Want your business to be more profitable? Leave the office

A remote structure can help start-ups find a buyer willing to pay top dollar

Content of the article

Nothing against brick and mortar, but if you’re considering starting a business that doesn’t require a centralized location, these are two things you can probably do without.

Advertising

Content of the article

Ditching the office can not only make your business more profitable day-to-day, but also help your business sell for more when the time comes for you to move on.

“Looking forward, we expect a greater share of new businesses to be completely off the mark,” writes David Rowat, partner at strategic investment firm Strategic Exits. “The economics are just too compelling.”

From real estate crisis to online boom: eXp Realty

Working with researchers from Harvard Business School and University of British Columbia, Rowat recently reviewed the case of eXp World Holdings, an all-hands-on real estate brokerage firm with operations in the United States, Canada, Australia and the United Kingdom, and how the company’s performance compares to one of its leading physical competitors, Redfin.

Advertising

Content of the article

eXp was launched in 2010 amid the collapse of the US housing market. The company’s founder and CEO, Glenn Sanford, ran a traditional brokerage until 2008, but after the market collapsed and revenues dried up, Sanford calculated that the only way his company would survive would be to cut back. its overhead costs.

So he moved his business online. All training and teamwork would take place virtually. More headquarters. No more desks 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 that Redfin made use of.

Between 2015 and 2020, eXp’s revenue grew from $23 million to $1.8 billion, a 78-fold increase. Over the same period, Redfin’s revenue grew five-fold, from US$187 million to US$886 million.

Advertising

Content of the article

As of January 19, 2022, eXp was valued at US$3.96 billion, which is significantly 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 retail spaces has allowed eXp to roll out a number of initiatives that have made it attractive to job candidates, from profit sharing and from stock options to investments in new technologies that give its agents a competitive edge.

“eXp’s virtual operations have positioned the company at the forefront of the residential real estate industry,” writes Rowat.

The world is your talent pool

Rowat says the benefits of going remote aren’t limited to the real estate space, nor are they solely related to reducing overhead and freeing up capital for innovative compensation plans.

Advertising

Content of the article

In staffing, for example, an online business has the ability to hire workers from anywhere.

“You don’t have to hire people just because they live an hour from your Vancouver headquarters,” Rowat said. MoneyWise. “You can hire them in the Philippines, Bangalore, Singapore – anywhere like that, which means you have the opportunity to attract the best employees in the world. You get very strong people and low salary costs.

That’s certainly the case with 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 defined radius of our Toronto headquarters, Blockthrough has been able to source talent globally,” said company CEO Marty Kratky. -Katz. “We were able to find amazing people with the skills and experience to quickly grow our business to the point of capturing the attention of the Globe. »

Advertising

Content of the article

With a group of skilled employees working in a low-cost environment, a company can boast two qualities – profitability and growth potential – that large corporations look for when in acquisition mode. Rowat says a remote structure can help start-ups more easily find buyers willing to pay top dollar.

“The more profitable it is and the faster it grows, the more it is worth. And remote businesses have a distinct advantage in both categories,” he says.

The sale of a business can also be a bigger windfall for its owners if it was kept away from the start. By requiring less capital to start, a virtual business will not have as many outside investors to receive the proceeds of a sale.

Advertising

Content of the article

Remote businesses still need strong management

Some business owners may be reluctant to step away from bricks and mortar, fearing they will lose control or that their employees may struggle to stay engaged in the isolation that daily work from home entails.

But after being forced into a remote work environment amid the COVID-19 pandemic, Rowat says many workers are starting to see the benefits of not having an office to report to, with commute time recuperated. leading among them.

Nonetheless, it’s your responsibility as the leader of your company to create a remote work environment that helps employees connect with each other and feel valued as part of a team.

“It’s up to management to make sure everyone is engaged, that they’re kept informed, that their ideas are listened to, and that they get praise for the good work they do,” says Rowat. .

Advertising

Content of the article

For eXp, this involved the US$10 million acquisition of VirBELA, a technology company that has created an entire virtual world in which company employees can interact.

Jeff Whitehead, chief financial officer and chief collaboration officer at eXp, acknowledges that this type of expense will not be feasible for all businesses. But it’s crucial, he says, that companies follow eXp’s lead in one key area: commit to going completely remote.

“I think successful companies go out of their way,” he says.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Advertising

comments

Postmedia is committed to maintaining a lively yet civil discussion forum and encourages all readers to share their views on our articles. Comments can take up to an hour to be moderated before appearing on the site. We ask that you keep your comments relevant and respectful. We have enabled email notifications. You will now receive an email if you receive a reply to your comment, if there is an update to a comment thread you follow, or if a user follows you comments. Visit our Community Rules for more information and details on how to adjust your E-mail settings.

Comments are closed.