Simon Baker - CEO of realestate.com.au

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.
 
WS,

A very good synopsis of the presentation.

Considering joing the Syd chapter of W/net & travellling from CBR myself. All that I've spoken to about it give it a good wrap.
 
Fantastic summary on turning a buisness around. An absolute inspiration for people thinking of starting up their own business. The thing that stands out for me was how he made the company customer driven rather than company/employee driven, a sure path to success for any business.
 
WaySolid [B said:
Summary of the turn around:[/B]

* 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.


WaySolid.

Well done Way.. I like the above summary, particularly "Don't let perfection get in the way of better"

Can you give an example he used for this?

GarryK
 
1.
Garry K said:
Well done Way.. I like the above summary, particularly "Don't let perfection get in the way of better"

2. Though the inverse is also sometimes quoted in motivational texts:

'the good is often the worst enemy of excellent'

An example of 1. could be when an IP you buy is a very good deal at the asking price, but you put in a lowball offer and you end up losing it to some other purchaser. So you end up losing out entirely, even though you know it will have made a good profit for you even if you paid close to the asking price.

2. could apply if you enjoy your job and are too complacent to go for something better. Or to someone who seeks positive cashflow property but isn't agressive enough in their offers and ends up with neutral or negatively geared IPs.

So it's two sides of the one coin.

Regards, Peter
 
I was there with WS. Inspiring talk from Simon. He will go further than realestate.com.au. All sssoooo logical....

The thing I like was that he didn't borrow from institutions to cover turnaround operating costs.... [though News Limited injected a few mill.]

He decided to grow from new revenue.
Can't get into too much trouble then.... The business either swims or sinks on its own efforts. Too often borrowed funds mask bad business.

Spoke with Simon after seminar. major points:
- focusing on getting sale price listed for all sales.
- solutions for redundant listings from slack agents were being targeted.
- I asked for more bait for site visitors i.e. more meaningful freebies like comprehensive market analysis, a little technical analysis applied to real estate sales data so consumers could visualize trends. I told him I felt this would consolidate the site as a must have.
- online auctions were about 5 years away.
- I expressed concerns that regulators would consider their internet market monopolization anti competitive. Simon said they would counter that the newspapers monopolized for years (esp The Courier-Mail in Bris), and realestate.com.au still competes with them.
 
Simon Baker sounds like a great achiever .
Thanks for posting WS.

The only contact I ever had with Simon Baker was an email I sent suggesting they look at some way of reducing the number of spelling errors. I know this has been raised on this forum as well. He said that they cant really control it as the agents type in their own details.

I was happy to read they may be only about 10-15% from being mature. It means there may still be a fair bit more upside to the ole share price. I bought in 2002 at around 15 cents and I remember being concerned by buying for triple what it had been trading at. However if it was nearly broke its no wonder that it was at 5 cents.

I'll be interested to see where RE.com is at in a couple of years. I expect they will eventually branch out into related areas.
I'd personally like to see them use their huge database for more market analysis.
I do some myself but its a bit time consuming.
LB
 
Hi Bruce
Good questions that you asked Simon on Saturday.
It would be great to have the sale prices listed. Also what does the sale date actually mean? Date contracts listed or settlement date?
One problem with the listings I've noticed in my local area is the same house being listed sold by 2 different agents at 2 different times (on least 2 different occasions). Looks a bit dodgy to me.
 
Garry K said:
Well done Way.. I like the above summary, particularly "Don't let perfection get in the way of better"

Can you give an example he used for this?
GarryK
Garry,

He didn't mention a specific example.

I first read that line in a book John McGrath wrote, perhaps it's a popular saying.

This might fit the description: When Simon took over the CEO position the website needed upgrading and the relationships with the existing customers weren't ideal. A decision was made that instead of making these things better a priority had to be placed on just signing up new customers and waiting till later to improve the site. A perfectionist might not be able to do this :)

Thats the closest I could think of anyhow.

WaySolid
 
Last edited:
shazza said:
Hi Bruce
Good questions that you asked Simon on Saturday.
It would be great to have the sale prices listed. Also what does the sale date actually mean? Date contracts listed or settlement date?
One problem with the listings I've noticed in my local area is the same house being listed sold by 2 different agents at 2 different times (on least 2 different occasions). Looks a bit dodgy to me.


settlement date = sale date.
yeah the garbage in garbage out thing applies to realestate.com like all databases. 'Simon says' :) they were working on strategies to rein in REAs who didn't get that. But they still need to mollycoddle at this stage to keep REAs on side.



Garry, re perfection getting in the way of better, 'analysis paralysis' also fits, as does 'not seeing the forest for the trees'. A lot of new business people get caught up playing with MYOB or monitoring stock, rather than getting out and mixing it with customers, and selling. I guess it comes down to personality type. Some severely introverted types just don't like the human interaction thing, which isn't good for business. Good business means good human relationships.

Meanwhile, I have to get off to a client myself and give them this month's good will special. I am a part time physiotherapist and service nursing homes. Sometimes it is a couple of free cinema tickets for the DON's kids, other times it is a piece of pertinent exercise equipment I have picked up cheaply at auction or driving past a garage sale. Do you think these little sub $50 gifts/donations generate more then $50 worth of goodwill?
 
Interesting article.

I noticed this week that in Glebe there were 613 properties for sale on realestate.com.au but the following week, only were listed 525. There were only a small number actually sold in that week. Could they have lost a couple of REA subscribers in that area?
 
Well it would have been nice if I bought some shares in realestate.com.au at the time I listened to this seminar..... 0.92 to 4.95 in two years is very impressive.
 
I'm really interested in a post above, that suggested one day RE Auctions might appear on the net, with bidders doing it on line. That raises some interesting issues, such as, how people would register as a bidder, before bidding starts? One would assume they would have to validate their ability to purchase. Otherwise, properties would have to be re-auctioned. I wonder what other issues on-line property auctions would raise?
 
Andrew_A said:
it would have been nice if I bought some shares in realestate.com.au at the time I listened to this seminar
I bought some for $4.19 back in September, then sold them for a small loss in October when it looked like the price was dropping off.

And it's hardly stopped going up since... :rolleyes:

GP
 
I love this internet business stuff :D Although not allowed to talk about it here :(

Well.. you CAN talk about it.. this thread is evidence enough of that.. what you CAN'T do is shamelessly start threads that are nothing more than ill-disguised attempts to plug your own enterprises.
 
Well.. you CAN talk about it.. this thread is evidence enough of that.. what you CAN'T do is shamelessly start threads that are nothing more than ill-disguised attempts to plug your own enterprises.

This is sweet coming from Mr Money Beans who has a history of rubbishing Property Managers....gee, I wonder why that would be!

George "pot, stones, kettles and glass houses" Grubar
 
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