Welcome to episode #103 in the Real Estate Redefined Video Series. Last week, Dan Forsman attended the invitation-only Swanepoel Mastermind Summit in San Diego. Watch the video to hear Dan’s thoughts on the business models of these new players and the 4 fundamentals required for a sustainable company.

— Transcript —

What happens when the most powerful leaders in real estate get together for a masterminding event?  Watch the rest of this video to find out!

(Roll intro)

Last week, I had the opportunity to attend the Swanepoel Summit in beautiful San Diego.  This is an invitation-only event for the top leaders in the real estate industry.  Some of the players there included Ron Peltier, Chairman of HomeServices; Gino Blefari, CEO of HomeServices; Chris Stuart, CEO of HSF Affiliates – our franchise organization; Rich Barton, CEO of Zillow; Glenn Kelman, CEO of Redfin; Gary Keller, CEO of Keller Williams; Ryan Schneider, CEO of Realogy, Robert Reffkin,CEO of Compass; Eric Wu, CEO of Opendoor and many more.

It was fascinating to hear so many different perspectives.  In my 33 years of real estate, I have seen many new trends and new players enter the industry.  Some make it – but most do not.  There are 4 basic fundamentals that you need to be a successful business.

First, you must deliver clear and compelling value to the consumer.  That is why we spend so much time and energy to constantly improve our value and service.  iBuyers are selling convenience because the net proceeds to the seller are lower.

Second, you must have the capital to fund and grow the business.  In the iBuyer space, Opendoor and Zillow have more funding so they are able to spend more money on advertising.  Many of the new players are spending a disproportionate amount of money advertising through industry public relations and media outlets – even though their value propositions and valuations are unproven.  PurpleBricks is a good example of a new player who launched with a huge advertising campaign in the U.S. and Australia.  They are now leaving Australia and some analysts are predicting they may leave the US market after a series of leadership defections.

Third, you must be able to make a profit and provide a return to the investors and shareholders.  This is the hardest part.  Right now, it is very unclear how some of the new business models on the industry will be able to be profitable.  There are big questions about the iBuyer business models.  Zillow and Redfin are not profitable yet. There are also big questions about Compass.  They are spending a tremendous amount of money to build what looks like a traditional brokerage.  That will not justify their current valuation and will not produce the expected returns for their investors and shareholders.  Robert Reffkin continues to advocate for a single industry platform which was their original strategy.  They tried licensing their technology platform to other companies but their agents revolted.  Their current valuation is based on being a technology platform – not a brokerage.  If they had similar valuations to Brokerages like Realogy or RE/MAX – which are public companies, that would be a disaster for their investors and shareholders – which are many of their agents and employees.

Fourth, you must have the people, systems, processes and technology to operate and grow the business.  This is an area we focus on every day.  We work hard to get the right people on the bus and get people in the right seats.  We have made major investments in building a new sales success system – powered by Salesforce.  The first release will launch in July and will give our associates and clients many advantages.  We are also building a new enterprise-wide back office system for accounting, HR, transaction management and a powerful new agent and client portal.  We have the resources to redefine real estate with a new level of quality and innovation.

Successful companies must do all 4 of these things to build sustainable businesses. Remember the Dot Com craze of the late 90’s and then the Dot Bomb reality of the early 2000’s?  Knowing this, I have never more proud and confident about the future of our organization.  I am so thankful to be part of Berkshire Hathaway family of companies, led by Chairman and CEO Warren Buffett.

Thank you for watching this video.  The spring and summer market is here and 2019 is going to be another record-setting year for our company.  Remember, every day, in every way, YOU can get better and better!

The post Real Estate Redefined – Ep 103 – 4 Fundamentals of Business appeared first on Atlanta Real Estate Blog.