Low-cost, fast-track, global real estate
Tuesday, 11 March 2008
Last Updated: Tuesday, 11 March 2008
By Amanda Gome
When Simon Baker took over the CEO chair at online real estate classifieds company RealEstate.com.au in 2001, he reckons it was weeks from collapse. He then spent the next seven years digging the business out of a hole and building a global company.
His first step was to cut costs by 55% and simplify the offering to the market.
In 2005 he began his global expansion. Realestate.com.au continues to grow fast and since 2005 has expanded into 12 countries.
Revenue for the REA Group, Realestate.com.au's ASX-listed parent company, for the half year to 1 January 2008 was $71.3 million, up from $47.4 million. EBITDA was $14.2 million, compared to $8.4 million.
Baker’s philosophy? Australia was simply the stepping stone that has given the company the right to grow. He tells the Realestate.com.au export story to Amanda Gome.
Simon Baker is happy to answer your questions. Email feedback@smartcompany.com.au by 14 March.
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Amanda Gome: You entered New Zealand with allrealestate.co.nz in September 2005. Was that a good place to start your global expansion?
Simon Baker: Yes. Basically we’ve got two ways you can grow this business. One is through organic expansion – throw up a new website and then start from customer number one. The other is through acquisition. Now in 2005 we weren’t 100% sure which was the best way to go. We were, in terms of expansion overseas, babes in the woods, so what we said was ‘well let’s do something simple’.
We had a very easy way in which we could approach the New Zealand market. We did something as simple as put a map of New Zealand next to the map of Australia on realestate.com.au. We hired a bunch of New Zealand backpackers in a call centre in Melbourne and got them to call in to New Zealand and we, for a very low cost, started with customer number one.
So absolutely, I think for us it was the right thing to do because it allowed us, at a low cost, to experiment into a new market.
How long did you spend scoping the New Zealand market?
About 30 minutes. We knew how many agents were in New Zealand because we just went and looked at one of the websites over there and then we rang a couple and said if we were to, for a low cost, give you access to the Australian market, for an investment into New Zealand does it make sense?
The quick market survey of five agents had them all saying ‘yeah, that would be sort of interesting, we’d pay a little bit of money’, and we said well let’s try it because for us the cost of putting New Zealand on the map, so to speak, and then setting up a team was very small.
How small is small?
Five employees on contract and a bit of development costs... I don’t know, less than $100,000. So small, compared to a business we were doing for the year ending June 2005, which was $34 million.
And that was when we said OK we’re going through rapid growth, let’s look at where we can go to next, and we then said let’s look organically at New Zealand because it made sense. Everything made sense. Even some of the franchise groups were the same over there, so this was a natural step out for us, so we literally did it at low cost. We got really good traction fast. That gave us the courage of our convictions that overseas expansion made sense.
And how soon were you profitable in New Zealand?
We’re just reaching profitability now. But the answer to that question is we have chosen to run at a loss to grow for market share. I could run profitable from day one, but this would have a much lower and slower growth rate.
Did you make any mistakes in New Zealand?
New Zealand was not a massively different culture but it is a little bit different. We’re dealing across time zones we already had, because of Perth, so that didn’t really change it. But we learnt about dealing with multiple websites linking each other. Just a whole range of how you deal with different currencies and so on, which then forced us to address underlying systems and technology issues that you need to have in place to deliver these things long term.
And was that costly then?
No it’s not, because it’s stuff that had to happen anyway. You can’t be on MYOB forever.
What did you move up to?
We moved to a thing called acpac, which is a midrange web based global multi-currency finance system, so that runs all our countries now.