Simon Baker gave a speech at todays WealthNet club. The following is a summary of my written notes.
"Realestate.com.au - Anatomy of a turn around"
- SB joined Re.com in June 2001. The company was within 3 weeks of closing down. Re.com was running out of money.
- The market capitalization was 8 million.
- The share price was 5.6 cents.
- Re.com was kept afloat in June 2001 by an injection of 2.25 million from News Limited.
Poor management: June 2001
No clear strategy: There was no company vision in place.
No cost controls: There was beautiful imported Italian furniture in the office, Re.com was sponsoring the Bulldogs NRL team. The company was burning money fast.
Minimal systems and processes: The staff were often not clear on what their role was within the business.
Too many products: Re.com was trying to do too many things. Including web design and being in the ISP business.
Inconsistent pricing: There was 1 subscription product but 26 different pricing structures.
Low staff morale: Staff were not enthusiastic, it was just a job.
- There was very slow growth in RE agent subscriptions. In the previous 9 months there had been 281 new subscribers; but 189 lost subscribers.
- 200k visitors per day to the website.
- 35 employees.
- 3 million per year revenue.
- 15% market share.
- 1000 customers out of a potential customer base of 8000.
Focused management: June 2001 onwards.
- SB saw a huge opportunity in Re.com as it was a market leader that was being poorly managed.
- A new management team brought a new approach to the business.
- SB found great people for his management team, he "leant" on his friends to help him. He has 11 people in management positions.
- The 35 employees were reduced to 28. The Chief Financial Officer and Head of Sales were replaced.
- SB took over running the sales unit personally for a year, this created respect and allowed him to really understand the workings of the business.
Company focus: Re.com is a digital media company servicing the Australian RE industry.
- 24 month business objectives were set in place.
- Break even with cashflow had to be obtained quickly.
- Increased cashflow would be used to fund growth.
- A goal to be profitable in 2003.
Key areas of focus:
Customers: The customers needs were listened to and acted upon. Customers are now educated on how they might improve their sales using Re.com; 5000 customers were educated on how to sell property using the technology of RE.com last year.
Products: Products with the highest long term value were targeted, the churn rate on subscriptions is now <.3% which provides a constant revenue stream. Products that didn't add value were culled and the focus was placed on the core business of selling subscriptions to RE agents.
Competitors: The competitors were watched but not allowed to divert RE.com's attention from it's own business. Re.com chose to focus on grabbing more customers and making the gap from first to second in the market place wider.
People: There are approximately 20 people in the Australian RE industry that RE.com needed to have great relationships with. These were the heads of the major franchises and the state RE groups. Previously these relationships had been handled very badly. The CEO of Ray White had even been told that if they didn't join Re.com then Ray White would go out of business! Now Ray White is an investor in Re.com
Partners: Everything can't be done yourself. Accountants were brought in to run the financial side initially and were asked to arrange for a replacement CFO to be found.
Employees: Morale is now very good at the company. The 44 top employees were taken to Hamilton Island recently as a reward. Staff members are either "hunters" or "farmers". Hunters sign up new customers and farmers look after existing customers. Employees are empowered and trusted. Re.com has a dollar for dollar education policy to encourage their staff to continue learning and improving.
There are twice yearly formal performance reviews and each staff member is either classified as a "future leader" or a "trooper". Future leaders are encouraged to never leave the company, this status is not hidden from the troopers nor is any aspect of the business and it's progress. SB doesn't have an office, but works at a desk like the employees. Employees are encouraged to speak their mind.
The Results:
- Re.com is now more than twice the size of it's nearest competitor.
- Re.com purchased property.com recently, this gave them an instant jump in market share. Domain still remains a distant second.
- The market capitalization is now 100 million.
- The share price is now $0.85
- 120 employees.
- 19 million/year revenue.
- 40 million cash at bank.
- 133k people viewing 4 million pages visited the site in one day last week.
- There are 320k properties listed on the website.
- Re.com now only has 4 business units. 1) Residential 2) Commercial 3) Web design 4) Mortgage broking.
Summary of the turn around:
* No magic formula
* Have an absolute clarity about why you are in business.
* Focus on what really matters
* Don't let perfection get in the way of better.
* Be passionate.
* Have fun.
Some thoughts from Simon Baker on the future from his perspective:
- SB sees the industry as still evolving, perhaps ony 10-15% of the way to being mature.
- Less houses are now being auctioned.
- Average selling time now has almost doubled.
- Agents are having to learn how to sell rather than just how to list.
- Prices will trickle down slowly.
- 2-3 years at least away from online auctions.
- The Ebay model for selling property might be an option in the future.
- Re.com will focus on dominating the local market and increasing it's average value of customer.
- Currently Re.com only earns $350/month per customer. Plenty of scope to improve in the local market before other markets are considered.
- SB's favourite business books: Written by people who have actually done things, rather than academics.
1) "Built to Last" - Jim Collins.
2) "Good to Great" - Jim Collins.
3) "Who said Elephants Can't Dance?" - Louis Gerstner
WaySolid.
"Realestate.com.au - Anatomy of a turn around"
- SB joined Re.com in June 2001. The company was within 3 weeks of closing down. Re.com was running out of money.
- The market capitalization was 8 million.
- The share price was 5.6 cents.
- Re.com was kept afloat in June 2001 by an injection of 2.25 million from News Limited.
Poor management: June 2001
No clear strategy: There was no company vision in place.
No cost controls: There was beautiful imported Italian furniture in the office, Re.com was sponsoring the Bulldogs NRL team. The company was burning money fast.
Minimal systems and processes: The staff were often not clear on what their role was within the business.
Too many products: Re.com was trying to do too many things. Including web design and being in the ISP business.
Inconsistent pricing: There was 1 subscription product but 26 different pricing structures.
Low staff morale: Staff were not enthusiastic, it was just a job.
- There was very slow growth in RE agent subscriptions. In the previous 9 months there had been 281 new subscribers; but 189 lost subscribers.
- 200k visitors per day to the website.
- 35 employees.
- 3 million per year revenue.
- 15% market share.
- 1000 customers out of a potential customer base of 8000.
Focused management: June 2001 onwards.
- SB saw a huge opportunity in Re.com as it was a market leader that was being poorly managed.
- A new management team brought a new approach to the business.
- SB found great people for his management team, he "leant" on his friends to help him. He has 11 people in management positions.
- The 35 employees were reduced to 28. The Chief Financial Officer and Head of Sales were replaced.
- SB took over running the sales unit personally for a year, this created respect and allowed him to really understand the workings of the business.
Company focus: Re.com is a digital media company servicing the Australian RE industry.
- 24 month business objectives were set in place.
- Break even with cashflow had to be obtained quickly.
- Increased cashflow would be used to fund growth.
- A goal to be profitable in 2003.
Key areas of focus:
Customers: The customers needs were listened to and acted upon. Customers are now educated on how they might improve their sales using Re.com; 5000 customers were educated on how to sell property using the technology of RE.com last year.
Products: Products with the highest long term value were targeted, the churn rate on subscriptions is now <.3% which provides a constant revenue stream. Products that didn't add value were culled and the focus was placed on the core business of selling subscriptions to RE agents.
Competitors: The competitors were watched but not allowed to divert RE.com's attention from it's own business. Re.com chose to focus on grabbing more customers and making the gap from first to second in the market place wider.
People: There are approximately 20 people in the Australian RE industry that RE.com needed to have great relationships with. These were the heads of the major franchises and the state RE groups. Previously these relationships had been handled very badly. The CEO of Ray White had even been told that if they didn't join Re.com then Ray White would go out of business! Now Ray White is an investor in Re.com
Partners: Everything can't be done yourself. Accountants were brought in to run the financial side initially and were asked to arrange for a replacement CFO to be found.
Employees: Morale is now very good at the company. The 44 top employees were taken to Hamilton Island recently as a reward. Staff members are either "hunters" or "farmers". Hunters sign up new customers and farmers look after existing customers. Employees are empowered and trusted. Re.com has a dollar for dollar education policy to encourage their staff to continue learning and improving.
There are twice yearly formal performance reviews and each staff member is either classified as a "future leader" or a "trooper". Future leaders are encouraged to never leave the company, this status is not hidden from the troopers nor is any aspect of the business and it's progress. SB doesn't have an office, but works at a desk like the employees. Employees are encouraged to speak their mind.
The Results:
- Re.com is now more than twice the size of it's nearest competitor.
- Re.com purchased property.com recently, this gave them an instant jump in market share. Domain still remains a distant second.
- The market capitalization is now 100 million.
- The share price is now $0.85
- 120 employees.
- 19 million/year revenue.
- 40 million cash at bank.
- 133k people viewing 4 million pages visited the site in one day last week.
- There are 320k properties listed on the website.
- Re.com now only has 4 business units. 1) Residential 2) Commercial 3) Web design 4) Mortgage broking.
Summary of the turn around:
* No magic formula
* Have an absolute clarity about why you are in business.
* Focus on what really matters
* Don't let perfection get in the way of better.
* Be passionate.
* Have fun.
Some thoughts from Simon Baker on the future from his perspective:
- SB sees the industry as still evolving, perhaps ony 10-15% of the way to being mature.
- Less houses are now being auctioned.
- Average selling time now has almost doubled.
- Agents are having to learn how to sell rather than just how to list.
- Prices will trickle down slowly.
- 2-3 years at least away from online auctions.
- The Ebay model for selling property might be an option in the future.
- Re.com will focus on dominating the local market and increasing it's average value of customer.
- Currently Re.com only earns $350/month per customer. Plenty of scope to improve in the local market before other markets are considered.
- SB's favourite business books: Written by people who have actually done things, rather than academics.
1) "Built to Last" - Jim Collins.
2) "Good to Great" - Jim Collins.
3) "Who said Elephants Can't Dance?" - Louis Gerstner
WaySolid.