Compass CEO and founder Robert Reffkin, in a wide-ranging conversation with Inman founder Brad Inman at the Inman Connect San Francisco conference on Thursday, revealed how much Compass pays to acquire brokerages.
Compass CEO and founder Robert Reffkin, in a wide-ranging conversation with Inman founder Brad Inman at the Inman Connect San Francisco conference on Thursday, revealed that Compass pays the broker-owners of the brokerages it acquires between four to six times its yearly earnings before interest, taxes, depreciation and amortization (EBITDA), depending on the size of the acquisition.
Compass has acquired four brokerages since January 2016 — The Hudson Company and Conlon Real Estate in Chicago, Paragon Real Estate in San Francisco and ICS Realty in Aventura, Florida — as well as expanded into five new markets in Seattle, Philadelphia, Naples, San Diego and Tahoe.
Currently, the NYC-based, tech-focused company operates in 17 markets and has a public plan to achieve 20 percent marketshare in the top 20 metro markets by 2020.
Reffkin declined Brad Inman’s invitation to share the company’s total financial picture — but did note that it has raised $800 million in venture capital funding.
“Me personally, I’m very comfortable sharing [our financials], but I don’t always understand the implications of my actions,” Reffkin joked.
“None of it is debt,” he added, while explaining the outside investment. “It never gets paid back to investors, no investor is ever going to ask for their money back. They have shares in Compass like you have shares in a public company’s stock.”
Reffkin also addressed some of the claims that Compass is exaggerating its market share.
“The way that the industry looks at market share, we could hire every agent in the state of Arizona tomorrow, and we’d have zero percent market share because they’re looking at the company level, not the agent level,” said Reffkin. “We look at it as, agents that have signed and started and their last 12 months relative to the market.”
Reffkin and Inman also chatted about Compass’ technology platform, which it started licensing to indie brokerages this week. Reffkin said his single goal is to improve the lives of agents so much that they don’t remember what life was like before.
“What the world deserves is everything that an MLS has, everything that a consumer site has, merged with the agent services, merged with the CRM that the agent has, all of their marketing and brochures, digital newsletters, social media, everything in one place and all on mobile,” Reffkin said.
“There will be a single platform in real estate,” he added. “There will be one. There’s not going to be 10 Googles. There’s not going to be 10 Amazons. There’s going to be one real estate platform.”
Reffkin told the crowd it’s not a matter of if, it’s a matter of who will be the company that builds it and who will its client be.
“Will it be designed to take clients away from agents? Will it be designed to take down the commission?” Reffkin asked. “Or will it be be designed, like ours, to reinforce the value of the 6 percent commission and create a second revenue stream for agents.”
Correction: Updated to correct Reffkin’s quote about Compass’s platform creating a second revenue stream. We apologize for mis-transcribing the quote in an earlier version of this article.