Kylie Davis: (00:01)
Welcome to the Proptech Podcast. It's Kylie Davis here, and I'm delighted to be your host as we explore the brave new world where technology and real estate collide. I passionately believe we need to create and grow a sense of community between the innovators and real estate agents, and sharing our stories is a great way to do that.
Kylie Davis: (00:20)
Now, the aim of each episode is to introduce listeners to a Proptech innovator who is pushing the boundaries of what's possible and to explore the issues and challenges raised by the tech and how they can create amazing property experiences.
Kylie Davis: (00:34)
My guest in this episode is Domonic Thompson, national head of real estate at Macquarie Business Banking, one of the country's largest and certainly most engaged bankers to the real estate industry, and Dom has more than 15 years' experience in banking in the real estate sector, and he's been a driver behind the Macquarie Real Estate Pulse Check, and that's a regular survey of the real estate industry that has put data behind what excellence looks like in the industry since 2007.
Kylie Davis: (01:03)
Now, the Macquarie benchmark provides data to show how agents are typically performing, both nationally and at a state level across a range of metrics, including the size of their businesses, commissions, rent rolls, profitability, and revenue, and over time, this has created an extraordinary detailed picture of what success looks like in real estate in Australia.
Kylie Davis: (01:27)
Now, Macquarie were about to release their 2020 report when COVID hit, and so the whole thing got caught up, and you may not have heard about it, but there are some extraordinarily valuable findings in there, and I feel really privileged that Dom's here to run us through the highlights. So, here to tell us all about it, Domonic Thompson, welcome to the Proptech Podcast.
Domonic Thompson: (01:46)
Thank you very much for having me. It's great to be here.
Kylie Davis: (01:48)
No worries. Great to have you onboard. When we start an interview on the Proptech Podcast, we always do an elevator pitch. So, I'm going to put you on the spot and ask you what the Macquarie elevator pitch is in the real estate and Proptech space. What do you do? What problems do you solve?
Domonic Thompson: (02:05)
The elevator pitch. Jeez, it's been a while since I've heard that term. What do we do? Look, we're very privileged at Macquarie to have had such an engagement in the space for such a long period of time. So we've been banking professional services firms, and specifically real estate agents, for about 35 years now.
Domonic Thompson: (02:23)
We have a large number of clients, an excess of 2,000 clients across the country, that we've been helping for a long period of time, and obviously over that period of time, have utilised the insights and the relationships to build out bespoke tailored products and services to the market.
Domonic Thompson: (02:41)
But beyond just the products and services, I guess, because we're in a privileged position, I'm going to share insights around high performance, trends, and how we see the market moving forward. It's a very fortunate position that we're in, and hopefully that's enough of an elevator pitch for us.
Kylie Davis: (02:57)
That'll do us. Yeah, that's cool. So, tell us a little bit about you. How long have you been at Macquarie for?
Domonic Thompson: (03:02)
I've been at Macquarie for about 13 and a half years now. I've started with Macquarie at the Perth office at that point. Now, in Brisbane, I've been here for the last three, three and a half years. Out of that 13 and a half year career, I would suggest that 13 of that has been in the real estate space, so I've been an account manager, managing clients. I've been a business development manager, looking at the growth of our business. I've had some responsibility for looking after some of our offices, and now, I'm looking after the real estate segment as a whole, which incorporates both the residential and the commercial space for Macquarie.
Kylie Davis: (03:43)
Fantastic. The reason I wanted to get you on the show was because I wanted to talk about the latest benchmarking report and the perspective stuff that came out just as COVID hit, didn't it? It's kind of got a bit lost, but I was having a read of the report, and there's some fantastic stuff in it.
Kylie Davis: (04:02)
Tell us a little bit about the report and the data. What's come out of it?
Domonic Thompson: (04:08)
Sure. It's interesting to reflect on the survey. Macquarie's got a proud history of delivering insights through benchmarking and pulse checks, and this is probably our sixth or seventh iteration over what's now a 10-year period. Always great to see what's going on and support the anecdotes and observations of what we see with some data. Excuse me.
Domonic Thompson: (04:33)
We actually brought the pulse check to market at the back end of last year, and we were ready to release at the beginning of this year, but obviously COVID, and we turned our attention to looking after our clients and very much focused on our clients and providing them with tools and resources to help them navigate what's clearly, obviously, still a current situation.
Domonic Thompson: (04:57)
As we've done that, we've realised that, whilst we put pulse check on hold, there were certainly some reference points in what pulse check and benchmarking were showing us that we could relate to, so that's why we're now bringing pulse check to market a little bit later than what we thought.
Domonic Thompson: (05:11)
What's it telling us? Look, three key trends for me. One is that there continues to be a downward pressure on both sales and property management commission. I won't get caught in the numbers for the purposes of our catch-up, but the trend is still downwards, across both sales and PM.
Domonic Thompson: (05:28)
The second trend is that property management is growing in importance. We've seen effectively a doubling of portfolio sizes, of properties under management over that 10-period that we've been conducting this survey. We've gone from about 350 on average back in '09 to about 750 now. So, it's seeing that really grow and scale and consolidate through.
Domonic Thompson: (05:54)
As that goes forward, we're also seeing the percentage of overall revenue that's coming through property management also continue to increase as well. There's a lot more investment of time, resources, in property management as part of the traditional business model.
Domonic Thompson: (06:10)
Finally, I guess, it's that profitability and revenues continue to come under pressure, and it's hard for any business to maintain a consistent, improving profitability or revenue line. As part of that, we actually singled out high-performing agencies that have looked at some of the characteristics of those and how some of those businesses really looking to buck the trend across all of those metrics and really dig deeper into it so that we can share that with the industry and certain with our clients.
Kylie Davis: (06:43)
Let's explore that a little bit because, Macquarie Bank, you guys are quite high-end banking, I guess, and so you would be servicing probably some of the bigger end of the market or the top end of the market. Is that true, or is that a bit of an urban myth?
Domonic Thompson: (07:01)
Look, it's an interesting observation. I think we've never taken our latest approach to market. Our clients range from ABC Real Estate to start up, right through to relationships with some of the corporate franchises across the country. We pride ourselves on our ability to take clients on that journey. Sorry, and to also make the point, but we have varying degrees of relationships with clients.
Domonic Thompson: (07:25)
There might be some that we're purely helping out on a transactional basis and helping them with payments and streamlining the likes of accounts receivable, and then we've got both, so we've got more comprehensive relationships with. We're not only providing products and services, but we're helping them on a journey about planning and looking to the future, of what the future of real estate might look like.
Domonic Thompson: (07:46)
I think it's fair to look, on average, and say, "Well, what does a Macquarie client look like?" Typically, they do have larger properties under management. I think across that book probably around the region of around 700, which is actually the industry average as it related to the pulse check survey that we had. Many might argue with that, but from our respondents, from our survey, late last year, 750, as I mentioned before was the number.
Domonic Thompson: (08:11)
They typically do have more scale, but that's usually an end result with being part of a journey, and our clients tend to think more strategically about the services that they offer and what their business looks like and think about it tactically.
Kylie Davis: (08:27)
Yeah. Cool. It is, however, the most comprehensive survey of real estate businesses and what they're going through though across the country, isn't it? Even if I'm not a Macquarie customer, the data that you guys are pulling out is still probably relevant to me as a business, so there's stuff I can see in that and learn from.
Domonic Thompson: (08:47)
Exactly. It was the highest engaged survey that we've ever conducted. We had 731 respondents. We don't get the granular data about who specifically. We get data around geographical splits, and obviously the data that's [inaudible 00:09:01] to report back, but I can't tell you how many of those were clients and/or prospects.
Domonic Thompson: (09:07)
I think just given how long the benchmarking report has been in the industry, and obviously the high regard that many hold it in, I think we do tend to egt a lot of engagement from people that may not be clients, but we certainly hope at one point that they will be.
Kylie Davis: (09:23)
Cool. The three trends were pressure on sales and declining commissions, property management becoming increasingly important, and then impact on profitability. You guys also have a reputation for being quite across and engaged in the Proptech community. What are some of the things that the Proptech industry can take out of those three key trends? What does that mean for us?
Domonic Thompson: (09:51)
Look, I think when we look to high performing businesses, agencies, there certainly was a trend to an increased tendency to learn into the Proptech conversation and engagement of tech solutions. I'm trying to remember the numbers specifically. High performing businesses, I think, had at least one more, and again, we're reporting on average against the prescriptive number, which, as I said, wasn't exhaustive.
Domonic Thompson: (10:21)
High performing businesses were typically utilising more tech than those other agencies that maybe weren't performing under those higher metrics. When I talk about high performance, we were typically looking at businesses that were generating greater than 20% profitability, turning over an excess of a million dollars, and had a really strong focus and mindset around adaptation. It's no surprise with that adaptation mindset that they are utilising more technology.
Domonic Thompson: (10:49)
I think it's more than just that. It's not just a propensity and an appetite. It's almost an excitement around using and trying and making mistakes and learning along the way, which I think is going to be a real critical characteristic for any business moving forward, regardless of real estate, but we're obviously talking real estate today.
Domonic Thompson: (11:09)
I'm also mindful that real estate has been on a journey for a period of time around technology, and it's really been the current backdrop that's driven a real strong acceleration towards tech, which is great, and I think many businesses from recent experience will realise that maybe tech isn't as fearful as I thought it would be, about embracing and the change management, and not to obviously underplay change management and the importance and how much effort goes into it, but I think many businesses are learning that the tech's actually not something to be as fearful of as they once were, and they're seeing the benefits across their business, with their staff, and with their clients as well.
Kylie Davis: (11:50)
Is it fair to say that the tech that these high performers are adopting are across those three key insights? So, looking at technology that can certainly improve their profitability, or automate, and make things more efficient, improving their performance of their property management team, and then also looking at other revenue or ways to offset the downward push on sales commissions?
Kylie Davis: (12:22)
What are you seeing?
Domonic Thompson: (12:23)
I think it's fair to say that we're all starting to understand that there's a number of different lenses by which we need to look at technology, and clearly some of it's around efficiency and what it can do to help lower cost, but as we get greater appreciation for the employee experience and the correlation between the employee experience and the client experience, I think we're starting to look beyond the numbers, to see the actual benefit of using technology as an enabler.
Domonic Thompson: (12:52)
Yes, it's definitely ... I think the more that tech is driving efficiency, it's removing process and automating things that should have been automated many, many years ago, and having people more focused on delivering the [inaudible 00:13:07] and the relationship and not simply processing if it's a paper or inputting data, and the risks of that. Let alone the onerous aspect of role descriptions where it's not exactly necessarily the most enjoyable part of anyone's day.
Domonic Thompson: (13:24)
I just think there's a greater sense of appreciation that looking at technology to provide solutions can have many forms, by which you look at it in the first instance, but the many benefits that might come out of it certainly go beyond what the initial interest of that is. It's certainly helped.
Domonic Thompson: (13:41)
I think property management, to your point, I mean we're all aware that property management is a very sort of onerous part of a business. There's a lot of heavy fixed overheads that are in there typically around headcount, but not limited to headcount. And no surprise that that's where a lot of technology has been focused, so people are starting to outsource and automate. Some of that's been forced through the likes of social distancing recently.
Domonic Thompson: (14:05)
But again, having done that and seeing that, okay, well the client experience hasn't been impacted. My staff are telling me that they love the fact that they didn't need to go out and do that, or it made it easier. Okay, so what do I now do with this person because I can now use him to do other things that maybe are more enriching than what they were currently doing. Maybe it's more aligned to their skillsets or their desires. It makes things more interesting.
Domonic Thompson: (14:31)
I'm excited around how numerous ways we can look at this, and that people are starting to look at it through a different lens than just simply a cast out sort of process.
Kylie Davis: (14:43)
One of the things that I love about the report is that it makes that connection, and I think puts some data behind this idea that technology is actually a leadership issue now. That it's about how your curiosity as a leader and your interest in your business actually often helps you lean into tech solutions because you're looking at constantly solving problems in a better way.
Domonic Thompson: (15:10)
Yeah. It's interesting. We look at tech, but I think you can put it under the banner of innovation, and when we ask the industry to report back on what some of these barriers to innovation were, time was the most critical factor. It's hard to find time when you don't have anyone specifically accountable to driving another agenda.
Domonic Thompson: (15:29)
I think certainly another characteristic of high performing businesses is having extended leadership teams and extended number of people by which you can drive accountability to metrics that contribute to success. So, appreciating that there are many, many businesses out there that are sole proprietors that are probably trying to pedal fast and do everything. I think it's incumbent on them to look at their team more broadly and establish a leadership team that can help drive some of these agendas and drive accountability.
Domonic Thompson: (16:01)
So for those that do have the privilege of a broader, essentially, equity ownership within their business, it's really exciting when you can see different skillsets come in and drive all these different agendas that can help take the limitation of time away because you've actually got people ... That's their key role. I think if it's not someone's key role, it needs to be part of someone's role because if you're not driving accountability to it, it's simply going to fall by the wayside.
Domonic Thompson: (16:32)
That speaks not just to innovation and the likes of technology, but I think anything that you're trying to drive in a business, is having that accountability to it.
Kylie Davis: (16:41)
Yeah. Yeah. Absolutely. And now, let's hear a word from our sponsors.
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Kylie Davis: (17:53)
So based on the data, Dom, what was the proportion of the industry of high performers that you guys are seeing?
Domonic Thompson: (18:00)
So, out of the sample survey that we had, so out of the 731 utilising the characteristics that I outlined before, so around 15% that fitted that sort of mould of turnover and profitability and mindset. I think that's a fair representation. I think many of the industry are certainly still on a journey, and we're looking for some clarity and guidance around what the answer is.
Domonic Thompson: (18:29)
I think we all just need to get comfortable with the fact that there isn't a specific answer, but at the same time, we need to be all doing something, and that something can differ from business to business because at the end of the day I think when we view tech more as an enabler than as a passport to the future, that's going to be the core foundation that everyone will look as a base case for operating.
Domonic Thompson: (18:56)
It's then going to be, okay, how do we build the value proposition on that to really differentiate ourselves. If we take that mindset into the journey, we'll appreciate tech is just the inevitable component. There will be elements of that that we will plug and play as we navigate the future. Plug and play, I do think, is the future. It's not a case of having the same mindset that we've typically done in technology of saying, "Here's my partner, and that will be partner for the foreseeable future."
Domonic Thompson: (19:23)
I don't see any need to change that in the next five or 10 years. I think, great, that we're seeing the incumbent tech stack improve and innovate, and that's driven a lot of the innovation in the industry. It's not necessarily that people have done something different. It's just that the current tech stack is improving, but I think we need to be open to the fact that we will be plugging and playing different modules for the foreseeable future around, okay, well, that doesn't work for me anymore, but this new and shiny, or this, maybe it's an existing incumbent that's just developed a head of other competitors in that specific field, and that's where business owners need to be focused on, on what their business needs to look like, and how they will build that architecture with these different components.
Domonic Thompson: (20:07)
That's why it's going to need some accountability.
Kylie Davis: (20:10)
Yeah. That creation of the architecture, of that building of the plan is to ... What you need from a tech point of view, that really does come from its heart at your vision for what kind of service you want to offer and what kind of employer you want to be, and your whole business philosophy, doesn't it?
Domonic Thompson: (20:29)
Exactly right. Exactly right.
Kylie Davis: (20:31)
No, I get really excited about this. It's like, finally, it's not a tech problem. It's a leadership/human thing.
Domonic Thompson: (20:37)
It's a great point, Kylie. I mean vision and strategy, I think, is so particularly important, and it always has been, but I think now more than ever, when we're navigating these uncharted waters, and I say that not just through a COVID lens, but this transformational pace, that I know you and I have had numerous conversations about over several years, and it's just that COVID has accelerated a real drive and push to address some of this transformation by pure necessity.
Kylie Davis: (21:10)
Well, it gave us a whole lot of time suddenly, didn't it?
Domonic Thompson: (21:13)
It did. It did. It stopped us from engaging face-to-face and having to put wet ink on paper. It just forced a heap of people to all of a sudden find ways to get things done quickly. It's amazing how much more productive we've become through COVID through necessity again because we've had to get things done, whereas we always thought we were working hard, but we're probably realising we can work harder as long as we don't burn ourselves out, which is another agenda.
Domonic Thompson: (21:38)
Back to your point on vision and strategy, it's so critically important. Another element that came out of the pulse check when we were asking our respondents to rate the importance of certain attributes for success and high performance, and vision and strategy was a component of that. Industry rates the importance of vision and strategy really highly, the highest. It's what's needed to be able to be successful, and yet on self-rating, probably one of the poorest metrics that the industry rates itself.
Domonic Thompson: (22:10)
Yes, we get that vision and strategy is really important, but in terms of doing, we're probably not where we should be, and there's some room for improvement there. Other interesting elements that came from that was execution as well, so if you think about vision and strategy, and obviously, there's numerous decisions that need to be made on a daily basis. Numerous decisions of the day that will need to align to this broader vision and strategy that you're bringing your team on.
Domonic Thompson: (22:37)
Again, execution, pretty important. Self-rating? Pretty poor. I think there's a real opportunity to focus on certainly those two elements, and there was a few more that were referenced in the report. Okay, we're going to need to this vision and strategy. We need to get off of the hamster wheel, get off the dance floor, up on to the balcony, and just have a little bit of balcony time to think about what this is all about, where we're going, and the journey that we're taking people on.
Domonic Thompson: (23:08)
Our team are up for the journey, and they like the future and what this might look like because it will probably involve new role descriptions, job descriptions, and accountability, but also to ensure that the decisions that we're making around the likes of the tech that we're investing in, et cetera, et cetera, are aligned to the long-term plan, and that the partners that we're partnering with are working in conjunction with that and in harmony with that agenda.
Kylie Davis: (23:33)
We're seeing a real shift change at the moment, aren't we? I think this is one of the astonishing times that we're in. We're moving away from this idea that there is one person who is the boss, who is the head of the business, who has to make all the decisions and have all the answers, and one tech platform that does everything or does things your way, to moving towards ... into an environment where we are much more collaborative, much more open to making people accountable and sharing responsibility, and recognising that we don't necessarily have the answers.
Kylie Davis: (24:13)
At the same time, the technology is basically more open API, connected, pushing solutions to the people who are best able to solve those problems rather than one person being that key commander at the top responsible for everything. My question, because that was a bit long-winded, sorry about that. My question in that space then becomes: what is the role of franchises in this space? Is it in that leadership conversation, or how to ... these new skills around strategy and vision, or what should the franchisers be offering to their offices?
Domonic Thompson: (24:54)
I think there's a lot that business owners would be looking to franchise for. I think there's a real opportunity to demonstrate value in this environment. Again, I'm talking not just COVID, but just the broader transformation because there's so many different ... I wouldn't say agendas, but there's so many different things to be thinking about, whether it's my tech stack, whether it's how I improve CX, whether it's how I improve EX, and the types of people that I want to recruit, so recruitment.
Domonic Thompson: (25:25)
Whether it be marketing, whether it be building out ancillary services. Clearly for businesses of scale, and it's not just limited to businesses of scale, but for those that have larger businesses where they can direct accountability for a lot of different things to different individuals, that's easier than it would be for the majority of the industry that still, to your point, struggles with limited leadership scope outside of potentially one individual that's just done everything their way. It's just the way it's always been.
Domonic Thompson: (25:59)
Let's face it. It hasn't. It's worked, and on that basis, if nothing's broken, I don't need to change that. I'm not saying that there's not a relevance in the future for those businesses. There certainly will be, but it just depends on, again, the vision and strategy of what do I want to be. Is that what I want to be, or do I want to be on a journey where I want to take my business on a journey of growth and look at it through a different lens? In order to do that, I need to think differently about how I drive all these agendas within my business and potentially look to empower people through accountability and obviously some transparency to help that as well.
Domonic Thompson: (26:38)
Back to your question, I think there's real opportunity, and arguably, it's playing out where franchise owners can deliver great value to their businesses around a lot of competing agendas. I think the challenge is which ones do they focus on and which ones align with the agenda of their franchisees.
Kylie Davis: (26:56)
Okay. The Australian market has been extraordinarily challenged, not just through COVID, but actually over the last 12 months. When we look back to March last year, we were coming through the election. Transaction volumes have been down for a really long time. Do you think that's made us more resilient as an industry? Do you think we've been coping or dealing with this for a while?
Domonic Thompson: (27:21)
Yeah. Definitely. Look, I take my hat off to all of the business owners there that have ... We obviously have an unprecedented period of growth Australia. We were very fortunate for a long period of time and saw a lot of success within the industry during that time, and then we had ... I think we held our first perspective conference back in early 2018, and literally as soon as that concluded and we talked about all this wave of challenge that might be coming ...
Kylie Davis: (27:49)
And, bang, it happened!
Domonic Thompson: (27:52)
Bang, it happened!
Kylie Davis: (27:52)
It's your fault. You conjured it.
Domonic Thompson: (27:58)
We predicted it. That's all we can say. We didn't realise at the time exactly what would be the straw that broke the camel's back, but it was very much around the timing of lending restrictions that was really trying to prevent this bubble that was happening on the east coast in the investor market. It clearly had a significant impact to the extent that we saw the backend of FY18 into FY19, and basically, that financial year really just be a mess for a lot of people. Volumes significantly down and people needing to adapt.
Domonic Thompson: (28:34)
People were having to make some hard decisions and get accustomed to a business performance that they just weren't accustomed to. Numbers down materially. In some instances, we were seeing up to 50% down year-on-year from a number of clients. Then, in the middle of FY19 or FY19, we saw the general election, and things picked up again, and we saw that play through right to the beginning of the year. We saw it really play through to Christmas, and people were wondering what would happen when we came back and we saw it continue until COVID hit.
Domonic Thompson: (29:06)
Yeah. I think there's a lot of resilience that's been built in. For me, people are still needing to make harder decisions now than they did during FY19 because this has been sharper. Hopefully, there's some early signs of optimism that are already coming through, but I think some of the decisions that people were able to get away without making during '19, they've now had to make early in order to ensure that there's liquidity in their business to carry them through what's inevitably going to be some quieter months.
Domonic Thompson: (29:37)
Certainly in June, July, August, I think, from a cash play perspective, because we've seen obviously the volumes over recent weeks diminish. That's where we hope that our clients are focused and the market more broadly, on that liquidity. If you can make it through the last 18 months, you've built up a fair amount of resilience, what I simply hope is that that resilience transitions into building a business and reestablishing a business that's more built and robust as it relates to that volatility, which is outside of everyone's control.
Domonic Thompson: (30:11)
How do we look to really ensure that we've got that resilience in our business so that we know what levers we need to tweak when we need to, if volatility comes through again, and/or how do we continue to build up the cash flow of our business to make it as less exposed to sales as we possibly can? Now, everyone's go a different agenda around that, and I'm not suggesting that everyone needs to, but we're certainly seeing a lot of businesses continue to drive up what we call fixed cost coverage ratio. That is a percentage of their costs that are covered by recurring income, and being less exposed to trying to cover costs by making sales.
Domonic Thompson: (30:48)
It will typically always be a gap, but many, many businesses are on that journey, certainly looking to lower cost to serve, be efficient, to ensure that sales is more focused around profit and not cost recovery.
Kylie Davis: (31:03)
We're now in a period, aren't we, or a time, where the idea that you could start up a real estate business and just last from good market to good market, and just kind of hope that the bad market's kind of get out of the way, is no longer a business plan. That you need to be actually really resilient and squirrel away the money for the bad times, and to actually have a business plan and strategy and vision that recognises that it's not if winter comes, it's when ... Winter is going to come, and it will be here again, so to really make the best of it while it's there, but run your business really tight all the time, not just when times are tough.
Domonic Thompson: (31:48)
Exactly, and obviously with varying degrees of experience in the market, there were many that pre-FY19 really hadn't seen anything like that before. Albeit, there's also a number of people that had, that had been around running a well-established business for a number of years that, okay, this just happens, and we'll get through it, and everything will be fine.
Domonic Thompson: (32:09)
I think we all had that view of everything will be okay at some point, but it's being prepared and ensuring that you know what to do within your business to adapt to that specific point in time. I think there's a couple of things here around ... There's one around adaptation for the longer-term, but there's also the ability to adapt for any given set of circumstances that you might need to navigate potentially on a shorter-term basis.
Domonic Thompson: (32:37)
Some people adapt with a longer-term plan and don't need to kind of deviate away from that because they effected involatility into their business and are more resilient through building our recurring cash flow and income and being less exposed to sales. That doesn't mean they're purely property management only, but there are also those that have probably got a greater sense of appreciation for, okay, I know what I need to do in my business if my income level is over here or here. Understanding what you need to do is half the challenge.
Domonic Thompson: (33:07)
I think it was fair to say there was a lot of conversations that we've had in the market where people just simply didn't know where to start, and as it relates to the work that we've been doing in recent months with COVID coming through and we could see what the pain was going to be and where the pressure would come in coming months around cash flow. It was just getting people early to start thinking about where are you going to make the changes. That's one thing. Then, it's, okay, what's the timeline here?
Domonic Thompson: (33:40)
From my experience, having worked through Perth and the resources kind of going bust, and I remember seeing a number of clients that got their head around the decisions that they had to make, but it's inevitable ... Well, it's not inevitable. It's interesting to see how long people will potentially put that off as long, as long, as long as they can. Whereas we know making those decisions early can ultimately put you in a better position moving forward than delaying those inevitable choices.
Speaker 4: (34:09)
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Speaker 4: (34:22)
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Speaker 4: (34:37)
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Speaker 4: (34:51)
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Kylie Davis: (35:17)
There's two things I want to talk about. One is, because I remember from the 2016 report that you did or something, one of the findings that struck me was that when times are good and when you're making an awful lot of money in real estate, one of the findings from that report was actually that doesn't actually mean you're in a good state, that your business is being brilliantly run.
Kylie Davis: (35:39)
We could see that in the data, that there was a lot of businesses in that report that seem to be creaming it in terms of revenue, but their profitability was really low. It talks to that piece around needing to actually understand what's going on really underneath the hood of your business, and where you're spending the money, and whether it's getting your costs down and that impact on profitability.
Kylie Davis: (36:06)
Do you think that's what our lesson from COVID has been? To actually really understand what's going on in our businesses?
Domonic Thompson: (36:16)
Look, I definitely think there's a greater appreciation for the cost structure of the underlying business. There's probably still too many businesses out there reporting on a consolidated PNL basis and don't really understand, well, what's the profitability of PM, what's the property of sales, and whilst one might look good at any point in time, sales, as an example, that can quite easily be a rogue. Even then, if that does happen, how does my property management stack up on its own profitability?
Domonic Thompson: (36:46)
The fact that many business owners have had to really get the gloves off and delve into my financials, my financial position both within my business and personally, understand what pressure I'm potentially putting on the business personally, what's going on within my business. Things that I'm paying for that I didn't even realise, subscriptions that I'm not even using anymore, and probably realising how lazy and sluggishness elements of their business are.
Domonic Thompson: (37:19)
I think there will be a greater sense of appreciation for the financials. Many businesses will now start reporting separately. We see a majority of high-performing businesses, if not all of them, reporting separate profit centres, not only for their business around sales or PM or any other aspect that they've got, but they're also drilling down for the individual.
Domonic Thompson: (37:40)
The individual property manager within property management, the individual salesperson within sales, and understanding, A) what that person's costing me that goes way beyond just a common split that looks at all the other ways that you're supporting those individuals.
Domonic Thompson: (37:55)
Also, within property management, okay, well I'm paying my property managers a similar amount, but yet they've all got portfolios of different asset values and income and profitability, so is it fair that I'm paying them all the same on the basis that each of the portfolios is dropping me a different level of income?
Domonic Thompson: (38:13)
I'm not proposing a single answer to any of those problems, but I think going through the process gives you a greater understanding of how the business is actually working on a day-to-day basis. It will enable us, from that greater appreciation, make better informed decisions on A) what our business looks like moving forward, B) but also when things change where we've got some opportunity to lower our cost to serve a client and make things easier to serve a client so that we can use the headcount to be more focused on revenue generation or cost management than simply conducting a process, which obviously, in most instances, is driven by legislation and regulation.
Domonic Thompson: (38:56)
As we see that evolve and be more embracing of tech solutions, that will only help us empower our people to delight our clients, and from that, generate more revenue opportunities.
Kylie Davis: (39:10)
Cool. You said that in this report, too, it states that basically the size of a typical rent roll has pretty much doubled, that we're seeing bigger rent rolls. What we've also seen in the PM space or during COVID is we've seen that people can work from home, and in PM especially, with the dominance of women in that part of our industry, this is going to open up, I hope, more job opportunities or more flexible career structures for PM, especially if you're managing on outputs and accountability rather than clocking in and off into the office.
Kylie Davis: (39:49)
Let's sort of play this out a little bit. What do you think the future ... Are we going to see a bigger split in the industry of offices that have got their act together, that know how their businesses are running, and are becoming mega offices that are much more professional and well-structured compared to the mom-and-dad shop things? Do you think we're at that point where we're starting to break away from the mid-size average office?
Domonic Thompson: (40:18)
Yeah. Look, to a certain extent. I mean, clearly the current environment is accelerating at a number of different agendas, and work flexibility is certainly one of those where we've all had to embrace it. I'm in my 11th week of working and living under the same roof, which poses its challenges.
Kylie Davis: (40:38)
Have you got the COVID crazies?
Domonic Thompson: (40:40)
COVID crazies. There's certainly silver linings to these dark clouds, and I look at it through a Macquarie lens and know how we're talking within our business, and we will not go back to doing things the way we've always done them.
Domonic Thompson: (40:56)
Clearly, there will be certain elements of our business and the way that we go about it internally that will remain the same, but I think we've all got a greater sense of appreciation for the fact of less travel time to work for me, less jumping on a flight numerous times in a month and what that can mean, not just for inefficiency at work, but also the home life, as well, and consuming your time.
Domonic Thompson: (41:21)
I think when we start to look at some of these benefits, it does lend itself to, okay, well, what does this mean for empowering staff at home? What does this mean potentially for small businesses being able to be set up and working remotely, and I definitely think that there's a place for that, but also for these larger businesses that could arguably be more efficient, more profitable, by taking up less floor space and empowering their teams to work away from the office, which many have already been doing.
Domonic Thompson: (41:54)
I think not only are we seeing that productivity is maintained, but more importantly, if not equally as importantly, if not more importantly, we're seeing that our staff are loving it. I think what we're seeing is that typically staff are loving it. They still want the connection. We're probably more connected than we've ever been through the likes of video links, and I think staff will still want somewhere to go. Maybe they'll go in the office one or two days a week, but not five, because they'll still want that part of work, but I think what we should be thinking about is, well, where is the opportunities more broadly.
Domonic Thompson: (42:27)
If we're doing this, if we are enabling self-service with our clients through tech in many instances where we're not adding value, how do we get these people that potentially working from home, not coming into the office, how are they engaging with people, with our clients? What do our clients expect in terms of how they're engaging? Just because they're working from home doesn't mean that they can't meet with clients. Maybe clients would prefer to meet up at their local café rather than come into the office and see someone face-to-face.
Domonic Thompson: (42:55)
Again, this is all really exciting, and I think not only should it be exciting for business owners, but it's an exciting conversation to engage with your team and see where the benefits have come through this whole experience, and how they will play not only into a new business model, but, I think, improved efficiency, greater profitability, and a more engaged client relationship as well.
Kylie Davis: (43:19)
Yeah. I really hope we don't end up bungee-stretching this and sort of bouncing back too much. Dom, quick last question. What do you reckon the next five years olds, or even the next three years, as we come out of this? More flexible work, more understanding of our businesses, but what does your crystal ball say about the future of real estate and Proptech?
Domonic Thompson: (43:50)
The context around the environment for a period of time has been sub-scale, lack of efficiency, and people really struggling to make that next time in the absence of equity and the ability to scale and consolidate, which we've seen continue to play out, and as evidenced through the numbers.
Domonic Thompson: (44:12)
I think that consolidation agenda will continue to play out. I think sub-500 is still a hard place to be in terms of properties under management. Albeit, saying that with the accelerated push towards technology and automation, we'll see businesses benefit from the current experience to be more profitable than they had been pre-COVID.
Domonic Thompson: (44:34)
I think we need to adjust ourselves to a new normality of activity levels around sales volume. With that, knowing that we're probably not going to get back to where we had been for a period of time, it will just continue to push this focus on understanding how I can make my business more efficient, how I can utilise tech to enable my business, how I can use it to improve my employee engagement, how I can use it to improve my client experience, and seeing how those actions lead to the results rather than being so focused on the results.
Domonic Thompson: (45:15)
I think, for me, that's what we'll see. We will continue to see consolidation. It doesn't mean that there's not room for anyone that's not sub-scale. I think it's all been about a value proposition, a bespoke value proposition in market, and relevance to your specific geography or subset of the market. I do think that we will continue to see people embrace technology with a greater propensity than we have done for a period of time. Albeit that lens that will continue to be challenging around the number of participants and the number of solutions that come into the marketplace to solve for a myriad of problems.
Domonic Thompson: (45:56)
That's the real focus around tech is ensuring that you're investing and partnering with the right provider that is aligned with vision and strategy that's helping you to the long-term goals of your business.
Kylie Davis: (46:09)
Fantastic. Now, listen, I also understand that in your personal future, you are expecting your first baby soon. So, congratulations on that.
Domonic Thompson: (46:19)
Thank you. Yes, we're very close. We're literally two weeks out. If I run away ... [crosstalk 00:46:24]
Kylie Davis: (46:24)
If it turns up on time. [crosstalk 00:46:26]
Domonic Thompson: (46:32)
... the chat right now, you'll know where I'm going. No, it's all very exciting. We're contributing to the corona generation. It's not quite the backdrop that I was expecting to be having a first child, but it makes it all the more interesting. Yeah, exciting times are here.
Kylie Davis: (46:43)
At least you'll be able to stay home a bit more and you won't be expected to jump on a plane. I'm sure your wife will be grateful for that for the next 12 months.
Kylie Davis: (46:50)
Dom, thank you so much. It's been fantastic to talk to you on the Proptech Podcast.
Domonic Thompson: (46:54)
Pleasure. Thanks, Kylie.
Kylie Davis: (46:55)
That was Domonic Thompson from Macquarie bank. Now, you all know me and my love of data. This is one of my favourite real estate reports. I'm seriously like a kid at Christmas with this thing. It gives us such a clear and insightful picture of what the practise of real estate looks like across Australia. I think it really needs to be more broadly understood and adopted by the industry.
Kylie Davis: (47:19)
Now, if you're in a Proptech and you want to understand the real estate both nationally and at a state level, don't go to the real estate institutes. They can't help you. They don't have the data. You want to check out the Macquarie benchmark report, and so I've included a link in the show notes.
Kylie Davis: (47:35)
With each of these reports, the picture gets clearer and clearer. That those businesses that use technology to improve the efficiency of their back office, to reduce their admin and costs, and which have a really strong vision and mission for their business, that have strong leaders, and where their staff are really engaged, these are the most successful businesses. It's not about scripts and dialogues. It's actually about leadership.
Kylie Davis: (48:01)
What we see in this latest report is unarguable data that shows that the importance of automation and AI, the value of relationships both with customers and our staff, the importance of humble leadership, and how property management really needs to be the beating heart of every real estate business.
Kylie Davis: (48:18)
So you can be the world's best agent at listing and selling, but if the business fundamentals in your agency are not working around these things or working on improving that stuff, you are going to be in a world of pain. So grab a copy of the report, and if you're an agent, see how your business compares. If you're in tech, see how your innovation talks to one of these key things.
Kylie Davis: (48:39)
Now, if you've enjoyed this episode of the Proptech Podcast, I would love you to tell your friends. Drop me a line or an email or say hello on LinkedIn or on my Facebook page. You can follow this podcast on Spotify, Google Podcasts, Anchor, and Apple iTunes. I'd like to thank my audio support, Charlie Hollands and the fabulous Jill Escadero, and our sponsors, Smidge Wines, official wines of the Proptech community, HomePrezzo, turning property data into amazing marketing content, and of course Direct Connect, making moving easy.
Kylie Davis: (49:13)
Thanks, everyone. Until next week, stay safe and keep on Propteching.
Content marketing strategist, researcher, journalist and presenter specialising in the real estate industry. I'm passionate about proptech, digital disruption and all things property, big data, leadership and entrepreneurial ideas, have an MBA and specialise in social and digital media content creation and automation.