From housing bust to online boom: eXp Realty
Working with researchers at Harvard Business School and the University of British Columbia, Rowat recently examined the case of eXp World Holdings, a fully remote real estate brokerage with a presence in the U.S., Canada, Australia and the U.K, and how the company’s performance stacks up against one of its major brick-and-mortar competitors, Redfin.
eXp was launched in 2010 amid the wreckage of the U.S. housing market. The company’s founder and CEO, Glenn Sanford, had been running a traditional brokerage up until 2008, but after the market cratered and revenues were drying up, Sanford calculated that the only way his company would survive would be to slash its overhead costs.
So he moved his business online. All training and teamwork would be conducted virtually. No more head office. No more offices at all.
By eliminating the need for brick and mortar facilities, eXp was able to grow rapidly with little help from outside investors. The US$760,000 the company raised is microscopic compared to the US$1.1 billion in external funding Redfin made use of.
Between 2015 and 2020, eXp’s revenues rose from US$23 million to US$1.8 billion, a 78-fold increase. Over the same period, revenues at Redfin rose by a factor of five, from US$187 million to US$886 million.
As of Jan. 19, 2022, eXp was valued at US$3.96 billion, notably higher than Redfin’s valuation of US$3.35 billion, despite Redfin being founded six years later.
The savings associated with not having to rent dozens of commercial spaces allowed eXp to roll out a number of initiatives that have made it appealing to prospective hires, from profit sharing and stock options to investments in new technologies that give its agents a competitive advantage.
“eXp’s virtual operations have positioned the company at the forefront of the residential real estate industry,” Rowat writes.
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The world is your talent pool
Rowat says the advantages of going remote aren’t limited to the real estate space, nor are they solely related to reducing overhead costs and freeing up capital for innovative compensation plans.
When it comes to staffing, for example, an online company has the ability to hire workers from anywhere.
“You're not stuck hiring people strictly because they live an hour from your head office in Vancouver,” Rowat tells MoneyWise. “You can hire them in the Philippines, Bangalore, Singapore — any place like that, which means you have the opportunity to attract the best employees in the world. You get very strong people and reduced payroll costs.”
That’s certainly been the case at Toronto-based software company Blockthrough, which was recently named the eleventh-fastest growing company in Canada by the Globe and Mail.
“Without the physical constraint of only hiring talent within a set radius from our home office in Toronto, Blockthrough has been able to source talent on a global scale,” the company’s CEO, Marty Kratky-Katz, says. “We’ve been able to find amazing people with the skills and experience to quickly scale our business to the point where it got the Globe’s attention.”
With a group of skilled employees working in a low-cost environment, a company can boast two qualities — profitability and growth potential — that larger companies look for when they’re in acquisition mode. Rowat says a remote structure can help young companies more easily find buyers willing to pay top dollar.
“The more profitable it is, and the faster it's growing, the more it's worth. And remote companies have a distinct advantage in both of those categories,” he says.
The sale of a company can also provide a bigger windfall for its owners if it’s been remote from the get-go. By requiring less capital to get off the ground, a virtual company won’t have as many external investors to cut in on the proceeds of a sale.
Remote companies still need strong management
Some business owners may be reluctant to move away from bricks and mortar, worried that they’ll lose control, or that their employees could be hard to keep engaged in the isolation involved with working from home every day.
But after being forced into a remote work environment amid the COVID-19 pandemic, Rowat says many workers are beginning to see the advantages of not having an office to report to, with the reclamation of commuting time chief among them.
Still, it’s your responsibility as the leader of your company to create a remote work environment that helps employees bond with each other and feel like a valued part of a team.
“It’s up to management to make sure that everybody's brought in, that they're being kept up to date, that their ideas are being listened to, and that they get commendation for the good work that they do,” Rowat says.
For eXp, that involved the US$10 million acquisition of VirBELA, a tech firm that created an entire virtual world for the company’s employees to interact in.
Jeff Whitehead, eXp’s chief financial officer and chief collaboration officer, acknowledges that that kind of spend won’t be feasible for every company. But it’s crucial, he says, that businesses follow eXp’s lead in one key area: Commit to going fully remote.
“I think the companies that are successful kind of go all in,” he says.
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