On today’s show we’re talking about the work from home trend that the pandemic seems to have amplified. Long before the pandemic, the warning signs were there in many industries. On today’s show we’re going to take a closer look at one company that was formed purely with the assumption of zero bricks and mortar locations for the entire company.
This company was newly formed EXP Realty, now a public company that has nearly 40,000 agents in the company. The company was formed in 2009 and has been slowly quietly building to create a breakout transformation of the industry.
If you consider that each employee in a traditional company would allocate anywhere between 200-300 square feet per employee, the annual cost of office space at $30 per square foot gross is about $6,000 per employee. For the company with 40,000 employees that amounts to a cost saving of 240 million dollars a year.
That’s a real saving of hard cash that can better be put toward creating a more competitive company.
The fact is, almost every real estate broker or agent has a home office, or at times a mobile office. What they need are strong systems. They need to be in the field with their clients.
The incredible part of their story is that they have been able to scale much more quickly than most other companies. The effort to onboard a single employee is much greater when they need to have a physical space, a physical desk.
The company is growing fast. Last year, the company grew from 500M in 2018, to 980M in 2019, and 1.46B in 2020.
Imagine if the company had a bricks and mortar footprint, would they have achieved the growth in 2020 in the middle of a pandemic?
The point of this episode is to highlight a business that is all about real estate, that has zero real estate. Think about it. That’s a pretty strong contradiction in terms for some. It might be ironic for others. But they own no real estate. This is not something that just happens. In order for a company to grow to 40,000 strong requires strong systems. It’s a little like the McDonalds philosophy. When Ray Kroc bought the original McDonalds locations from the McDonalds brothers, he didn’t focus on making a better hamburger. He focused on the systems and processes that would allow the business to scale. The systems would have to be strong enough to allow a Big Mac to taste the same in Tokyo or Tasmania, in Santiago or San Francisco.
That means an emphasis on training and onboarding of new staff, on having systems for routine transactions, and more importantly for having systems for managing exceptions.
After all, why do we need physical offices?
Some would say that physical proximity is needed for training. Well, that’s not strictly true. Some would say that you need to be able to walk down the hall and ask the boss a question when you have a problem. That’s not true either. You need a place to store all your physical files for security. Well, yes you do, but nothing says the file storage has to be centralized. If you have a system of electronic records storage, that data center is going to be internet connected anyway.
Real Estate as a business is hyper local. Being an agent or a broker in a particular area is hyper local. But operating a brokerage is geography independent. You need to localize certain forms to comply with local regulations, but the steps involved in a transaction are the same.
So the question remains, how many other industries can be virtualized? Does a law office need to have a physical office?