Breaking Property News – 15/12/23
Daily bite-sized proptech and property news in partnership with Proptech-X.
Paul Starkey – Reflections on what good looks like in Agency & Agency Technology from the man in the know
For those who do not know Paul Starkey, maybe it is time that you should, I have in the past years asked Paul as an individual to have quiet chats with exuberant founders looking to be the next Elon Musk, as his wise words have got them to understand the enormity of what they have to overcome to win big. Here in his own words are some of his key thoughts,
‘There are many elements I can reflect on during the 8 years I spent at Reapit, but recent involvement in the Foundations/Platform side of things and the partner network is one that is worth comment. The partners Reapit engaged with fell broadly in to three types;
The long established market players who generally where cash positive and had an established customer base amongst estate agents and generally who provided a product or service that was a key element of the agents operating model, I will talk more later about the types of service that PropTech organisations delivered to agents and the associated merits.
Those that are part established and need to scale, these may be in second or third funding rounds are generally generating revenue, but may not be profitable, they are not as vulnerable as those detailed below, but there are associated risks based on their size and they need to balance spend vs scale to ensure they remain commercially viable.
The newer startups with an idea and funding to get this off the ground and started, some of these will find a niche and succeed and some will simply run out of money and fail, not always as the idea is poor, but they have been unable to get critical mass and revenue to support their model going forwards.
ugh its share price has recovered a little, it will be interesting to see where the ticker sits by mid-summer 2024. The results for 2023 were already baked in, but next year there will be all to play for, especially with the amount of capital CoStar Group is about to deploy.
Purplebricks.2 now sells your home for free – but at what cost?
Following its recent acquisition by Strike, the estate agency group backed by Freston Ventures, Purplebricks today launches a new pricing structure that genuinely lets customers sell their home without paying a penny. All Purplebricks customers can benefit from the service, which includes a home valuation, negotiation, listing on a major portal, and an app that lets them control their listing and viewings. Customers can choose to pay for additional services as and when they see fit.
Andrew Stanton’s Personal Analysis aided by Zara Stanton
As all will know since early in 2017 I followed and commented in forensic detail on the trials and tribulations of Purplebricks.1. On a personal level I think that Michael & Kenny Bruce and the original team did in fact do a lot of good, they made it acceptable that there should be a listing fee – which I think all agents should charge universally, and they offered the public something new. (We can debate the other stuff – thousands of my followers know my thoughts on these so no point in covering them once again.)
So when I got a Press Release earlier today – one of about 10 a day we receive, I said to Zara my co-director shall we run this and she wagged her tail and we did the courteous thing, but it would be remiss if I did not add my own take on offering a freemuim model and what that looks like. So let’s do the mathematics on this business model, Zara get me the black pen for the whiteboard we need to do some serious figures.
Serious Figures
Each month the old Purplebricks business used to burn over £1M a month, even though it was getting instant cash flow from listing property. I am not sure of the end figures but let’s say Purplebricks in its last 12-months of trading listed 40,000 properties at £1,100 average fee = £44,000,000 of cash upfront coming in the year. So £3,666,666 from listings and still burning £1,000,000 plus means monthly drag is £4,666,666 plus a month to break-even.
If now they lose all upfront cash for ver, that means in the next 5-months, they burn £4,666,666 x 5 = £23,333,333. Then when first sale completes on no sale deal, if they are lucky they get some financial services, conveyancing services and other bolt on revenue, trickling in.
By the end of the year lets say with beefed up advertising which increases costs they list 50,000 properties. Under the old model that would be £55M in the hopper, instead they bank zero (?) but they get six months of other revenue streams let’s say list 4,166 a month, half complete, get 30% of conveyancing and 30% of the finance, on 2,083 sales x 6 months = 3,794 lots of conveyancing fees and 3,794 of financial services in six months, I put that at only £4,000,000 tops of combined revenue in.
So year one Purplebricks old model on 50,000 instruction that would be £55M + extra revenue from mortgages and conveyancing, and still make a marginal loss. Under new free model, it could generate only £4M of cash in. With costs likely to be £40m – £60m. So possible losses of £36m to £56m after 12-months of trading, plus any liabilities inherited from the old company. Maybe I will be proved wrong? Who knows as the model has yet to be tested, although Strike using this freemium model has eaten through multi-millions in losses to date.
And this is where I am scratching my head here, did Sir Charles Dunstone when at Carphone Warehouse use a freemium model to scale that business? I thought not. Sure you can buy the property market, and when you have 8% or 10% of that market (that most agents do not want the public looking for the cheapest fees possible with property stock to match), sustained by giving the service away for free, how do you monetise that? Exactly.
InventoryBase Connect why a Centralised Platform for the modern estate agent is essential
Steve Rad, CEO and Co-founder of InventorBase gives some thought leadership advice on where the real estate industry is going and how to navigate it. Full disclosure and I am sure that thousands of my followers are aware, Steve is one of my earliest clients and in my opinion one of the brightest minds in his sector, so a useful torchbearer in what is fast becoming a very complex and fast moving landscape.
Steve Rad, ‘The simple truth is this – estate agencies who don’t align their business with modern technology will find themselves lagging behind their competitors. With so much financial and emotional investment on the part of buyers, tenants and landlords, professionals in today’s rapidly modernising property industry have the impetus to evolve to meet their clients’ needs…otherwise, they may risk fading into obscurity.
Like many other professions, agents are becoming equipped with more insights thanks to the information age. A Fourth Industrial Revolution has begun. But rather than feel overwhelmed by the volume of data and learning new ways of working, wielding technology (and its many benefits) can ensure customer satisfaction, besides completing transactions and other property processes with precision, speed and efficiency.
This is part of our mission at Inventory Base, and why we’ve developed solutions like InventoryBase connect – a centralised platform built with the modern estate agent in mind. One that strives to offer faster, smarter ways of working without losing the face-to-face human relationships that the property industry is built on.
Showing how this digital tool can prove itself an invaluable resource in meeting these aims, this article will preview the evolution of estate agencies in the digital age and how InventoryBase Connects proptech solution can help revolutionise your day-to-day practice.
Andrew Stanton Executive Editor – moving property and proptech forward. PropTech-X
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