Purplebricks pays price for growing too quickly
Today any thoughts Purplebricks had of returning to being a billion-pound business appear doomed.
The online estate agent that was valued at £1.5bn in July 2017, this morning has a share price of 124p following the shock exit of founder and chief executive Michael Bruce.
Purplebricks has also ended its disastrous foray into Australia and announced a review of its expensive move into the difficult US market.
The firm that was only founded in 2012 to disrupt the traditional real estate industry has come crashing down to earth with an almighty bump.
So what went wrong? Russell Quirk knows better than most how Michael Bruce is feeling. The veteran estate agent launched eMoov in 2009, growing it to become the second biggest online estate agency behind Purplebricks.
At its peak eMoov was listing 4,000 properties a year and employing 140 people. In 2015 the company raised £2.6m in an oversubscribed crowdfunding round via Crowdcube and gambled heavily on continued growth.
Three years later and eMoov had gone into administration after effectively running out of money.
Today Quirk (pictured above) told BusinessCloud that Purplebricks’ flawed decision to expand into the US and Australia had “come home to roost”.
He explained: “I’m very surprised that Michael has left the business. Whether he was asked to leave or if he felt he’d taken it as far as he could.
“However I’m not surprised by the Australia move. As I’ve been saying for some time they’ve expanded too quickly.
“I think the US will be the next to close for Purplebricks. The US is where they’re burning cash. To pull out of the US would put a big question mark over the whole business.”
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Quirk believes Purplebricks still has a future in UK but says it’s bad news for the online estate agency model.
“There’s a massive question mark over the online hybrid proposition,” he said. “I don’t believe it will ever get mainstream.
“Purplebricks should focus on the UK. Fundamentally it can take most of the online sector but I don’t believe that will ever be bigger than around 10 per cent. It currently has a 3.5 per cent market share.
“It doesn’t mean the end of Purplebricks. It won’t be a £1 billion business again but it can be £200m-£300m.”
Quirk also had words of praise for his former rival Michael Bruce.
“He’s an incredibly impressive individual,” he says. “He looked at the things eMoov hadn’t done right. He nailed the marketing and created a brand. In the UK he executed superbly.
“The problem was he expanded. The US is littered with the graves of UK businesses that tried to expand there.”