Changing Your Business Model
Entrepreneur Robert Reffkin knows what it’s like to turn around a business that’s in dire straits. With Compass, he had to help guide the company through several changes of direction and a couple of high-profile lawsuits.
After Compass launched in 2013, Reffkin and the New York-based real estate platform’s team decided that they had to completely switch up its business model. It ended up pivoting twice more finally arriving at its current state.
Reffkin says constant change put an incredible amount of stress on the staff.
“That was the most difficult challenge,” says Reffkin, the company’s co-founder and CEO. “People came to build one vision, and it was emotionally difficult for them to switch the vision of what they were building.”
Business Model Innovation
What changed for Compass? The company initially started out dealing only with rentals, but Reffkin and his team quickly realized that more than 90 percent of the U.S. market was in sales.
“So we pivoted to focusing on sales, which is a market driven by incredibly talented agents,” Reffkin said. “As a result, we went from building renter tools for consumers to sales tools for agents.”
Then came more problems. Over the past two years, the New York real estate firms Corcoran Group and Citi Habitats separately sued Compass over a range of issues, including database access and exclusive listings. The firms all reached confidential settlements this past August.
Then came the silver lining: A month after the settlements, Reffkin says Compass’ valuation skyrocketed to $800 million. This was the payoff for years of hard work.
Reffkin had met Compass co-founder Ori Allon years before, when Reffkin was working as a fellow at the White House. Reffkin went on to become chief operating officer at Goldman Sachs before leaving to start Compass alongside Allon.
Their simple idea? That the real estate industry was lacking from a technological perspective. That eventually became Compass, which has made big investments into making its online tools better.
“We are the first company that has raised over $100 million to invest in technology tools to improve how these stakeholders—agents, buyers, sellers—can work with each other,” Reffkin says.
Looking back, Reffkin thinks mentors are a critical part of his entrepreneurial journey.
“You don’t want to just learn from your own mistakes,” Reffkin stresses. “You learn from other people’s mistakes.”
Reffkin says his mother was his first mentor, and she’s supported him in all his endeavors, starting with his high school career as a DJ. She emigrated from Israel to Berkeley, California, where she raised Reffkin on her own.
“I think the most entrepreneurial thing someone can do is move to countries where they don’t speak the local language,” Reffkin said. “Throughout my life, she gave me a viewpoint that anything’s possible.”
Reffkin has found several more mentors along the way, including some high-profile business executives. But he also made clear that mentors don’t always have to be from above.
“I found a lot of mentorship from my peers, who faced the same challenges and opportunities,” Reffkin said. “Sometimes, they’re right next to you.”
Another important lesson Reffkin has learned while growing with Compass is to become replaceable. He says that one of his goals at Compass has been to make sure that up-and-coming leaders in the company can one day take over his job.
“I think in order for the company to grow, people need to grow,” Reffkin said. “In order for people to grow, you need to have others take on your responsibilities.”
Photo credit: Compass