Ailing online agency House Network saved by drilling magnate
UK's first online estate agency recently went into administration after facing dramatic increases in customer acquisition costs, but is now up and running again.
House Network, the UK’s first online estate agent, has been acquired by a London-based company after ‘dramatic’ increases in the cost of gaining instructions forced the agency into administration.
The purchaser is Universal Acquisitions Ltd (UAL), which was set up last month ahead of House Network being named in a winding-up petition. UAL has one shareholder, 43-year-old construction drilling entrepreneur Marc ‘Ziggy’ Seagroatt.
House Network is up and running again and has a new management team with wide estate agency, digital market and e-commerce experience. The revived firm will be reorganised and a new business plan is to be implemented.
UAL says its research shows House Network was a “strong business that delivered strong profits for many years and built market share through customer referrals”.
Softening market
“Unfortunately, investment was made into the firm, preparing it for a potential IPO, at a time when the market was softening.
“A dramatic increase in the cost of acquisition led to financial difficulties forcing the firm into administration. We are delighted we have been able to very quickly get the firm operational again so it can continue to offer the quality of services it is known for.”
House Network was first incorporated in 2003. Its most recent accounts to include profit and loss figures reveal that it made a loss of £3.1 million before tax during its financial year to 28th February 2017.
“We are not coming into this blind with grand plans to disrupt an industry overnight,” says UAL. “We are realistic about the online estate agency sector and, for example, do not believe it will have a 25% market share in the next 12 months.
“However, we do see areas of growth and expansion which can be achieved by stabilising the business and providing the excellent staff at House Network with the products they need to excel.”
Why would someone pay for the assets of a company that was losing £250,000 a month? I am not sure what value there is in buying into an online model, given that since last September, Hatched, Emoov, Tepilo, and others have failed, and none of them made a profit. Marc ‘Ziggy’ Seagroatt would be better off setting up some cold start offices, at £160,000 a go, break even year two with all cost back, marginal profit year three, and £200,000 plus profit year 5 onwards.
Instead, ‘Ziggy’s’ online model will probably involve hundreds of thousands if not millions in advertising the service of the company, backed up with a tiny a self employed listing sales force and a minimal after sales service.
If only the onliners had a marketing strategy that included sales people who promoted the listed property, rather than waiting for the passive influx of buyers finding the properties online and then interfacing with the vendor direct, that might actually be useful.
Buying the assets? (whatever they might be) of a business that losses £250,000 a month, to me is a questionable concept.
With Purplebricks share price at 2016 levels, under 140p a share all last month, and Tepilo, Emoov, Hatched, House Network and two other online agents having ceased trading since Sept 2018, are online agents not proving to be Proptech Dinosaurs of the present?
A large lumbering, cash burning giant, moving unsteadily, and aimlessly in the property jungle until they finally keel over when the food supply (cash flow) runs out. Proptech is a brilliant aid to agency, but it does not replace the human element the men and women in the industry whose experience, effort and expertise makes transactions flow.
My thoughts are unless it is just a tax write off, Marc ‘Ziggy’ Seagroatt should perhaps of invested 160K into a traditional cold start office, (maybe 20 of them, so 3.2M) and break even in 2 years, all cost recovered (so 3.2M recovered), make a marginal profit year 3, and by year five you will be making 200k profit on a turnover of 700K if you have a multi-discipline business per branch.
His alternative strategy seems to be more speculative, spend multi-millions on advertising your brand as you have no offices, employ sales people on a self employed basis, mainly as listers, employ no front line negotiators or sales managers to run the sales strategy.
Then cross your fingers that properties listed online ‘sell themselves’ as buyers and vendors connect directly to organise viewings and sales. And invest limited money in sales progression as the business model relies on instructions and upfront fees, rather than fees on completion.
Thoughts?