In June 2015, I was presented with a huge opportunity: Zoocasa.com, the real estate resource owned by media giant Rogers, was being shut down. The site, which generated real estate leads for agents across Canada, had operated since 2008, but was no longer profitable. However, it had a fabulous brand presence and a well-established url – and so, just days after its demise, a group of investor partners and I rallied to purchase it, with a focus on the following assets:
- Brand awareness that is 82% higher than the next competitor
- Unique monthly visits of 500,000+ per month
- The fact that $4.4 million in commissions had flowed through the site in 2014
What we literally obtained in the purchase, however, was a web address and suppository full of code. And as we knew the existing business model wasn’t working – the cost of acquiring customers far outstretched any hope of profitability – it was time to take Zoocasa.com in a new direction. We have since started to pivot, using the assets available to us to create a new model – the real estate brokerage of the future.
Taking a New Approach
Fast forward to today: we’ve spent the past year overturning the business model, with a strong focus on what Canadians want when they search for their real estate options. Rather than farming leads out to agent members, we’ve brought that aspect in house with a fully-staffed brokerage. We’ve also rebuilt the website and its architecture from the ground up, resulting in a beautiful new platform that makes looking for or selling a home a more intuitive experience.
The ability to pivot is incredibly important for FinTech companies, especially those of us in the transactional services industry. Unlike pre-revenue social unicorns, we need to make money! And so, our goal has been to pivot until profitable – an insight I was able to share with an audience of innovators and creators at FinTechTO’s December showcase.
Here’s a recap of what I shared with the group.
What Do You Really Need to Pivot?
Did you know: Startups that pivot have 2.5 times more money, have 3.6 times better user growth and are 52% less likely to scale prematurely? Seems like a great argument for taking a new direction – but it’s important to consider the following when determining if such a move is right for your business:
- Is your customer acquisition cost greater than the lifetime value of their business?
- Are there market changes your business cannot weather?
- Is your market too small to sustain growth?
- Are users unwilling or unable to pay for your product?
If the answer to the above is a resounding “yes”, then perhaps you should consider pivoting your business – changing one of the fundamental pillars of your model while keeping one foot firmly on your foundation and values.
Think Profit, Not Just Passion
According to a study from CB Insights “no market need” is the number one reason startups fail. That reflects the need for solid strategy when creating your business. Are you truly solving a problem for your end consumer? Are you offering your products to the right market segment? Should you really be offering a service, which includes the provision of your product, rather than trying to sell it directly? It’s important to take an honest look at whether you’re offering the right thing, to the right people, at the right time.
Disruption is Overrated
“Disruption” is a much-used buzzword in the startup space, and while the idea behind it seems appealing – shaking up the status quo with a new and better way – your business could experience great wins and support through a collaborative and cooperative approach. In our case, the real estate industry has always revolved around a hands-on, personal service model. It’s an important experience for the customer, and an essential part of the transaction. We strive to support that aspect, while at the same time introducing new technological advancements that do change how customer interact with agents and search for homes.
Should You Grow, Or Pivot?
Knowing when, and by how much, to scale your team is a make-or-break stage of any startup. It signifies the time when you must know 100% whether to commit and invest in your original concept – or whether you should enhance it with other ideas. It’s a fact that 74% of online startups fail because of premature scaling – forcing growth before the product, or market, was ready. By contrast, those who scale properly see growth 20 times faster.
Above all else, startups have to be brave, and willing to test the waters of change. And, while finding the right mix for your business is crucial to its success, heed the famous words of Drew Houston of Dropbox: “Don’t worry about failure… you only have to be right once.”
