Times are Tough (part 2)

I just wanted to follow up on the article i wrote yesterday with some more thoughts on what property portal sites should do in the current financial crisis.

I came across a presentation from Sequoia Capita on startups and the economic downturn.   The key messages are similar to the ones i wrote in the previous article however they have gone into more depth and i thought i would summarise them here for everyone.

Here are the key messages:

1. The recovery will be long – dont expect a quick turn around
2. There are new realities – raising money on high speculative valuations is a thing of the past and series B and C funding will be very very tough
3. Customer take up of businesses will be slower than projected
4. Expense cuts are a must
5. You have to become cash flow positive

 

It is all about survival for your business.  To do this, you will need to:

• Have a “must have” product
• The revenue model must be established – no time for speculation / experimentation
• You must be realistic and understand market uptake
• Cutomers must be able to pay for the service
• Cash is king
• Have to become cash flow positive

In cutting costs, they suggest the following areas be investigated:

• Decrease engineering head count
• Reduce the features of new products to those that are essential
• Measure and cut those marketing elements that are not working
• In sales and business development, are you getting the returns on any investment
• What does the sales pipeline look like and are they realistic sales
• Delay payments to manage cash burn
• What other costs in the business are just not essentia

I think their summary is great – here are the main points:

• Perform a quick situational analysis
• Adapt quickly
• Use a zero based budgeting approach
• Make cuts
• Review salaries
• Employ a heavily commissioned sales force structure
• Bolster balance sheets
• Become cash flow positive as soon as possible
• Spend every dollar as if it is your last

The best part of the presentation are pages 39 – 56 (Read it here)

1. Times are Tough, Portals Should Tighten their Belts

   The credit crunch and the collapse of the financial markets can only mean one thing - the days of easy access to funding is well and truly over. In a recent article on cnet titled "VC's throw cold water on portfolio companies", VC's and angel investors are giving their portfolio companies a clear message - prepare for the worst. So what sort of preparation as they talking about? They are suggesting cutting marketing costs, reducing G&A costs and even laying off staff. The way angel investor Ron Conway put it in a letter to his portfolio companies is "This is the equivalent to "raising an internal round" through cost reductions to buy you more time until you need to raise money again; hopefully when fund raising is more feasible." Therefore what does this mean for the property portal sites around the world?...

2. Strategies for Tough Times Workshop

   The Property Portal Watch Workshop in New York is rapidly approaching. This workshop will help the owners and operators of property portals around the world share their experiences and gain useful insights into how they can improve their operations. We have had a strong response with over 40 attendees from 15 different countries. Attendees to the free workshop also receive free passes to the Inman Connect conference held at the same venue from the 7th to 9th January. Read on to find out more ... ...

3. Strategies for Tough Times Workshop

   Whether we like it or not, today's operating environment is getting tougher and it is important that all property portal sites have the right strategies in place to ride out the storm and hopefully improve their market position in the process. We have therefore decided to hold the first Property Portal Watch Workshop to address just this very issue. Property Portal Watch, in conjunction with the team at Inman News, are proud to announce the free Strategies for Tough Times workshop to be held on the 6th January in New York - the day before Inman Real Estate Connect conference. In addition, the first 50 people to register will receive free passes to the Inman Real Estate Connect conference. This is one workshop and conference owners and operators of property portals shouldnt miss....

4. zillow.com Lays Off 25% of Workforce, What Future Does it Have?

   Zillow has announced that it is laying off 40 people or 25% of its work force. This reflects the tough times that the business is facing and raises questions about its long term viability and if it will ever financially live up to its hype. Read on for more ... ...

5. REA Group Announces 47% Net Profit Growth but No Dividend

   The REA Group today announced $11.4 million in first half profits, a year on year growth of 47%. Underlying this growth in profit was a year on year growth in revenues of 28% to $91.3 million. The key driver of this growth continues to be the Australian business, which delivered a 26% year on year increase in revenues and a 40% increase in EBITDA. However, while operating cash flow was $10.2 million, the Directors again failed to declare a dividend. While on the surface these look like strong results, especially given the economic environment, a closer look reveals that revenue growth appears to be slowing. The business may be in for a tough second half of 2009....