Steve Koerber's Old Blog

Remuera's house sold name since 1998 – 021864166

Joneses Liquidated

Posted by Steve Koerber on February 17, 2008

Sold by Steve Koerber

When I heard that the flat fee ($8995) real estate company “The Joneses” were liquidating I had mixed emotions. 

On one hand, I had tried and failed in 1999/2000 to own and operate my own franchise office in Remuera.  A combination of over-exuberance with no qualifications, not enough financial backing and a flattish real estate market forced me to close shop and return to sales.  I learnt so much from that experience and luckily it put me on a more rewarding path.  So I know how the directors and staff at The Joneses feel to have failed.  I sincerely hope this experience points them all in new and exciting directions.

On the other hand, fewer competitors in the real estate industry augers well for those who remain.  For consumers, low fee alternatives like Green Door, Homesell etc are still available.  Those companies will now benefit from The Joneses demise.

Why did The Joneses fail?  I agree with a mortgage broker who was interviewed on the subject.  She said the business model wasn’t right.  With my limited knowledge of real estate business running costs I calculated that the Joneses might last until June 2008 (not February 2008), but of course I had no knowledge of their capital reserves and resources.  To keep paying their staff, recruit more staff, open new branches, market themselves on billboards etc, I reckon their flat fee needed to be to at least $14,000 per sale.  At that level however, their customers wouldn’t have felt they were getting particularly good value for money.

The bottom line is this:  The most important skill a real estate salesperson brings to the table is the ability to negotiate.  A great negotiator will always attempt to achieve such a high price or create such a magical deal that their client (the homeseller) feels as if they haven’t paid a fee at all.  Worst case, a great negotiator’s client should feel that the fee they paid was incredible value for money.

The Joneses agents were paid a salary.  The best negotiators (in any field except politics) don’t/won’t work for a salary.  The money they earn is in direct proportion to the number of people they help and dependent on their client’s total satisfaction.  The Joneses obviously employed some outstanding people, but it would have been impossible for them to attract the calibre of great negotiators they would have needed to keep afloat and grow their business.

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2 Responses to “Joneses Liquidated”

  1. Steve,

    A very balanced opinion on the matter, I commend you for this as I have heard some less charitable comments within the industry.

    I think any industry needs to embrace change and accept competition for without it such an industry will either be faced with an eventual major paradigm change or the consumer will vote with their.

    As to The Joneses business model – the issue was not unusual and has been faced by many a start-up company: how can you get enough sales to generate enough free cash to compensate for my “burn rate” depleting my start up capital. The answer for The Joneses was not price as the price had to be below a sensitive threshold to demonstrate a real point of difference. The issue for The Joneses was volume sales. They needed by my estimates 120 per month to cover the existing cash burn rate of c. $800K per month. This just to break-even. All this data was detailed in the analysts report that accompanied the prospectus for the reverse listing.

  2. stevesrant said

    Thanks Alistair, agree your comments. Thanks for your support. I enjoy reading your blog too!

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