A small online agency which in six months of trading has secured around 140 sales says it’s on course to be the first in the digital sector to be a fully profitable operation.
Stafford-based Imovehome says its model and modest marketing approach means the average price per listing is £84, a small fraction of that for many other firms.
Imovehome is run by Amy Dixon, a former High Street agent for 20 years who started the online agency - although she prefers to call it a digital agency - early this year. So far investment has been around £1.2m and the firm is nearing completion of an additional funding round.
It charges sellers an upfront basic £249 which pays for the company checking and verifying property details and then listing the home on what it calls “the big three property sites; Rightmove, Zoopla and Prime Location.”
Other charges include an EPC for £75, floor plan £55, copywriter for property details at £45, professional photographs at £95, a virtual tour at £125, a For Sale board at £45 and an agent to handle viewings charged at £35 per hour.
For the basic cost, all calls and enquiries are handled by the agency and it arranges viewings. Its website says “we help you negotiate any offers and see you through to completion.”
A key characteristic is that it offers a valuation tool for customers to set the asking price on their own property - and Dixon insists most sellers are sensible and don’t attempt to over-value their homes.
“Customers are sensible and highly motivated. Everyone these days will have sold something on eBay and have tried asking too much and have found it didn’t sell, so they’re sensible when it comes to their home” she has told Estate Agent Today.
“I don’t see very much price loading amongst those who value their own homes, because around 95 per cent of homes are similar to others so it’s easy to compare. I saw a lot more price loading amongst agents on the High Street” Dixon adds.
The company has significant staffing - 25 employees plus around 40 other outsourced people, many to operate a 24 hour call centre.
Dixon says she also has a vast list of some 2,000 people across the country who can offer the add-on services - photography, accompanied viewings and the like - to any client whether they’re in Scotland or southern England.
The Imovehome model relies on referral fees and Dixon wants to promote the one-stop-shop concept further by saying that those who use her company’s preferred lending, legal and other services may in future be able to complete a purchase in as little as three or four weeks in total - depending, of course, on others in the chain.
Next month the company is expanding from sales into lettings and maintains that the business model it currently has will go on to make it the industry’s first truly scaleable and profitable online agency.
“We haven’t thrown the money around on TV advertising like Purplebricks and we haven’t jumped into the party like Emoov and employed everyone we could until someone got things right” insists Dixon.
And her goal for the next two years? “In about six months we’ve gone from about 50 listings to 300 so if we continue that level of growth, I’ll be very very pleased.”
You can see the Imovehome website here.
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This will have High Street agents trembling in their shoes. Not.
So far, a highly thought out approach with transparent charges and an interseting pricing policy. This is agents thinking outside the box, being brave and bold enough to take the risks. Good luck Amy Dixon!
And in a long line of other companies doing exactly the same thing and now have gone, £1.2 mil invested and 25 staff with an income of around £33.000 in 6 months so a massive loss so far and that's at full price not the £84.00 per listing average, I bet in another 6 months they will be shelving staff and looking at why it didnt work like all the others didnt work !!!
Will be interesting to see how this pans out. Operating costs must be in the region of (at the very least) £750k so at a net return of £165 a listing thats over 4500 listings needed a year to break even. At nearly 90 listings a week thats a serious volume business. Wish her the very best of luck but way too early to be talking about 'real profit'. What I don't understand is why a lean, digital solution requires so many staff- surely achieving profit and being cost-efficient is about using digital to remove the cost burden of staff.
Poor ole Joe Public, are they really so daft to risk their biggest investment and future home on this? Some still are it seems. Poor ole Joe.
I wish her well, but I am not sure I understand her ambition for the next 2 years when she says she would be pleased to replicate the pace of the last 6 months which has been a 6 fold increase in that time, she cannot be referring to another 250 listings. That still only gets them to a revenue of £448k. And based on these numbers that supposedly would make an operating profit of £300k? What are these 65 people and herself being paid if costs are so low? Either way the model will have to change. They need a 20 fold increase in listings very quickly or their fees need to increase significantly. Same historic conundrum all online agents face.
First one to make a profit, think NOT....
Peering through the smoke and mirrors, this is an average upfront fee model of £1,039 (if there are 10 viewings) per listing. Plus referral fees on top for I assume conveyancing and finance.
The 140 sales is an irrelevant figure, as the business runs I assume on instructions and upfront fees.
So, 140 sales is probably 200 listings in 6 months (140 = 70% of total listings the rate of unexchanged sales generated).
That is 33.3 instructions x £1,039 = £34,598 + referral fees, approx. £11,500 = £46,098 income a month. Or £553,176 per annum income - not profit.
Costs - 25 members of staff, average salary £25,000, plus car or car allowance plus taxes etc, £687,000 a year. 40 outsourced staff, average £8,000 a year, £320,000. Total £1M.
Typically wages = 60% of company costs, so running costs for all other parts of company will be another £665,000 a year.
So total costs a year for company to break even are 1.65M, or £137,500 a month.
To break even - at £1,384 a unit, they need to list 100 a month, at present they are listing 33.3, so they need to triple their instructions to break even (and that is without paying any of that 1.2M back).
The other kicker is that the pay upfront model - has failed - even Vic at Purplebricks has seen that the general public will not do repeat business if they pay in advance and get no sale, and have to pay twice with a second agent who charges on results / exchange of contracts. Especially as in the industry agents on exchange on half of their stock.
I assume and it is not clear in the piece - that Imovehome is a pay up front and pray model, rather than a pay on results model, if not - well an awful lot more than 1.2M is going to be needed to be injected in the coming months.
Even if you could triple your through put of instructions - what else will increase? - yes you got it - staff costs and running costs, so the break-even will be in excess of 2M, which means no profit ever.
I mentioned Vic Darvey CEO of Purplebricks who is a very bright man, and so I thought it right to show some balance on pay upfront online models.
But, when he says things like the company is ‘not for sale’, or the company is going to change how it charges customers - the question I am going to ask is … Is Vic there? As I think he might be a little light on strategy.
For me, the only great thing about Purplebricks for investors in its shares, was that on paper it seemed to be the mother of all cash cows. It appeared, and that was always the illusion, that with a positive cashflow from upfront fees, that it would once established make huge profits, without a costly bricks and mortar empire of offices, populated by expensive employed staff.
The truth, now the smoke and mirrors are no more and the business model is clear for all to see, is that you can strip out the staff costs, the managers the negotiators etc who sell property and just have listers (even better if they are self-employed), but if your business campaign runs on a multi-million pound spend on television, web, radio and every media medium – it does not matter how much cash you are getting upfront, if the spend per unit listed far exceeds the cash you get in.
Close scrutiny of the annual accounts of Purplebricks show a worrying conclusion that gross profit runs at about 45%, but when ‘marketing costs’ and ‘admin’ costs are added in that 45% gross profit becomes a negative figure.
Purplebricks were closer to making profit when their turnover was 50M plus, they made a 5M loss. They then bragged that when turnover doubled, they would hit profit. Instead the 5M loss grew into a multi-million loss.
The only thing keeping the Purplebricks empire afloat is the model of cash upfront, win or lose for the vendor. This pays the Local Property Experts and covers some of the costs of the business.
If Vic feels that he is going to change the model, the cash input will dry up, and if the company has to wait 5-months for properties to sell and complete, from point of instruction, those multi-million monthly costs will eat the company and Vic alive.
Perversely, I am not a luddite, I like new technology, and online agents (in concept) but I think that proptech should deal with the backroom stuff, as it does for many online and traditional agents. Allowing estate agents to have more time to be agents, to spend face to face time with clients, rather than be a replacement for them.
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