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Serial entrepreneur Ben Kinney has created an enviable real estate career that began with a robust portfolio of tech and brokerage sales enterprises under Ben Kinney Companies and skyrocketed with his three-year-old tech and business services venture, Place, which garnered a $100 million investment from Goldman Sachs.
Despite all of his success, Kinney told the Inman Connect crowd that he hasn’t moved his eye away from “the bear on the hill.”
“I spent a lot of time in the woods as a kid and as an adult and there’s been a couple of times where I’ve looked up on the mountain, and there’s been a big, scary grizzly,” he said. “When you see a bear on a hill, you observe it, and you’re cautious, but you take pictures because it’s a really cool thing.”
“But when that bear is on the hill, we’re making a decision,” he added. “Is the bear going to come into camp? Or is the bear going to continue walking across the hill in the direction that it’s in? So all of us right now? I think we’d like to say that there isn’t a bear on the hill, but affordability hasn’t been this bad since 1996.”
Although the coming downturn isn’t projected to match the Great Recession, since the majority of homeowners have solid personal finances and have built up enough equity to sell instead of going into foreclosure, Kinney said that doesn’t mean the coming months won’t be rough.
“With affordability so bad and this kind of shift, I think that there’s a guaranteed 100 percent chance that we’re going into recession,” he said. “And I think it’s going to feel like the worst month that you’ve had in the last three years. So what you do is you ask yourself, ‘If I had the worst month, every month, could I survive?'”
To prepare, Kinney said real estate leaders must trim down their expenses, focus on recruiting competent sales and operational directors, get agents into production as fast as possible and improve their retention rates through tech, training, education and other benefits.
He also said brokers would be smart to focus on their middle agents — those who complete 18 to 36 transactions per year — during a recession since they’re most at risk of dropping out.
“The bad agents suck during the good times; they’re fine,” he said. “The good agents can’t find a better job unless they’re doing something illegal like selling drugs or something that makes the same amount of money.”
“So it’s that middle agent, that heart of America [that completes] 18 to 36 transactions a year, that wakes up and says, ‘Hey [a] 20 or 30 percent reduction in my income means I have to get a job or I’ve got to cut expenses immediately, and those are the ones that are at risk — It’s not the bottom or the top.”
Tech entrepreneurs have another challenge to consider as venture capitalist firms tighten their pursestrings and slow the stream of six, seven and eight-figure investments.
“There are two types of tech entrepreneurs. There are ones that bootstrapped and had to make payroll like you and I have done in our career,” he told Inman founder Brad Inman. “When you do that, you teach yourself to hire based on the amount of revenue that you grow that month or that quarter that year, right?”
“Then there’s another group of entrepreneurs that have been taught by VCs and private equity to spend as much money as we can give you because we’ll give you more,” he added. “Then all of a sudden, they’re not keeping that promise of giving these people more money. And now they’re in a bad situation.”
Kinney said the latter group of entrepreneurs must take on a bootstrap mindset and use venture capital to pad their companies’ savings so they can succeed when times get lean.
“We did $140 million in top line last year [with] $22 million in net income,” he said of his conglomerate, Ben Kinney Companies. “This year we’ll do $300 million and top line and [have a] proportional amount of profit.”
“I haven’t spent into the money that Goldman gave us because we’re profitable,” he added. “So I’m kind of saving that for the apocalypse and right, it’ll be an opportunity for us to get into business with mergers and acquisitions.”
As the writing on the wall becomes clearer, Kinney said real estate professionals must focus on three things: Being empathetic, hard-working and kind.
“Walk with that consumer hand in hand through tough times,” he said. “I did it in 2008, 2009 and 2010, when people were committing suicide, when people were losing their house and people were getting divorces; it was a tough time.”
“My job was not to save them,” he added. “My job was to walk with them until we found an outcome that worked for them.”