Housesimple is confident of hitting profitability early next year and hopes to cover the whole of the UK within 18 months, its chief executive Sam Mitchell has revealed.
Mitchell, who scrapped all fees for the vendors using the online agent earlier this year, said the indicators from its initial rollout of the service in Yorkshire and other parts of northern England suggest it is destined for profit.
Speaking to EYE, Mitchell said: “We would like to cover most of the UK in the next 18 months.
“We need to make sure we get the strategy right first.”
Rightmove figures show Housesimple currently has 2,315 listings, of which 969 are either under offer or sold subject to contract.
Mitchell revealed he has been told by Rightmove that it has the equivalent of 91 branches of stock.
He said Housesimple would make money from its mortgage broking, conveyancing and home moving services but said it wasn’t obligatory for vendors to use them.
Mitchell said the agent was also hopeful buyers using other agents would use its financial and moving services.
He said only 3-4% of its seller and buyer base would need to interact with its financial services to “make it stack up”.
He said Housesimple has already overtaken Purplebricks for market share in Yorkshire just 12 weeks after launching the free service.
Mitchell declined to reveal the agent’s conversion ratio and use of its financial services but said it was “broadly in line with what we want”.
He said the next rollout would be in “densely populated, lookalike towns” to where it currently operates in Leeds, Manchester and Liverpool.
Mitchell said he was unconcerned about rivals such as Yopa raising more funds.
He admitted Housesimple may need more money from its backers Toscafund and Carphone Warehouse founder Charles Dunstone to expand but said it was important to have the right strategy rather than a “money first approach”.
Mitchell said: “Our backers are supportive and we have a running dialogue.
“If you take a money first approach then you have to outspend Purplebricks.
“The important thing is to differentiate. I would be more worried if others were changing their strategy.”
Comments (20)
Madness
The nuts are running the nuthouse
Plainly just a data harvesting operation.
Is there any way of finding out what House Simple actually pay for their Rightmove subscription? Not an approx but true verified figure. Sam was their head of lettings before joining House Simple and perhaps has managed to secure a favourable deal to make his 0% less of a burden than what a full paying member may find it.
An essential membership per branch is £1,200 + VAT per month, this is what a local agent would pay for example. In theory every ‘virtual branch’ should add an additional £1,200 per virtual branch. However online and larger cooperates can negotiate the cost per branch down. The most I’ve heard is to reduce it by about 30% per branch – perhaps Russel Quirk could weigh in to confirm? –
Per branch you can list an unlimited number of properties within your radius, which is the town/area you operate in. Any properties outside that small radius are then added to your virtual branch total. Worked out as 31 properties per virtual branch.
So any local agent managing more than 31 properties in their radius, is in fact paying a lower portal cost per listing then the online agents. That is a massive advantage to local agents.
Of course all these rates can increase if you choose the ‘Enhanced’ or ‘Optimiser’ packages with Rightmove, which add things like the banner adds you see on House Simple’s listings, so in reality House Simple are probably paying more than what i’m estimating.
Sure I understand what House Simple ‘could be paying’ but what are they ‘actually’ paying. Just trying to establish if prices can decrease on a ‘Used to be a director of Rightmove’ package.
Is there any way this figure can be known? Is it ever declared anywhere?
Not to my knowledge. Only way to know is Rightmove insider looking it up. Not public data.
The economics of House Simple’s statements. I’m not sure it adds up
Just the rightmove cost per virtual branch is about £1,000 a branch, so based on 91 branches that equates to £91,000 + VAT a month!
However Mr Mitchell has exaggerated this 91 branch claim some what, as a branch equates to 31 active properties e.g. not SSTC. Currently they have 2,603 active properties which equates to 84 branches – i guess close enough to 91. Still would be £84,000+vat Rightmove cost per month.
Zoopla’s pricing is a little different, based on 40 listings per virtual branch but this includes SSTC. So that would equate to more branches, however their cost per branch is lower. I estimate Zoopla bill to be £48,000 + VAT per month.
So portal cost totals £132,000 + VAT per month. with 2,603 active properties that is a cost of £50.71 per month per listing.
They pay their local agents £100 per listing, So if on average a property stays on market with them for 3 months (we all know probably longer), just those two costs alone equate to £252.13 per listing. Before you consider their overheads, call-center costs, importantly marketing acquisition cost etc.
I’ll let you guys decide on the conversion economics to cross-sell conveyance/mortgages, I think the reality is each listing on average costs House Simple about £400-500 when you add on the other associated overheads etc.
Maybe if for every property, you had the seller or buyer or prospect viewing take up two units of Mortgage/conveyance referrals… they might just about break-even.
I believe they are banking on:
1. This ‘free-service’ proposition catapulting their popularity, drastically reducing their acquisition cost per customer.
2. Developing tech and training call centers to better convert data into capital. I do not believe at the moment they have demonstrated enough revenue from their data to justify this ‘free’ service. I think they believe they can over come this by better managing their data to achieve it…. and I think they will fail.
As per HS last published accounts (y/e 31.3.2018) the total portal cost was Approx £500k.
Their T/O for the year was just £2.5m and the annual losses were £13.5m (after tax).
That’s some mountain to climb !
At least they will cause some disruption for their fellow disruptors 🙂
“I’ll let you guys decide on the conversion economics to cross-sell conveyance/mortgages”
Here, hold my coffee.
Conveyancing;
HS are partnered with My Home Move so I would estimate £500 referral fee per case.
Let’s generously assume HS are on it with applicants and refer as many purchasers as they do vendors for conveyancing, so multiply ref fee by 2.
Average 26% of consumers use conveyancer recommended by agency according to recent article from PIE.
So I would estimate average revenue per *completed* sale is £500 x 2 x 26% = £260
FS;
HS are partnered with MAB, I assume they’ll net 25% of proc fee and protection insurance products.
Average new UK mortgage is £160K and average percentage of proc fee paid to broker is 0.4%
I don’t have a figure for % of consumers that use broker recommended by estate agency but let’s use 26% as above for conveyancing.
Crude calculation for % of mortgageable purchase opportunities: FCA reported 549K resi mortgages executed by brokers in 2016, and land reg shows 980K purchases in 2017, so let’s say 56% (549/980) of new purchases are mortgaged by brokers.
For protection insurance products, I‘ve been told 45% conversion rate on £700 gross referral fee is realistic, and agent would net 25% of that.
So I would estiamte average revenue per *completed* sale is ((£160K x 0.4% x 26%) + (£700 x 26% x 45%)) x 56% x 25% = £34.76
So that’s £294.76 from the 2 biggest ticket referrals, and one would expect HS will work/innovate hard to maximise their conversion rate. They’ll clearly need to also squeeze as much revenue as possible from removals & utilities but I’m curious to understand how can they can “make it stack up” at 4% conversion rate when I’ve assumed 26% above.
Imagine the pressure put on the listers to get the leads that can convert to revenue.
What is laughable is the way people with no idea of the strategy of HS or any understanding of the terms of their investors, make comments like you are all experts. Get on with your own agencies and keep quiet about businesses you know nothing about
Yes Sir!
Perhaps you can explain then?
I don’t understand from their press release!!
From the last published accounts (y/e 31.3.2108) they spent £5.8m on PPC – T/O was just £2.5m.
For the previous year they spent £2.6m on PPC – T/O was £2.2m.
As that strategy didn’t appear to work – they now have a new one !
“He admitted Housesimple may need more money…”
That’s pretty much a dead cert – HS and YOPA were on track to run out of cash about two months ago.
The rudderless ship that is PB may be about to enter choppy waters as the trio fight over the FSBO share of the market.
What a joke, they are massively overvaluing houses.
I went to see an old client in Glaisdale, North Yorkshire who had been conned by this “free service”. They had been told £150,000 more than it was worth and HouseSimple have been sacked in less than 3 weeks.
Classic case of filling up the books. No such thing as a free lunch!!
Rightmove and trading standards should be guarding the innocent / greedy git sellers by banning this practice. Just like payanyway schemes.
How exactly would you do that then? Trading Standards Officers have to be qualified RICS Surveyors and check every listing in the UK to make sure an agent doesn’t list it above an arbitrary percentage above their survey valuation? Of all the preposterous ideas I have seen suggested on here over the years that has to be up there with the most silly.
Bottom line is if they are making money on referral fees only then the clients are still paying for it. If clients used their free service only and got their own mortgages / lawyers etc at cheaper prices then HS don’t have a business. Very high risk indeed and hard to believe 3-4% is going to keep them afloat
3-4%?? This is either incorrect, or the fees HS are making on FS must be astronomical. Chap this isnt the 1990s, estate agency cannot survive on FS business and the other referral fees you hope to rinse clients for. And the fantasy of getting other estate agents clients to use your add-ons is laughable when most people haven’t heard of you.
This sounds more like a puff piece ahead of another round of financing to me.