Where Real Estate Gets Its Dirt

Revenue and profit

The recent announcement that Zillow is going to pay $108 Million for dotloop got me riled up. Then Dan forwarded me this article from Jason Fried, co-founder of Basecamp. So good, and keeps everything in perspective.

How much are we worth? I don’t know and I don’t care.

“Startups these days are bantered about as if they were in a fantasy football bracket. Did you hear Lyft raised another $150 million at a $2.5 billion valuation? But Uber got tossed another $2.8 billion at a $41.2 billion valuation! Then there are the companies barely off the ground getting VC backing with 25x valuations, despite having no product or business model.

Entrepreneurs by nature are competitive. But fundraising has become the sport in place of the nuts and bolts of building a sustainable business.

How did you hear about us?

When someone signs up for Cloud CMA we have wizard they walk thru, which helps them get set up (photo, logo, etc.) August of last year we added a question, “How Did You Hear About Us?” It had a drop down menu with the a few choices. Of the customers who bothered to make a selection here’s the breakdown:

Your MLS 33%
Another Agent 24%
My Broker 14%
Other 12%
Google 6%
Email 3%
RETechnology 3%
REALTOR Mag. Ad 3% – We run a small ad in the classified section
Live Event 2%

One of these stats really stood out to me….

Agent: 24%
I’ve always wanted to do a “Have a friend sign up and get a free ____” marketing campaign. I haven’t pursued this idea because I thought that agents were too competitive. This result is showing me that they do talk about tools they love.

As a SAAS (Software As A Service) company this is great news. Its kind of a “network effect”. And so far I haven’t done anything to promote agents to get their friends to sign up. So far…

How did you hear about us?

[UPDATE: I should mention these are on Direct Subscriber to Cloud CMA, meaning they are paying for Cloud CMA with a credit card, not part of a site or broker license.]

Mike Sparr shares “How To Not Go Out of Business”

Mike Sparr, CEO and founder of Goomzee, just wrote great post about the challenges and decisions vendors face in this business. It’s a long post but worth the read.

How Not To Go Out Of Business

I’ll add to his advice with a bit of my own. Mike talked about the challenges investing in a sales team.

“Now they could make 400 calls per day, automate the voicemail part, reach 90 people daily, do 30 demos and close 1-2 sales. Agents then averaged 20-22 sales/month, bringing my CAC down to about $135. This means at $20/mo product after 7 months of service I pay for my cost of sales and begin earning revenue for the actual product, support, and ongoing R&D. If I wanted to scale sales of this product, I’d have to set aside enough cash to float realistically the first 10 months of every rep’s paychecks before expecting to break-even. You really want to recapture your investment per rep within 2-3 months. Either raise your prices, lower your wages, or roll the dice.”

I would say that adding a Yearly Plan or Two Year Plan, where the agents pay up-front, can help you finance your sales team growth. I’m not sure if Mike meant this when he stated “raise prices”. Good stuff.

More on Freemiums

Sarah Needleman and Angus Loten from WSJ: When Freemiums Fail

“The freemium approach doesn’t make sense for any business that can’t eventually reach millions of users. Typically only 1% or 2% of users will upgrade to a paid product, said David Cohen, founder and CEO of TechStars, a start-up accelerator since 2007 with five U.S. locations.”

Great article on why smaller businesses should forget the freemium hype and get money right away.

Is the “freemium” model dead?

“Freemium has run its course”, Rags Srinivasan writing for GigaOM

“A small percentage of a very large number is indeed a large number, but can your startup stay solvent while you wait for the conversion to kick in? Freemium only offers the hope that non-paying users will fall in love with your product and start paying for it. Shooting an unlimited number of free bullets and hoping some will hit the target is a shotgun approach to monetization. It’s time to take a deliberate and targeted approach. Or as Vanek told me in our conversation, “it is time to retire the shotgun.”

Good post on the origin of the freemium model and argument why it has been fallen out of favor with some developers. Don’t skip the comments either.

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