Monday, April 28, 2014

A tale of scale.

  In the past four years I have had the need to sell two houses. One in Stockholm, and the other in Florida. One sold, the other didn't. This is a tale of scale.

  To many people the image of Sweden is probably of a chilly place with somewhat grumpy socialists marching across the frozen landscape. Florida by contrast is a wonderland of palm trees and happiness. But I digress...

  When I contacted my broker in Sweden, he came by, we discussed the market conditions (a bit mediocre in 2010) and signed an agreement. Since I was on the road a bit we arranged for the house to be shown in my absence. 

   In Florida, I also contacted a broker I knew and arranged for the house to be listed. Market conditions were a bit better in 2012, so I was optimistic about the prospects for the house. This house was also being sold with me being out of town.

   Two houses, both in desirable settings, were being sold in roughly the same manner, at least from my perspective as the seller. 

   Where things became very very different was in the approach of the broker. 

   My broker in Stockholm takes very few houses to sell. But they ALL get sold. He puts his time and effort into it, and the listings are exclusive to him. 

   He took a decidedly average house in a nice suburb and had it sold well above our expected final price within a matter of a few weeks. 

  Why? Because he is focused on very few things professionally. He takes in listings which he is confident he can sell, and then puts his efforts into making that happen. In this case he even, at his own expense, detailed the property. 

   By contrast, the broker in Florida has many many listings, all in the MLS. He's a good, hard-working guy, but he's focusing on running his business, rather than the individual listings his firm has.. His money is in having enough inventory that some houses move and they take a cut. He is, in a word, scaling. 

   In fairness, they did put some effort into it. But the focus of the business is too spread out. The effort to market the house was just not sufficient. It sat and sat, until the market just sort of forgot about it and I had it removed from the market after several months.

   The moral of the story, is that while scale might sound very appealing, it doesn't work for all businesses. For me as a client, I was much better looked after by my broker in Sweden. 

   Client's don't care about your market share, or your reach. The internet reaches everyone. We want to be looked after. In a business involving such an intrusive process as selling a home, being another number feels lousy. Having the home not sell, worse.

   I even wonder if scales works for the big broker. The smaller operation is less visible, but also less stressful, highly profitable (virtually no overhead) and he has the luxury of turning away business. The larger operation is a machine with a lot of moving parts. All of which must be kept working for the business to survive.

   In businesses that are totally data driven, with wafer thin margins, scale is a necessity. But in businesses where humans matter scale can be a stressful, counterproductive mistake. 

   To me, the equation looks pretty simple. Sometimes scale just doesn't work. Grow at your peril.

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