

Drive more bookings through better service to customers and using tech.
Plan resources better (when to have how many staff to optimise for income).
Using intelligence to offer discounts or promotions in times of lower volumes.
Collect payments (for convenience, but also to boost the product’s ARPU).
Offer unique business models – monthly subscriptions and sell products (all great for the products ARPU).

All to make the business hit the cashflow breakeven point sooner, maximising profit.

Zoning in on barbershops and hair salons

SA doesn’t have great industry stats, which is a shame – it could help entrepreneurs find opportunities way easier. But for a start, GG Alcock estimates the informal economy’s hair salon industry at R10 billion and some internet scrapers claim there are ±3’300 hair salons and ±1’000 barber shops in SA.

Sizeable but there is even more room for growth. In the UK, there are roughly 19’000 barber shops. Now with an employed population count of 33 million, that’s one barbershop for every 1’684 employed citizens. Or, comparing it to their GDP, that’s 1 barbershop for every $165m generated in their economy.

Mapping that back to SA, the demand could be anything from 2’500 (by GDP per barbershop) and 9’200 (by employed citizen per barbershop) and that’s not even counting the hair salons!

Even AI is super excited about the potential.

So, who is onto it?

Whilst there are international SaaS solutions such as Fresha that South Africans can use, you can’t help but feel a local player can serve the SA market that much better.

Especially since a solid in-person and on-the-ground sales effort is probably how you’re gonna get the most adoption in this space (just ask Yoco!).

That might just be an opportunity that DNKO can jump on. In its first year of operations, they managed to book more than 1’000 appointments for their clients.

Early days, but with a sizeable, growing market and little local competition, they might just be onto something.

IN SHORT

🕹️ Fly From Home. ASL Aviation Holdings, owner of several airlines including local Safair and FlySafair, is running trials on pilotless cargo planes with Reliable Robotics over the San Francisco Bay Area. And while there was no pilot on board, the test flight was piloted remotely from Reliable Robotics’ control centre 80 km away.

💳 Tap-and-Go. Remember how back in August we ran a Poll about how Open Letter readers like to pay and an overwhelming 41% voted “Tap-and-Go with card”? Well, Safaricom is set to issue 60 million of its mobile money platform M-PESA users with physical plastic Visa cards to provide Tap-and-Go payments to their customers.

🎓 Chancellor Musk. Elon Musk is set to open a university based on his recent tax filings that show he donated $100m to his charity, The Foundation, to establish a primary and secondary STEM school in Austin, Texas. The school will primarily be funded through donations and tuition fees.

👎 Shrinking Tech. The global tech scene has already seen a 50% increase in tech layoffs in 2023 from last year, with nearly 250k jobs lost. With everyone from Google, Amazon, Microsoft, Yahoo, Meta, and Zoom right the way through to smaller startups affected, here is the list.

💯 Radio 100. Radio in South Africa just turned 100 (yesterday – 18 December 2023). Happy Birthday to the still universal mass medium in SA and the most popular and pervasive medium on the African continent. Here’s to the next 100 years of Taylor Swift, Opinionated DJs and annoying, repetitive radio ads.

⏪️ Reversed Sale. After mounting pressure from UK & EU regulators, Adobe’s $20bn deal to buy out Figma has fallen through. But Adobe has to pay a “reverse termination fee of $1 billion”. Now that’s gonna be one lekker Christmas party.

BUILDER’S CORNER

A Team with the Right Skill Set

You got your idea (or getting there) and it’s time to get going – great! Now, how do you set yourself up with the right skill set/mix of people?

Well, inspired by Paul Graham’s original hackers & painters analogy, and looking at the 3H concept of what any startup needs right at the beginning, we propose building your startup around 3 core functions/roles.

These could be your first 3 employees, or – more likely – 3 founders or a mix thereof. Either way, these are the 3 skills you likely need to start strong.

Your First 3 Team Members

1. The Hacker

This is your coding guru. The Hacker's role is to develop and deliver code swiftly, turning your vision into a tangible product. Speed and efficiency are their mantras, and they thrive on bringing technical solutions to life. Now don’t confuse the “hacker” with someone who has stolen money from your internet banking or even with a normal software developer. The “hacker” in this instance refers to a kind of software developer who is extremely creative in moving fast (i.e. hacks things together) and is adept at taking the shortest route possible to ship.

“Hacking code together is bad in the long run” you might rightly point out and it's true. But in the early stages of startup speed trumps scale. Why? Because you are still learning and chances are you are going to bin the hacked code soon. If you spend months putting together your scalable product, you will lose a lot of money when you realise it's not exactly what customers want.

How to test if someone is a “hacker”: Give them an idea and ask them to slap a basic version of it together over a weekend. If they come up with something that can be used to solve the problem (or part thereof), chances are, you have a hacker.

2. The Painter

Aesthetic appeal is key. The Painter ensures your product doesn't just work well but looks great too. They bring a blend of design prowess and creative flair, essential for captivating your audience and standing out in a crowded market.

And they double as your branding and marketing material go-to as well. Things that look legit, just sell more easily, and someone with that visual eye that can help you bring legitimacy is worth gold.

How to test if someone is a “painter”: Two things. Firstly, look at their portfolio but secondly, watch them design something in person. Ask them questions along the way to see how they think about aesthetics. A good “painter” generally has a natural feel for what looks slick and feels right.

3. The Hustler

Growth is their game. The Hustler is your business builder, focused on networking, sales, and strategic partnerships. They're the force behind your startup's growth, pushing boundaries and opening doors to new opportunities. A startup is nothing without customers and this guy will do anything and everything to get it done.

How to test if someone is a “hustler”: Give them 24 hours to get an interested prospect you can pitch to. Better still, get them to make a sale (even without the product being done). If they pull that off, selling once the product is live will be a breeze.

What’s more, you can use these core functions as a base to build out the rest of your team as you grow.

Got startup team-building hacks or insights? Hit reply and share with the class…