Creating a new Flywheel.
I confess to being hugely influenced by Jim Collins and hence his latest monograph, “Turning the Flywheel”, might not resonate with you as much as it has with me. That said, having read it three times in the last week, (it’s very short), I’m confident I won’t be alone in suggesting this update to “the ‘flywheel effect”, a concept first introduced in Jim’s 2001 book, “Good to Great”, could be of equal importance to the original bestseller.
I must also admit to being attracted to loops or systems that repeat. These were first introduced to me by my most inspirational mentor, Colin Blundell, also about two decades ago, so maybe the connection was always there just waiting to be made.
I declare these potential biases as I’m going to stick my neck out even further than usual and say this concept is one of the most powerful business models that’s been created. I’ve attempted to apply it to estate agency but must qualify that the three examples I’m going to share today are first drafts that I fully expect to be amended and improved in the coming weeks and months.
I summarise the flywheel effect as being what happens when a company invests all it’s effort and resources into an appropriate activity that is extremely hard work but then, in time, gets the right results faster and faster, better and better, building on its own momentum to become if not unstoppable then a force that’s extremely hard to counter. Rightmove has a brilliant flywheel, so too Moneypenny – their flywheel looks like this:
There’s no “one size fits all” flywheel, indeed I’ve created three initially for estate agency. The first is based on my observations of Alexander Phillips, the $10million agent and Australia’s number one for several years running.
Alex told me the first rule of becoming a $10million agent is to find an area where there’s $10million or more of commission to be made. Some agents operate in locations that effectively cap their earnings at a much lower figure. His flywheel is then based on prospecting which he does relentlessly every single day making over 100 calls. This leads to sales success which he makes highly visible thereby raising his profile. This attracts a referral network within his marketplace with whom he reciprocates.
Note: the flywheel never gets easier – it requires continuous investment – however the results get better and faster, the return on effort increases and improves unless and until it wears out (requiring replacement) or becomes neglected, typically through complacency.
I’m sorry to say that the traditional estate agency flywheel doesn’t work any more.
Two things have caused the model to break – first the land registry publication of all sold prices, (which previously only estate agents knew), and secondly, Rightmove as a source of nearly all the current stock. These two combined means that the “expert knowledge” of old is now freely and widely available.
Instead we’re working with many of our members to build a flywheel like this:
The “new traditional agency” model requires a much higher level of service to the customer than previously necessary. This requires a different profile of agent, one that totally gets what service is truly about.
Rather than listing anything and everything, instead only taking on properties at the right price and fee followed by marketing them brilliantly well to achieve above average results which in turn enables investment in the best training and incentives thereby attracting the “right” people.
At the other end of the market, I think the flywheel PurpleBricks and perhaps some of the other new models have set out to build, looks like this:
The model requires marketing costs to reduce as brand awareness builds which would appear not to have happened yet. Likewise, rather than delivering a market leading service, offering one that is average but much cheaper as this will appeal to a selection of the mass audience but note, the bar is set at industry average, not below average.
If you would like to explore how your flywheel might look like then join other leading estate agency owners at a Property Academy Leadership Mastermind Group workshop. We have two free trial events, one in Surrey on the 21st March, details here and another in Peterborough on 3rd April – details here.
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