Chain of command
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9/12/2009 12:00:00 AM
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Countrywide Plc group CEO Grenville Turner's late afternoon presentation to the St.George Flame broker group on diversification last year was as unexpected as it was inspiring.
He kicks it off on an attention grabbing note by saying: "I think it is a fair summary to say that at Countrywide we will do anything to do with property that will make money."
Inside heads perk up. Some would call Countrywide's modus operandi ruthless - others business smart. Either way, the company must be doing something right because Countrywide Plc is still one of the top providers of services relating to residential property in the UK.
Leverage
It aims to "sort of" do everything to do with property in the UK; to leverage opportunities with customers all the way through the home loan value chain.
"And everything hangs off a discipline of strict adherence to the Countrywide business model - which all starts inside the real estate branches," says Turner.
Each branch operates under a local brand name. One of the things Turner believes the big corporates get wrong when they acquire smaller businesses is they operate the new business under one brand - and chuck out all the goodwill associated with the original local brand.
"They put up a name that has never been there before, and has no association with the market. So they pay a fortune for what is called goodwill on a balance sheet and then they throw it all away," he says.
Countrywide's real estate market share in the UK is typically around 25%, and in some areas it is as high as 30%.
Another thing Turner is very comfortable with is his brands competing amongst themselves. This could be as many as four brands in some of the towns and cities where they operate.
His rationale is simple: "Any estate agency only sells 50% of the properties they take on. So when the customer moves his business to the next agency around the corner - it is also owned by Countrywide,"
Point of sale
In financial services, Countrywide is the UK's largest mortgage broker.
Last year was a tough one for the company. It only settled œ5bn in loans, down from œ7.5bn in 2007.
But here is the rub. From the 39, 000 mortgages it settled, the company sold 32,500 life policies and 38,500 general insurance policies.
So, says Turner, we cover the customers' entire range of needs at the point of sale.
"We tell the customer they are about to take on the largest financial commitment they've ever taken, and ask how they are going to pay it should one of them die," he says.
All of the mortgages written are introduced by the real estate businesses. Answering a question from the floor about what percentage of the mortgages written originate from sources other than real estate agents, Turner replies "none - it is not our model".
Another question. "The 39,000 mortgages would have come from 55,000 house sales?"
Correct, he says. According to Turner, Countrywide's cross-sales performance outdoes everybody "by a country mile"; and he puts it down to two fundamental aspects of the business.
The first is Countrywide recruits from outside the industry and trains all new consultants itself. The company has a five week program, where besides being taught the Countrywide way, consultants are told of the conversion rates they have to hit once they go out into the field.
The second is that all consultants are performance managed from the very beginning. Countrywide utilises a one in ten supervisory regime, so line managers see consultants every week and go through their business details and facts.
One transaction
You cannot buy a house from Countrywide without sitting down with one of its financial consultants first.
"Because part of our responsibility to the vendor is to say 'we need to know that you can fund this purchase' part of the transaction is that you have to sit down with one of our consultants.
"At that point we go through a full fact-find that determines whether the buyer can actually fund the purchase. Now we say 'we represent the vast majority of lenders in the UK, and would you like us to help you with a mortgage?' Our experience is that if we do this the transaction will go through more smoothly," Turner says.
It is not compulsory for the buyer to do the mortgage through Countrywide, but it is encouraged.
And at the same time customers are offered great deals with general and life insurance and other financial service products.
"I believe that if we can make the sales process as simple and straight forward as possible they are going to buy from us - and they do," says Turner.
Face-to-face
One of the differences between Countrywide and its competitors is its absolute believe in face-to-face sales delivery.
"We get the conversion rates others don't because we sit in front of the customer and we go through a two to three stage process with them," says Turner.
Brokers sit in the real estate offices offering loans from a limited panel of lenders (for simplicity reasons) Charging a fee-for service is not part of Countrywide's business model.
Not charging fees is something Turner debated long and hard, since most of the market is already moving in that direction.
"It's not because of sentiment or anything else, but the very simple calculation is we don't want to put any barrier in the way of a customer seeing a consultant and engaging with them. And a fee, we believe, does [create that barrier]," he says.
On the current conversion rates that Countrywide achieves, its average income per property sale transaction nearly doubles with every cross sale it makes.
"So am I bothered about charging a small fee and facing the prospect of losing that customer who won't engage with me? Not in the slightest."
Other services
Countrywide also values the properties it sells.
"So if you buy a house and arrange the mortgage from us, our surveyor does the valuation on behalf of the lender," he says.
At this point there is a huge outcry from the room. A conflict of interest, surely.
"Absolutely not," says Turner, "separately regulated, separate directors and interestingly enough we probably have the best record in the industry because it is not in our interest to screw it up."
The other thing is that if you can't sell the property through a private sale, Countrywide is the third largest auction house in the UK - so will put the properties into auction and sell them that way.
And in 60% of the cases where the company sells the house, Countrywide will also do the conveyancing on behalf of the client.
It's a pretty lucrative side to the business too. In July we made œ1m in a single month.
"We are now by far the largest transactional conveyancer in the UK," says Turner.
The conveyancing division is divided across two centralised units, since the [UK] Law Society requires that acting for the buyer and seller needs to be separated. And this is increasingly what Countrywide is doing.
"And the reason we do that quite simply is that we're open seven days a week, so you are able to contact a solicitor on a weekend when most transactions are going through," says Turner.
And that's not all.
"We operate about 100,000 properties under management," says Turner, "so that is where they are being let by both commercial and individual landlords and we find the tenants put them in and collect the rent."
And with fees ranging from 10% to 15% for the full period of the rent, he says it's a great business because 80% of the revenue is rolled forward - as long as you don't mess up.
"Our focus is very simple: market share, structural costs and fee levels," he says.
Business Model
The unique, yet ingeniously simple skill that Countrywide has is that it delivers integrated solutions with local expertise.
"The business model," Turner says, "is quite straightforward. You buy your home from us, we organise your financial services, we undertake the conveyancing for you, we check the value and condition of the property and we look after you afterwards."
If any issues occur in any part of the transaction, then Countrywide sorts them out for the customer - because in one way or another it is the same entity dealing with the deal.
And if it does it properly, Turner knows the customer will come back when they buy or let their next house.
"Ours is a philosophy of repeat purchase," he says.
Getting this interdependent cooperation right is driven partly out of a fear of getting fired - through the strong performance management regime - and partly through creating relationships of mutual dependency in the office.
"I am absolutely committed to the belief that if you handle the mortgage, you sell more houses," says Turner.
This is because often - and especially in this market - the mortgage is the element that causes the house sale to fall over, says Turner.
"So it's in the interests of the real estate agent that problems get dealt with in-house because we can sort it out by talking, understanding and explaining things," he adds.
The full rounded choice offered by Countrywide is competitive - but not cheap.
"I absolutely insist that we charge a premium for face-to-face distribution. All of our products are priced like that and we don't apologise for it.
"When people try and negotiate the rate down the standard answer is - which part of the service don't you want?" he says.
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