Leadhome: Changing The Home Buying Process In South Africa

Leadhome: Changing The Home Buying Process In South Africa
28
Jul

Co-Founder of Leadhome, Marcel du Toit, On What it Takes to Solve a Unique Problem, Be a Successful Entrepreneur, and More

Marcel Du Toit hails from the Western Cape Province in South Africa and completed both high school and university in Stellenbosch, attending Paul Roos Gymnasium and Stellenbosch University. After getting his bachelor’s degree he earned a scholarship for Oxford in the United Kingdom where he earned his master’s degree in finance and management. He then performed strategy consulting in London and eventually returned to South Africa.

Following the return South Africa, Marcel became more involved in mergers and acquisitions with the international investment bank Deutsche Bank until 2014 where he left to pursue entrepreneurial ventures.

How Leadhome Solves a Huge Problem

Du Toit partnered with Hendrik Vorster Hattingh to create Leadhome because he saw that in regards to the real estate industry, everyone seemed to dislike the real estate agents. He mentioned that there are a few reasons why this mentality is directed toward real estate agents.

One of these reasons is that estate agents charge a very high percentage commission fee to sell properties. In South Africa the average commission taken from the sale of your property is between 5% – 9% of your property value. This used to be alright if you were purchasing the property as an investment back in 1980, but with today's technology it does not make sense anymore.

With services like Uber and AirBnB that are making services and entire industries more transparent, it occurred to us that the real estate industry had not caught up with these changes. When Du Toit’s fellow co-founder, Hattingh, mentioned that there was a better way to do things, they set out to solve the problem of people disliking estate agents by providing better service at a much lower cost.

Leadhome’s Approach

At first they targeted the online estate agency industry only by building a platform that could connect buyers and sellers without the use of an agent to remove the middle man in the deal. This would drastically reduce fees for both sides. The more they looked into this idea though, they realized that the agents were actually the added value in the whole process.

Upon understanding the value of agents, Du Toit and Hattingh built a model that used the best parts of the real estate agency industry which included the estate agents themselves, their experience, and history of understanding the trends and prices of an area. These characteristics combined with new technology so their agents could perform more effectively while costing less than traditional estate agencies.

By combining agents’ knowledge and experience of an area and an online platform, the agent is able to get you the best price possible because they know the quality of schools nearby, how far of a walk it is to pubs and restaurants, and more.

Leadhome does not believe in commissions so they provide the best real estate agents at the lowest flat-rate possible. Du Toit says this is because it honestly takes the same amount of effort to sell a $10 million home as it does to sell a $100,000 home so Leadhome only charges about 25% the cost of its competitors in South Africa.

As of now Leadhome is in a race of its own in South Africa because the next form of competition charges twice as much so Leadhome is in its own bracket. Du Toit wants to focus on the residential sector of South African real estate because they are only in sales at the moment, but he is looking to launch new ventures for the company to expand services offered for commercial, industrial, and retail properties.

Company Operations

Leadhome uses their online platform to connect with their clients, but their main distribution channels are really their agents. Du Toit explains that their company, “trades in trust” and believes that clients deeply need to trust their agents to sell their houses and get great prices for them.

In order to fulfill this way of thinking, each agent is placed on a salary to remove any conflicts of interest. If an agent works only on commission based off of houses successfully sold then they are incentivized to get the sale done at all costs which can lead to delivering advice that is not always the best for clients. To incentivize customer service, if an agent gets a five-star rating for customer service they get a bonus. This has worked extremely well for the company so far and has aligned the interests of both the sellers and agents.

Another way Leadhome separates itself from competition is by opening hours of operation from 6:00 in the morning to 10:00 at night. Most of the competition is closed when their clients are available and this can cost a business. Especially if your clients work from 8:00 in the morning to 5:00 at night, adjusting your times of operation makes complete sense. Their online platform also allows them to keep a 24/7 service open for any clients who want to schedule a property viewing or a meeting with an agent.

To increase transparency throughout the entire process the company is also implementing an end-to-end transparency platform. This will help clients through a stress-free experience because selling your house is one of the most stressful situations just after divorce and death in the family.

Marketing and Customer Acquisition

To market their company, Leadhome uses all distribution channels except print to get their message out. Marcel explains that around 92% of buyers come from online platforms through companies like Zillow, Realtor.com, or Redfin. Much of the marketing Du Toit likes to focus on is brand marketing.

Specifically for Leadhome, the company uses newsletters, social media, and Google AdWords. They try to be more active than normal, small agencies. Another important channel is very important to their marketing as well: Word of mouth.

They have seen a fantastic response form their clients and received five-star ratings from every client they have dealt with so far. About 50% of their business is just a result of people standing around barbecues, having a beer, and talking about their new real estate agent that is giving great service and shaking things up.

Leadhome Growth Intentions

Currently Leadhome is in Johannesburg, which is the biggest and richest city in South Africa. They have ambitious plans to expand and become a national company, though. They are aggressively growing their team and company but they emphasize that their growth will not come at the expense of their clients. As they continue to grow they still want to make sure they retain their personal touch to keep the five-star ratings coming.

Starting off, Du Toit and co-founder Hattingh financed the startup all with their own capital. They started quite small but as of lately they have seen exponential growth so they have considered taking on the right investors to raise capital. They like the idea of raising money because it would allow them to grow quicker, but they are focused on keeping their strategy at the moment.

Biggest Lessons Learned in Startups

In both of his first two failed startups and his current growing one, Leadhome, Du Toit mentions he realizes that running a startup is a learning curve and a big thing he learned is to approach building a business methodically.

He also says to make sure that you have done as much as you can to understand the industry and the opportunity. If they have a hypothesis that is wrong then they pull it and continue to improve on their processes. Marcel told me that the biggest thing he had learned so far was that you can do as much research and talk to as many people as you can, but the only way you can really learn is by doing.

To aspiring entrepreneurs, Du Toit advises to get out in the industry, talk to people, actually get into the market, and try everything you can. The biggest characteristic an entrepreneur should have is to hustle as much as they can. It is also mandatory for you to build a strong team around yourself. He advises to focus on doing whatever you can to get the best people, do not be too hung up on your ownership, and make sure everyone is incentivized.

Increasing Skills and Learning

Outside of running his business, Du Toit is currently learning coding. He never got a chance to delve into the field because of his studies in finance and management, but he realizes that as his company becomes more of a technology business, coding will be a great skill to have. It also helps him have meaningful conversations with his CTO.

In his opinion, one of the skills you can never stop learning in people skills. You need to be able to interact with your team members, make sure that everyone is able to work together, and make sure people understand each other and retain open lines of communication.

Marcel Du Toit’s Favorite Resources and Tools

Marcel du Toit prefers old-school tools like excel mostly, but to run the business he likes using Google’s technologies to communicate and perform.

The Top Five Principles and Values to Achieve Success and Happiness Marcel du Toit Would Pass on to Future Generations

Five principles Du Toit would pass to his future generations would be hard work, honesty, seeing people as human and understand where they are coming from, understand people’s motivations and goals even if it is not always possible, and surround yourself with people that inspire you and help you grow into a better person.

Top Books Recommended by Marcel du Toit

Books that have helped him grow and become inspired consist of, The Lean Startup by Eric Ries and  Zero to One by Peter Thiel.

The Startup Culture in South Africa

A huge startup culture is forming in South Africa. Cape Town is what they call Silicon Cape after the famous startup area of Silicon Valley. Silicon Cape is where you see a lot of young people heading for university, starting innovative ideas, and creating businesses. Johannesburg, where Du Toit is from, is slightly less than Cape Town because it has more of an industrial economy.

Because the United States has had a big impact on the entrepreneurial spirit in South Africa. As the United States shows how advanced they are, how many problems they have solved, and how many lives they have improved and this sheds hope on South Africa. There are so many more problems in South Africa, and the whole continent in general, that there is a large amount of opportunity to solve problems and help people.

The More You Learn, the More You Earn

Find out more about Marcel du Toit and Leadhome by heading to www.leadhome.co.za or contact him directly by email at marcel@leadhome.co.za.

You can subscribe to our podcast HERE in order to hear audio with more information like in this article and follow me on Twitter at @mclaubscher for daily content.

Live a life of passion and purpose on your terms,

M.C. Laubscher

 

This presentation is for educational and informational purposes only.The information being presented and considered does not consider your particular financial objectives or situation, and it does not make personalized recommendations. This material is not intended to replace the advice of a qualified tax and legal advisor or other qualified professionals. And you should not use the information in place of a customized consultation with a licensed professional regarding your specific personal financial objective situation and needs. We believe the information being provided is reliable, but we do not guarantee its accuracy, timeliness, or completeness.

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